What’s up with Polar Express? Grenada RR?

Iowa Pacific expects to operate the Polar Express Train Ride again this year in Batesville, IP CEO Ed Ellis stated Wednesday, replying to an e-mail inquiry.
After a hugely successful launch year in 2015, followed by ridership in 2016 that was almost equal to the first year, relations soured with local vendors in early 2017 when they did not receive payment for their services or only received partial payment. Some lawyered up and threatened lawsuit. Paychecks to teenagers who worked part-time on the Polar Express were delayed, in some cases until well after the first of the year.
Online research in recent months provides information that paints Iowa Pacific’s operation as a labyrinth of inter-connected companies operating different short-line railroads across the country, some with similarly sketchy records of payments to vendors and employees, apparently robbing Peter to pay Paul.
In May, the Texas State Railroad ended its contract with Iowa Pacific for operation of the historic, 25-mile state-owned line for nonpayment of an estimated $2 million in loans from the cities of Rusk and Palestine, Texas, according to a copyrighted story by KTRE, the Pollok, TX ABC affiliate.
Yet, in the story the Texas State Railroad Authority president cites Iowa Pacific’s profitable operation of the railroad as having been the incentive for attracting proposals from four other “quality” operators. The Arizona-based Western Group was ultimately selected.
This week, a story in the Santa Cruz (CA) Sentinel claims that Iowa Pacific owes the Santa Cruz County Regional Transit Commission $36,600 in unpaid Polar Express royalties and for storage of rail cars.
Yet a July 18 story in the Indianapolis Business Journal states that Iowa Pacific Holdings had presented a proposal for the operation of the 37-mile Nickel Plate Railroad between Tipton, IL and Indianapolis that was the top choice of the Hoosier State Port Authority overseeing the line owned by Fishers, Noblesville and Hamilton County, Indiana.
In January, Rail Events, Inc. a Colorado firm that holds the license to the Polar Express brand, filed a lawsuit against Iowa Pacific for non-payment of royalties, according to a February story in Trains magazine. The lawsuit alleges that IP owed Rail Events, Inc. $6 million in royalties from 30 percent of Polar Express Train Ride ticket sale revenue 10 percent of souvenir photography sold at the events. Rail Events, Inc. acknowledges that about half the royalties due had been paid. IP countered that it was holding back on a disputed amount due to what it described as “unfair practices” by the license holder.
Ellis said in March that IP hoped to settle the lawsuit.
The unfair practices IP alleges may have included Rail Events, Inc. staging a Polar Express Train Ride in New Orleans starting in 2016, siphoning potential passengers from the Batesville Polar Express.
In 2015, Batesville merchants noticed many Louisiana license tags on vehicles that brought Polar Express riders to town. The impact of the New Orleans Polar Express Train Ride reduced the number of early ticket purchases, forcing IP to deeply discount its ticket prices to maintain ridership. Ridership was close to 2015 figures but revenue was down.
The Santa Cruz Sentinel also reported on another factor in 2013 that may have contributed to the cash flow crisis that caught up with Iowa Pacific last year. IP had used the nine railroads it then owned as collateral for a $65 million Railroad Rehabilitation and Improvement Financing loan through the Federal Rail Administration (FRA). When IP sold one of the nine railroads, it put $35 million from the sale proceeds in escrow, expecting FRA to seek $20 million toward repayment of the loan, IP’s vice president of strategic planning Kevin Busath told the Sentinel.
However, FRA took the entire escrowed amount. In the interim, IP had spent the $15 million it had expected to get back from escrow. Busath told the Sentinel the money was used to pay down debt and fund other projects.
Another squeeze on IP’s cash flow came when its formerly lucrative business in the west Texas oil basins dried up with the drop in oil prices.
Internet comments that follow stories published about Iowa Pacific alternately castigate owner Ellis for mismanagement or praise him as a transportation visionary. People claiming to be IP employees or former employees frequently cite the company’s failure to reimburse their expenses accrued on their personal credit cards. Two former IP employees told The Panolian about their difficulties in recouping travel and lodging expenses from the company.
Another setback came July 4 when an arsonist started a fire that destroyed the rail bridge over the Yalobusha River north of Grenada. Fortunately, all of the Grenada Railway engines were north of the bridge at the time, and the bridge was insured, but the severed track will still cost the railroad in lost revenue and the insurance deductible.
Presently, the web site for purchasing Polar Express Train Ride tickets for Batesville, www.grenadapolarexpressride.com/buy-tickets, states that the web site has not been properly configured.
Meanwhile the New Orleans Polar Express Train Ride web site shows that many trains have already sold out of seats for its Dec. 7 – Jan. 1, 2018 schedule.
The 187-mile Canton to DeSoto County rail line was purchased in 2015 by the North Central Mississippi Regional Rail Authority for $43 million to avoid abandonment. NCMRRA issued $30 million in bonds and borrowed $13 million from the Mississippi Development Authority to consummate the purchase. Iowa Pacific was chosen to operate the line and is responsible for servicing the debt. It kept the Grenada Railway name. All payments are current, according to a spokesperson for State Treasurer Lynn Fitch.
“Railroads are a precious community asset, a generator of value-added employment like no other, ” said a former IP employee who was both critical and complimentary with Ellis’ operation of Iowa Pacific Holdings. The former employee asked not to be identified.
He leveled criticism at Ellis for fixation on the viability of private railroads providing passenger service and for difficulty with managing debt.
Yet he praised Ellis for recognizing that the national transportation policy has “failed to pay attention to the short lines” in favor of the large railroads and the trucking industry.
“Ed understands that clearly,” he said, which led to his founding Iowa Pacific Holdings in 2001 to target short, neglected rail lines threatened with abandonment.
“Ed has to date never abandoned a foot of railroad he has acquired,” his former co-worker said.