April 18, 2002

In the winter of 1999-2000 the Cumbres & Toltec Scenic Railroad was in danger of not re-opening for the 2000 season. The C&TS Railroad Commission had terminated the lease of the previous operator, and after a thorough bidding process, no suitable for-profit operators were found. In February 2000 the Friends stepped forward to operate the railroad on a non-profit basis, establishing a supporting corporation, the Rio Grande Railway Preservation Corporation (RGPRC) for this purpose.

Over the past two years of operation under Friends auspices, the railroad has hauled over 100,000 passengers. Initiatives such as parlor car service inaugurated last year, and improved marketing resulted in near record revenues for the 2001 season. In addition, the Friends and RGRPC have materially improved the locomotives and physical plant. This has been made possible by the generous support of our members, the support of the two states, and the hard work of the railroad’s employees. There is much to be proud of, and we remain optimistic about the railroad’s future.

However, the process has exhausted the financial resources of the Friends and RGRPC. While several million dollars of public and private funding has been applied to the railroad over the past two years, it has become increasingly clear that the cost of returning the railroad to proper condition is greater than we had initially estimated. Of particular concern are the locomotives, where repair work has uncovered hidden conditions requiring costly additional work to meet the new FRA boiler requirements. In addition, there are a number of important long-term projects that have not been undertaken due of budget limitations.

In fact, RGRPC needed to borrow over $400,000 to fund much of this year’s winter shop program. This level of borrowing was possible only because many generous members were willing to personally guarantee or fund substantial portions of the loan. But repayment of these loans from 2002 operating revenue will likely put RGRPC in a zero cash position at the end of the season. Indeed, if ridership this season is less than last year, or if other unforeseen expenses materialize, the railroad could end the season with a deficit. RGRPC cannot responsibly attempt to finance next winter’s repair and overhaul program with similar loans.

That puts the Friends’ ability to continue operating the railroad at risk. Under its contract to operate the railroad, RGRPC can notify the Cumbres & Toltec Scenic Railroad Commission by August 1 that it is terminating its contract effective the end of the 2002 season. We do not want to do this, but the financial realities may require it. In the event of termination of the contract, the commission would be forced to try to find another operator. And although the condition of the railroad has vastly improved over the past two years, it is not clear that the railroad would be a viable proposition for any other operator.

The Development Committee of the Friends’ Board of Directors has responded to this challenge by initiating a major new fundraising campaign for the railroad. The new campaign, named "Another Century of Narrow Gauge Steam," has two funding goals. The first is to raise a minimum of $300,000 in cash and pledges by July 31, 2002, to provide a sufficient level of assured funding to avoid termination of RGRPC’s contract with the commission. The second goal is to raise $2.5 million over the next five years to fund both immediate and long-term needs, and to start the process of establishing a permanent endowment for the railroad. Ten percent of every dollar raised will be placed into a permanent endowment fund established for the purpose of helping to fund the future restoration, maintenance and operation of the railroad. These are ambitious goals, but they represent only the minimum needed for the Friends’ operation of the C&TS to be financially viable in the long term.

We are happy to announce that contributions and pledges of more than $100,000 have already been received. Additional information about these fundraising programs will be available shortly.

Efforts will continue to seek as much state and Federal funding as possible. The states and the Federal government (through EDA) have shown an understanding of the importance of the railroad to the local economies by providing their support. But the reality is that such government support cannot be relied upon year in and year out, nor will it cover all the costs. RGRPC needs a sufficiently robust private financial base to fund what the public sector cannot or will not, and to survive in those years when the railroad is not among the public priorities.

The Friends has proven that it can operate the railroad effectively while at the same time continuing its mission of historic preservation. We feel strongly that the kind of not-for-profit structure that the Friends has created is the best hope to preserve the railroad. We will continue to seek funding in both the public and private sectors, but it is time to properly capitalize the Cumbres & Toltec Scenic Railroad and preserve it for future generations.

We deeply appreciate the support of our membership, and the significant contributions of the RGRPC employees and directors, in getting the railroad back on its feet these past two years. With your continued support, we can build the foundation for the railroad’s long-term success.

The Friends is committed to Another Century of Narrow Gauge Steam with the Cumbres & Toltec Scenic Railroad. We hope you will join us!

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