I was able to watch the portion of the city council meeting (via live-streaming online) where the passenger working group’s motion (to not, at this time, sign the funding agreement with RailMark Canada) was presented and discussed.

Tom Dodds, on behalf of the local Economic Development Corporation (EDC) and the passenger train working group, and Allen Brown, president of RailMark, were both able to address the council and respond to questions before the motion was called and voted on.

Some highlights:

• Dodds’ presentation reiterated the interest of various local groups in the health of not just the passenger service, but the rail network around the Sault in general, the economic benefit to the area of the various rail connections and services, and the working group’s strong support of the service. The working group feels that in addition to providing actual access to the country north of Sault Ste. Marie, due to the low levels of freight traffic on the ACR line, the revenues from the passenger train’s use of CN’s tracks, while a fraction of the maintenance costs of the line, would not be insignificant to the continued health of the overall line.
• Dodds tried to make it clear that the working group is not trying to say “no” to anyone, but reiterated that the EDC’s precondition to recommending the city sign the funding agreement was that the operator (RailMark) have suitable financing (in the form of a line of credit of up to three months operating costs) to prove the financial ability to maintain the service. So far, no documentation to demonstrate this has been provided, and this is why they recommend the city not sign the agreement at this time.
• It was suggested that other options may be and should be explored with CN, the working group, RailMark and Transport Canada. This may be towards the end of exploring other operators, but not necessarily ruling out RailMark if they can still make this work. Above all else, they want confidence and stability in the operation, and the current state of the funding agreement is definitely creating some uncertainty.
• It was acknowledged that from April 1 to May 1, CN had continued to operate the passenger service, being subsidized directly from the federal government under an extension of the previous agreement. Since May 1, RailMark has been operating the service entirely at their own cost. During the initial period, crews were provided by CN, but paid for by RailMark as RailMark gradually took over, but apparently as of last Thursday, it’s a fully RailMark operation.
• The passenger service and the Agawa Canyon Tour Train should be considered separate operations, and at this point the discussion is entirely about the funding and operating of the regular service, but ideally both will fall under the same operator, as the two services would naturally work well together and could share some resources. Due to the time frames involved with the current season, CN and RailMark have agreed that CN will continue to operate the Canyon tour train for at least this season.
• Brown’s address to council acknowledged the difficulty in obtaining the aforementioned line of credit, but mentioned that it would have been much easier if there had at least been a conditional agreement subject to the desired financing. However, due to the preconditions, there is currently *no* signed agreement at all, and his US bankers who would have otherwise been ready to provide the required line of credit are hesitant. Since then, says Brown, he has been mainly trying to work with Canadian sources of financing, and suggested he may actually be close to an agreement; he hoped to have something in hand at today’s meeting but will have to return to Michigan to have his accountant prepare some required financial information records.
• Brown also stated that as an American company trying to take over a Canadian railway operation there has also been a lot of work and a learning curve to climb. But RailMark did indeed obtain their certificate of fitness from Transport Canada, and that was the first such certificate under new tightened regulations (although I’m not real conversant in railway fitness requirements to know much about what the newer requirements are).
• Little mention was made of the service disruption last week other than by a councillor who made a comment about doing business with a company that create a couple of “uncomfortable situations” including the recent stranding of travellers during a follow up question to something in Mr. Dodds’ address. But then I guess when VIA Rail has service disruptions due to “Operational Issues” not much is publicly stated either, just there’s so many railfans and watchers in southern Ontario that everyone seems to know the whole story within about an hour. And VIA passengers usually at least have other options.
• One councillor asked Brown if he could comment on the state of the unresolved issues with the Columbia Star Dinner train in Missouri. Brown indicated that this train basically got caught up in complications regarding the failed sale or merger of one of his divisions to TBG Group, and he really should have resolved that by now but has been so focused on the Algoma Central deal, but suggested that a legal action from his company would likely be forthcoming but that his lawyer (for obvious reasons) said he shouldn’t mention anything about that (to which the mayor commented “You might want to listen to your lawyer”, with what seemed to be just a trace of snark).
• The final word seemed to be given by the city’s mayor who took a slight issue with something Brown said about various actions to comply with the city’s requests and the mayor wished to clarify that Brown and/or RailMark was not acting on the request of the city and that “any actions you take going forward are of your own volition” before dismissing Brown and calling the vote. This delivery came across rather like a verbal body slam against Brown, and he seemed visibly frustrated on being dismissed, and I can’t say I blame him. It’s been a bumpy road so far and multiple parties are understandable concerned, but from Brown’s perspective, working with multiple stakeholder groups, corporations and levels of government bureaucracy can’t be easy either.

Ultimately the vote was called (to not sign the agreement at this time) and passed. The vote was asked to be recorded, and it was unanimous in favour of the motion.

