October 12, 2002

The past five months have been among the most difficult in the Friends’ history. Nevertheless, despite the serious problems and distractions faced by the railroad since the beginning of the Another Century of Narrow Gauge Steam campaign, the response to the campaign of the Friends’ membership has been tremendous. I am proud to say that the campaign, thus far, has been an unprecedented success. Based solely on the initial member mailing in May, the web site postings and limited personal contacts, as of September 25, 2002, a total of 475 people (90% + of whom are Friends’ members) have made contributions and/or pledges totaling $476,000. The campaign has thus far brought in actual cash donations of $212,000, and pledge totals over each of the next four years are now approximately $62,000 per year. Words are not adequate to convey our gratitude to all the donors for this most generous outpouring of support, but I’ll try anyway: THANK YOU!

Of the cash donations received, thus far a total of $70,000 has been advanced to RGRPC for railroad operations and working capital, and approximately $10,600 (5% of the cash received) has been paid (or allocated) for current and expected direct campaign expenses, such as printing the brochure, mailings, etc.

When the campaign was initiated, the Friends’ Board of Directors agreed that we would allocate 10% of the campaign funds actually received to a permanent "endowment" fund for the railroad. The principal of this fund will be maintained by the Friends for the long-term benefit of the railroad, and the earnings on such fund will be used in the future for the C&TSRR. The campaign contributions allocated to this permanent fund, which is part of the Friends’ effort to create a long-term permanent source of private funding for the railroad, now approximate $21,200.

Several members have asked how the ACNGS funds would be used and when. First, expenditures of campaign funds are made only upon the approval of the Friends’ Board of Directors. Other than the administrative expenses and the $70,000 (noted above) advanced to RGRPC several months ago, all campaign funds have thus far been retained and held in investment accounts by the Friends. If you will recall, the campaign had three primary objectives: 1) capital for short and long-term operating needs, including restoring the railroad locomotives and infrastructure to good operating condition; 2) historic preservation, interpretation and public education; and 3) the establishment of a permanent C&TSRR endowment fund, the earnings on which will provide future funding for the above purposes. The Board has used "the long-term best interest of the railroad" as its primary criteria in deciding how and when to employ the ACNGS funds for these purposes.

When first conceived, the campaign’s short-term goal was to supplement the working capital position of RGRPC, and that’s how the funds advanced to RGRPC were used. The Friends work closely with RGRPC management, including Rich Casford, Treasurer and Director, in determining the amounts and timing of capital needed by RGRPC. In cooperation with RGRPC management, our position over the past several months has been to retain the campaign funds until there was more clarity regarding the situation facing the railroad. We have sought a focused, possibly leveraged use of the funds that provides the railroad and the Friends with the most "bang for the buck." The Friends have recently committed the campaign funds for two very important, related long-term needs of the railroad, and these uses of ACNGS funds, incidentally, are independent of what organization is operating the railroad.

Several weeks ago the Friends’ Board approved the use of up to $30,000 of ACNGS funds to purchase critical parts for C&TS locomotive 484. Locomotive 484, which is undergoing an extensive overhaul (in addition to damage repairs necessitated by its 1999 derailment), is one of two engines that must be returned to service upon opening for the 2003 season. When completed, 484 will be the first C&TS locomotive to completely conform to the new FRA boiler standards. Due to the obvious necessity to prepare locomotives for the 2003 season, the long lead times on certain parts, and the financial difficulties facing RGRPC, it was clear that this use of campaign funds to restore a locomotive for operation was an immediate critical need and in the best long-term interest of the C&TSRR. As it turns out, the necessary parts ordered by the Friends after consulting with RGRPC actually cost approximately $12,000, rather than the $30,000 originally authorized.

