Millard to CCCVB: An Introduction to How a Railroad is Run!

No. 32 -- VIRGINIA AND TRUCKEE RAILWAY -- Nevada Railroad Reconstruction Chronicles

Notes of the Carson City Convention and Visitor's Politbureau meeting of July 13, 2009

As I have said in other posts, the overloaded nine-member Nevada Commission for the Reconstruction of the Virginia and Truckee Railway has too many members to make operations decisions. This is the story, according to Kevin Ray at the June meeting of the Carson City Convention and Visitors Politburo. Accordingly, the NCRVTRWY has handed off operational responsibility to the CCCVP.

So if nine cooks spoil the soup, will five ignorant cooks do better? At the July CCCVP meeting, Millard kicked off a discussion by saying "this is your introduction to how a railroad is run."

Excuse me for laughing. Somehow the CCCVP is being given operational responsibility for the $40 million project, and they are getting "an introduction to how a railroad is run." This is your government at work, the same people who will bring you health care, energy taxes, and a possible "Nevada net profits tax" that is remniscient of the Depression era policies that just made things worse.

JUST KIDDING, HEADS IN THE BEDS, ASSES IN THE SEATS

Millard then said, "I'm just kidding." The problem is, he's not kidding. The CCCVP, as a body, is questionably proficient at "putting heads in the beds," quoting boardmember Stephen Lincoln. I would note that Stephen Lincoln is also an expert at riding trains and flipping off people he doesn't like. This actually happened as I was making video of a VIP train last year. Hi Stephen!

Back to the point. Millard's characterization is correct, the CCCVP is getting a crash course in railroad operations. They could also use a crash-course in publicity. As of July 19, less than 30 days away from their subsidized event, they have yet to list it on their own website on the events calendar. They also haven't listed it on the Nevada Appeal events calendar. They have not issued a press release.

I guess since the V&T Reconstruction Commission has given them $25,000 to cover expenses, they don't feel pressure to put "asses in the seats." Perhaps the train will be a sellout, but it won't be because of proper advance publicity.

EASTGATE DEPOT IS A "PERMANENT DEPOT"

While the V&T Commission refers to the planned depot on Dump Road / Eastgate Siding to be "interim," Millard appears to let the cat out of the bag when he refers to the Dump Road Depot as "permanent." This tends to support the V&T Commission's claims to have "shelved" plans to run all the way through the canyon and back to the Drako Way location they spent well over $1 million to acquire.

I repeat myself when I say, the main problem with the Commission is they change their minds every month. There is no plan. There is no budget. There's is just a fly-by-the-seat-of-the-pants effort to build a railroad as the pork comes in from the Federal government.

A little furthe into the discussion Millard repeats the Kevin Ray claim by saying "the commission is too big and bulky" to plan operational details. Millard also refers to a Railfest Committee, which should be a public body with public meetings. I have yet to see any notice or agenda from this group tasked with spending at least $25,000.

IS THIS A BUS OR A TRAIN?

Millard goes on to say that the CCCVP will sit between the Commission and the Grays. He notes that in the meeting packet are two agreements, one with each party, to lease the track from the Commission and get the Grays Virginia and Truckee Railroad to operation a train.

He then does something pretty weird, in my view. He refers to the tranportation mode at Railfest 2009 as a "bus." He explains this analogy is an effort to get away from "train syndrome."

Huh? He explains that this is like calling a bus company for a Rotary trip where the bus company sets a fixed price for the trip and is not responsible for selling tickets. He explains that the CCCVP will sell tickets. He then gets back into train-talk and explains, "this is the unknown ground of how we're going to try to run this train in the future."

Ask yourself, would a private business run this way? Would they commit to an operation of a train when it's "unknown ground?" Perhaps the CCCVP can build us a nuclear reactor on some "unknown ground."

WE COULD HAVE SOME LOSSES

After further explaining that the CCCVP is responsible for marketing the train, Millard explains that beyond the opening weekend "we could have some losses and we don't know what those are going to be, but we have obligated ourselves for twelve weekends." He goes on to do the math, that each weekend costs about $4000 so the total obligation is $48,000. He explains that the CCCVB is on the hook for this money.

I will make another post about the math and break-even points. See it here...

At this point the CCCVP got into the details of the contracts. Commission Lackey Kevin Ray was on-hand to answer questions. Molly Walt kicked it off with some questions about item #9. She asked about the $2 million insurance requirement called for by the re-con commission.

Dwight Millard answered that "we learned something" in the process of researching this. It turns out the CCCVP had been purchasing insurance on an event-by-event basis. In looking into the railroad event insurance question, Millard announced that all events were insured by a "pool" and that all previous expenditures for event-by-event insurance were unnecessary. I could have told them that, but hey, it's only tax money, right?

THE GREATEST OPPORTUNITY!

Kevin Ray gave a speech about how the Commission has spent millions of dollars of local, state and federal money to build a track and it shouldn't be left unused. He said the CCCVP has the greatest opportunity to make a go of it. I would note that all the money the Commission spent on an operator selection process seems to have been wasted. I would also note that the thousands the Commission spent for Ken Dorr and Attorney Michael Rowe to fail to negotiate with the Grays Virgina and Truckee Railroad also seems to have gone down the drain.

They apparently could have simply selected the Convention and Visitor's Politburo as the operator from the start. Kevin predicts that people will arrive in Carson City from all corners of the earth to ride the train -- I sincerely hope he's right!

FUZZY MATH or INFLATION?

Kevin noted that the Virginia and Truckee Railroad has been running trains for 37 years. Hmmm.... they started in 1976, it must be 2012!