So at this time, the agreement goes unsigned. I guess it’s up to the working group, RailMark and CN what happens next. If Brown does have a suitable source of financing lined up, maybe this whole thing can still come together soon and find some stability.

[Edit: here’s an article from the Sault Star covering today’s meeting.]

*Sigh*

I was really hoping this would work out. I really was.

Despite my reservations when we first learned that RailMark was selected to be the new operator of the Algoma Central Railway passenger service, I was cautiously optimistic. There were lots of little red flags, but I really wanted it to succeed. Now, just in advance of a city council meeting next week to discuss the subject, things appear to be flaming out in spectacular fashion, and I wish I could say I was surprised.

To recap the history of the last few months for those not closely following the news out of Sault Ste. Marie: On March 31, the last possible day before CN was officially slated to end the service, the official announcement of the funding extension and new operator was finally made, although rumours had been swirling around before that. In the interim, CN agreed to operate the service until the end of April so that RailMark could get prepared to take over. Which happened, but the transition was a rough one with a gap in service of for several days at the beginning of May, with the first northbound train departing on May 7 with only a single passenger as no one even knew if the train would even be running. (Strike one.)

From this rough start however, the passenger service has been operating under RailMark for the last month and a half approximately, but more warning rumblings have occurred. As part of their takeover agreement, RailMark was to have also taken up the operation of the Agawa Canyon Tour Train, but at the beginning of June CN announced that they would again be operating the tour train this summer, citing RailMark’s complete failure to do anything to market or promote this operation. (Strike two.)

[Edit – June 22: watching today’s city council meeting clarified a few things for me. The Canyon Tour Train and regular passenger service are covered under separate agreements, but it makes sense for them to ideally fall under the same operator. Due to the logistics and time frames involved (the tour season starts tomorrow) CN had agreed to operate the tour train for this season at least. This actually makes a lot of sense and is not necessarily a black mark if it’s as simple as all that, but just on top of the other little bumps in the road, and the way it was reported by SooToday, definitely seemed like RailMark was out of that one. Part of the problem in figuring out what’s going on is a limited number of news sources reporting on any details, and an apparent lack of any clarifying information from RailMark’s side of things.]

All of this over the last month has been building up to a city council meeting now scheduled for this Monday to discuss the proposed funding agreement with RailMark (as the city has been appointed the executor of the federal subsidy for the passenger service). The city is understandably concerned that RailMark has the financial wherewithal to pull off this operation, and put forth two major conditions: that RailMark secure appropriate insurance, and be able to obtain a line of credit. So far, there has been no indication of RailMark being able to obtain such a line of credit, and now the passenger working group, which lobbied so hard over the last year for the preservation of the service, is now recommending that the city no longer enter into the funding agreement with RailMark. (Strike three.)

Now, it appears that an unspecified incident in Hearst has prevented the southbound train from operating on Friday as scheduled, stranding dozens of passengers, mainly tourists and no train to the Sault is being expected at this point until Tuesday! (Bloody hell, what’s the count at now?)

From the article:

Al Errington, owner operator of Errington’s Wilderness Islands Resort and member of the Algoma Passenger Rail Committee has a pretty good idea of why it didn’t arrive.

In fact, it’s not expected to be running at all before Tuesday.

“Maybe not even then,” says Errington. “Right now a crew is towing it to Hawk Junction behind a freight train.”

“There was an infraction,” he says. “I don’t know anything about these things or how they work. Only that it meant the train couldn’t leave Hearst.”

18 guests of Errington Wilderness Resort were supposed to be on the train on Friday.

The article states that as many as 54 people were evacuated by float plane after being stranded by the railway. This is just downright embarrassing at this point. (Now I’m really curious as to what in the world exactly happened in Hearst on Friday morning.) This is really just compounded by being a singular case of bad timing, but still illustrates some teething issues.

So, with RailMark having lost the Canyon Tour Train (the service that would have actually made money), and the whole funding agreement with the city up in the air still, and now a spectacular incident on the eve of the city council meeting about the agreement, will the city keep going with RailMark or say “enough is enough”?

Unfortunately, what happens at that point is entirely unclear. I’ve not seen a lot of RailMark’s side of the story in the news articles, although for his part president Allen Brown has suggested that part of the issue in not being able to secure a line of credit (one of the city’s preconditions) is the bankers being concerned about not having a signed agreement with the city yet. A chicken/egg problem. If the city does give RailMark the boot, some have suggested that it would fall back on CN to maintain operation with the subsidy, but CN has stated they have no intention of getting back into the passenger operation. And RailMark as an operator was selected by CN, not the city or region (as CN owns the actual railroad), so the logistics of trying to find another operator are … murky, to say the least. What a mess.