The most recent and significant commitment of the ACNGS campaign funds relates to the grant applications submitted to the United States Economic Development Agency (EDA) by the Friends and the Cumbres & Toltec Scenic Railroad Commission jointly in early September. The grants seek funds for the purpose of rebuilding the railroads’ six steam locomotives, including the heavy overhauls required by the new FRA regulations. Two separate applications (or "pre-applications" as they are referred to in this initial phase) were made: one describing the overall project which would require total funds of $3.3 million over three and one-half years; and one for the initial phase which would provide $1.32 million to rebuild three locomotives (including 484 and 488) over a seventeen month period. The grants require matching funds of 10% each from the Commission and the Friends, which means the Friends’ portion would be $330,000 for the entire grant and $132,000 for the first phase. The Friends’ Board has approved the use of the campaign funds for purposes of providing the matching funds required by these grants.

The pre-applications have been submitted but are not binding upon the applicants. They are intended to provide the EDA with information about the project in order to evaluate its merits. EDA is to rank the C&TS pre-applications in competition with other proposals, and it is expected that EDA will invite successful applicants to submit formal applications during October or early November. If successful, grants would likely be awarded in early 2003, although funds spent by applicants after being invited to submit formal applications can be counted toward the matching requirements. Like most federal programs, the timing and availability of funds is uncertain, but Friends’ member Dick Cowles, who researched and prepared the grant applications, believes there is an excellent chance that the initial phase grant will be approved.

Use of the ACNGS funds to provide the match for a grant like that described above leverages the funds significantly, and makes possible something that could not have been considered by the Friends unless we had the contributions and pledges generated by the ACNGS campaign. However, use of the campaign funds for this purpose will substantially consume all presently available campaign funds, at least through next year. To supplement the campaign funds and possibly provide part of the funds from which to make the EDA grant match, we are applying to major private funding sources as well as renewing our requests for your assistance.

We continue to support RGRPC in all respects. In view of the disastrous financial conditions under which RGRPC had to operate this season, we are very pleased that it is now in relatively stable condition, thanks to the cash flow generated by the railroad operation since re-opening in mid-July and the talent, hard work and support of the directors, management team and employees, including President Bill Albert, Treasurer Rich Casford and acting General Manager Kim Flowers. We believe that being in a position to provide additional financial support to RGRPC over the next several months will be critical in connection with the decisions which will be made (by the Commission and others) concerning what entity will be selected to operate the railroad next year.

The Friends remain committed to our vision of assuring the preservation, restoration and continued operation of the Cumbres & Toltec Scenic Railroad, regardless of who the operator is, and our officers, directors and members are doing everything possible to make that vision a reality. In spite of the uncertainty regarding the railroad in 2003 and thereafter, the Friends and RGRPC believe that the long-term best interest of the railroad requires our fundraising efforts to continue. It is now even more important that we raise funds to support the railroad, and we are committed to doing so. The campaign money will, to an extent, constitute part of the capital that funds the effort to re-start the railroad in 2003.

About 25% of our members have contributed thus far, and while we need the support of every single member to build on what we’ve accomplished already, we don’t intend to rely entirely on the Friends’ members for campaign support. In the next month we will begin seeking contributions and pledges from the general railfan and historical preservation community and others.

Here is what I’m asking you to do now:

1. If you’ve already made a contribution or pledge, we thank you very much. If you can add to your contribution or pledge or if you can pre-pay your 2003 pledge in 2002, that would help tremendously.

2. If you haven’t made a contribution or pledge, we urge you to do so today. May I suggest a $100 contribution today and a pledge of $100 per year over the next four years? Every single dollar helps.

3. Make a year-end donation to the Friends’ General Fund or make your 2003 membership contribution early.

4. Please recommend our cause to other individuals or organizations you know who might join in our battle to keep the railroad alive and operating.

It is not an overstatement to say that your donations are directly contributing to an ongoing effort to save the railroad. That was true six months ago when the campaign started, and it’s even more true now.

If you have any questions or concerns please contact me at (phone 918-317-4376) or Tim Tennant at (phone 505-880-1311).

Please join us in our cause to ensure Another Century of Narrow Gauge Steam on the Cumbres & Toltec Scenic Railroad.

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