Railroad’s auditors question its viability

Over the past several years, I have written a number of letters questioning the ridership, viability and taxpayer support of the Adirondack Scenic Railroad and its parent, the Adirondack Railroad Preservation Society. My skepticism has been based not only on my personal observation that whenever the tourist train passes by, as it does intermittently between Memorial Day and Columbus Day, the cars usually appear to be empty or nearly so.

My questions have also been based on ARPS’ own ridership statements and its tax returns, and on information obtained under the Freedom of Information Law from the New York State Department of Transportation regarding public expenditures on the corridor.

The tax returns and ridership numbers never seemed to jibe; nor has ARPS’ contention that no taxpayer subsidies have been keeping the operation alive. Whenever I challenged ARPS’ claims, letters would follow from tourist train advocates insisting that my facts were wrong and that I had no knowledge of the scale and depth of this going concern.

Now the true story emerges from ARPS’ 2012 tax return and financial statement, prepared by the accounting firm of Testone, Marshall and Discenza, CPAs. Here we have an unbiased, professional assessment from an accounting firm hired by ARPS itself. The report includes the following revelation:

“There is a lack of controls and reconciliation procedures relating to ridership and ticket sales. During the audit we noted that there is no reconciliation of ticket sales to train passengers (with the exception of the Polar Express), train tickets are not pre-numbered, and there is no available method for calculating cost/revenue earned per passenger.

“Procedures relating to the recording of ticket sales and tracking ridership information is inadequate.

“Information relating to ticket sales and ridership may be incorrect.”

Since adopting the numbered tickets, in 2012, ARPS’ ticket revenue increased by nearly $147,000 with just 3,900 new riders, a seemingly improbable $38 per rider. A likely explanation is that prior-year ticket revenue was understated.

The overall losses continue to grow. The auditor’s report revealed that “the Organization showed a decrease in net assets of $81,570 during the year ended December 31, 2012. Organization’s current liabilities exceeded its current assets by $263,232. These factors create an uncertainty about the Organization’s ability to continue as a going concern.”

In addition, the report noted that ARPS had new borrowings from its board members of $6,500. The total borrowing from board members to maintain operations is now $95,000.

As for state funding, the financial report revealed that “During 2012, the Organization reported revenue of $150,143 from NYSDOT, which represents 6% of the Organization’s revenue in 2012. In addition, the Organization reported revenue of $991,872 via NYSDOT from the federal Transportation Enhancement Program, representing 41% of revenue in 2012. During 2011, the Organization received $299,421 from NYSDOT, which represented 20% of the Organization’s revenue. “

The deteriorating financial situation indicates that ARPS, over the past 20 years, has tried in vain to make the tourist train at either end of the corridor a financial success. If anything, ARPS’ financial viability would likely be enhanced by eliminating the low ridership operations here at the northern end.

In short:

1. ARPS has not been a universally well-run operation.

2. Revenue from ticket sales is insufficient to maintain its track and equipment.

3. ARPS is thus dependent on government subsidies.

4. Even with those subsidies, its financial situation is such that its own accountants question ARPS’ ability to continue operations.

This record stands in stark contrast to the projections for the proposed Adirondack Rail Trail on the 90-mile section of mostly unused rail corridor between Old Forge and Lake Placid. This premier Adirondack recreation trail will link together the communities of Lake Placid, Ray Brook, Saranac Lake, Lake Clear, Tupper Lake, Piercefield and points south. The experience of similar rail-to-trail conversions elsewhere shows that the Adirondack Rail Trail will be an enormously popular venue for outdoor lovers including bike riders and birders, joggers and strollers, commuters and high school, college and Olympic athletes in training. It will result in a much better and longer snowmobile season on the corridor, connecting with trails in the Tug Hill region and the St. Lawrence Valley. Unlike the tourist train, the Adirondack Rail Trail will be used year-round and used repeatedly by visitors and local residents alike. It will stimulate business, create jobs, help to revive struggling villages like Tupper Lake, and enhance the quality of life for all of us.

So what are we waiting for?

A resident of Lake Placid, Jim McCulley is president of the Lake Placid Snowmobile Club and a board member of Adirondack Recreational Trail Advocates.