Some more cynical minds have suggested this was CN’s agenda all along: pass off the operation to someone that would cock it up and then when it fails be able to happily wipe their hands of the whole thing without being the “bad guy” in the room. I’d like to think I’m not quite that cynical, but any of my other friends that have previously heard of RailMark through inside contacts in shortlines and operations in Southern Ontario pretty much instantly said “Well, that’s just a matter of time. Kiss that service good-bye.” when we heard RailMark would be the new operator. Their reputation locally by anyone professing to be “in the know” is somewhat of a joke. I just hope the Sault to Hearst passenger service isn’t the punch line.

I guess we’ll see what happens following the city council meeting on Monday…

Update: It seems that there was indeed an allegation of a rules violation and a formal Transport Canada investigation (during which the crew would have been barred from operating a train thus causing the disruption over the weekend) but the crew was ultimately cleared of doing anything wrong.

Well this came right down to the wire. With the ACR regular passenger service slated to be no more as of April 1st without a decision on support from the federal government, it was announced today that the government will renew a subsidy for the passenger service for a further three years.

See the article on Sault Online here:
Passenger Rail Service Funding Extended for Three Years

From the article:

The City of Sault Ste. Marie will receive federal support for three years for the continued operation of the passenger rail service to establish a new regime of passenger rail service in the area. This would allow Railmark, the proposed operator, to demonstrate its ability to deliver on its business plan. A review will be carried out at the three-year mark to determine if additional funding is warranted.

That new operator is Railmark Holdings Inc., in the form of a newly incorporated Canadian subsidiary, Railmark Canada, to operate the train service in Ontario.

Over the last few months articles have appeared in the local media documenting the bidding and evaluation process for finding a new operator for the passenger service (or at least what information could be known outside of the standard business NDAs covering the negotiations). As the months leading up to the deadline became shorter, several companies had submitted bids for evaluation by CN and the local stakeholders group, which then turned into one (as then yet unidentified) finalist selected for final negotiations, and then the announcement that agreements were basically in place between CN and the new mystery operator, with a grand plan to expand the services and make the operation no longer dependent on the federal subsidy in about five years. As the months became weeks, the request for additional interim federal funding was submitted to the government, and it was gradually revealed that Railmark was the final bidder, while as the weeks became days, the parties awaited the recommendation and decision from Transport Canada. And on the last day before the service would have become another page in the history book of Canadian passenger operations, that funding decision came down.

Railmark seems to have grand plans for the service, including additional options and changes to the service, cross-promotions with other tourism activities in the area, and additional dinner trains and special runs. If this all sounds a little vague, well, I tend to agree. A lot will need to be proven here, and I’m pretty skeptical about a short-distance dinner train in a remote market like the Sault, although special runs to things like folk music festivals in Searchmont seem to have been relatively well patronized locally in the past. The above article also mentions a return of the winter Snow Train through Agawa Canyon, which has not been running the last few years. This could be a good thing, if the demand is there. We will have to see. (Note that Railmark’s bid includes taking over the operation of the Algoma Central Railway passenger services, including the Agawa Canyon Tour Train.)

Railmark has a lot to prove over the next three years. Railmark markets themselves as a railway company with 15 years of experience in the business, although they don’t appear to have any current operations. Two previous dinner train operations are defunct; one was shut down and sold during the major recession several years ago, the other appears to be the focus of a complicated dispute with the city of Columbia, MO and also involving a failed merger with another company, Train Travel Inc. RailMark’s website announces this merger on their news releases, but fails to follow up the fact this this merger was unwound scarcely two months later. Keep digging around these companies and find a dizzying collection of small shell corporations with little or no actual apparent operations or assets.

Railmark was also involved in some bidding last year for some CN branch trackage between London and St. Thomas in southern Ontario. While this has gone absolutely nowhere so far (CN is still operating those tracks at the moment, and former CP and Trillium Railway lines in the St. Thomas area are now under Ontario Southland’s banner), Railmark doesn’t seem to have a serious reputation in this area talking to some friends who know some contacts in the local railway scene.

So, today’s announcement means that the “show will go on”, at least for now. What that show will be, time will tell. In the immediate term, Railmark needs to get their ducks in line in order to prepare to even take over the current operation and hopefully get that all sorted out before the tourist season really starts. (I’m not even sure what the immediate situation is as of tomorrow, as before this afternoon’s announcement, today’s train was basically slated to be the last if no support was provided.) And then they really need to prove themselves on this operation. While I remain cautiously optimistic for the future for now, there’s some red flags here that are slightly unsettling.

Update:

CN has recalled laid off employees and will continue to operate the service until Railmark is ready to take over, so passenger service will continue to operate this week. Note that the subsidy funds will actually be managed by the city of Sault Ste. Marie, which to me sounds like a good thing, and allowing the local stakeholders to hopefully be able to keep the operator(s) accountable.