Then Stephen "Flip-Me-the-Bird" Lincoln asked, "what's going to happen next year." Kevin replied that he hoped the CCCVP had enough success this year that they could continue next year. He suggested that by next year there should be enough interest to run trains seven days a week. How nice of him to commit the V&T to abandoning their Virginia City to Gold Hill operation in Virginia City.

Molly Walt asked if there was an estimate of how much profit the CCCVP (Carson City Convention and Visitor's Profit-Buro) would reap if the trains sold out every weekend. I make estimates of *operating* profits excluding capital costs here. Kevin said, "I don't know." He did seem to think that 100 people per train was the break even point.

Millard mentioned that the train capacity was to be 140 people and the Virginia and Truckee Railroad was charging $4000 per run. I have updated a separate post trying to estimate the break-even point for the CCCVP.

First Kevin said that at 100 passengers they'd break even. My figures show that it might take at least 110 to break even just on operating costs. Kevin later says he thinks they can break even at 50 people, which is a mathematical impossibility. He then says it would be worth it even if the CCCVP spends a few hundred bucks per trip, because it will bring people into Carson City.

Of course he can say that, it bears repeating that the commission he works for is paying for $25,000 of the costs.

LET'S FILL THE HOTELS

Kevin then makes a claim that because people have been waiting fifteen years for a train to ride, they may not all come this year. This is counter-intuitive, usually things like this (think Aces ballpark in Reno) see their highest attendance when it's a novelty, then over the years attendance and ticket sales drop off to a normal level. Oh, well, no one ever claimed there was an economist in the room -- I stayed home to watch this on video.

Kevin did say that these trains would "fill the hotels." Again, if this were a private business the analysis would be much more rigorous. As it is, since we're in bailout nation, these government panels know they can depend on the taxpayer. They have nothing personally at risk.

Kevin makes a point that people throughout the US have been wanting to get the contract to operate the Re-con rails. The funny part, the CCCVP is truly being given a gift. Any private company that owns a railroad would expect a return on their investment for leasing out operational rights.

In the case of the Commission, they are going to let a buddy-buddy government commission (CCCVP) use the rails for free AND pay for maintenance. They will be letting the CCCVP keep any profits! I guarantee you if this had been offered to the Grays REAL Virginia and Truckee Railroad they would have jumped on the deal. That's just my not-so-humble opinion.

ASS-KISSING AND BUTTERING UP 101

One of the CCCVP members asked what a "deadhead train" was. Millard with a straight face said that's a term from the 1960's. He was so deadpan that I think they believed him. Basically the train has to run from Virginia City to Carson City EMPTY in the morning, pick up passengers, make a round trip and "deadhead" back to Virginia City at the end of the day after dropping passengers back in Carson City. Millard went on to tell (BS) the CCCVP that the reason the commission chose them to deal with "so many unknowns" should be taken as a compliment.

There was discussion that they would sell tickets on the deadhead runs whenever possible. They continue show show a total lack of realistic plans and expectations within 30 days of the first run. "Good enough for government."

Trying to make it easy for the CCCVP railroad experts, following Millards "bus" analogy, Kevin Ray makes a cruise ship analogy. He says that at times cruise ships need to make "repositioning" moves. He says that he has seen some good deals on repositioning cruises. Buses, cruise ships? This must all make sense to the railroad experts in Carson City.

In the discussion Millard mentions that their PR firm has almost guaranteed that every train would be full. So forgive me for belaboring the point, the CCCVP are being given the job because they are railroad marketing experts, and then need to hire an outside PR firm to do the job? But no advertising or publicity has taken place WITHIN 30 DAYS OF THE MAIDEN VOYAGE?

Ooooookkkkkkkkk...... I will repeat a mantra I learned a long time ago when dealing with the government, "I will bow down and recognize my superiors, I will not criticize my superiors, even though I paid for their antics. I will bow down..."

FINALLY SOMEONE STARTS TO MAKE SENSE

Molly Walt then identified the CCCVP's involvement in the project as a leap of faith. Actually she first said leap in faith, then said leap of faith. She is correct, for fifteen years the whole project has been a leap of faith.

Then she displays a leap of ignorance of the history of the project. I am not going to write ten pages of detailed history here, but she asks, "if we take this leap of faith and make a profit, what's to stop another company from trying to do it next year." In her ignorance, she is asking a smart question. She wants an option on next years business if this year works out well.

What she's apparently unaware of is the whole expensive operator selection process, the "business plans" submitted by Sierra Railroad, American Heritage (Durango and Silverton) and the Virginia and Truckee Railroad. She seems to be ignoring the failed expensive negotiations between the Commission and the Virginia and Truckee that lined the pockets of Ken Dorr and Mike Rowe. She is not aware everything that happened lo these many years before the V&T Commission abandoned their principles and gave Dwight Millard's other Commission the sweetheart deal of the century.

OFFERING THE SWEETHEART DEAL TO MULTIPLE PARTIES

Kevin Ray responded, "I don't see right now that the (V&T) Commission is looking to sign another deal right behind this one." Au Contraire! At the last V&T meeting it was clearly discussed that the CCCVP deal was just for this year and that for 2010 and 2011 the Commission was looking to Sierra or the Grays or a combination of the two.

MILLARD DROPS THE BOMB!

Thankfully Millard was honest enough to say that for 2010 and 2011 the Commission was considering working directly with the Grays or offering the concession to Sierra. Then he dropped a bomb. He said, "Running that train from here to there will never be profitable for anybody."

That deserves a new post...
Article in progress... ya'll come back now, ya'hear!