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[quote user="cprted"] [quote user="Bucyrus"]I don’t understand what you mean when you say, “he doesn't want the financial liability of owning a locomotive himself.”  What exactly is the financial liability of owning a locomotive?  The only financial issue of owning a locomotive that I am aware of is the price of purchase. It is true that the price of purchase is all up-front, whereas a lease spreads it out, so you cannot compare them dollar for dollar.  But if the price of purchase were overall cheaper than leasing, is there some special reason why he would not want to purchase?   I just assumed that Sandberg was looking for the lowest cost option.  I was not aware of the fact you cite that he has ruled out direct purchase.  [/quote]  While I have no direct knowledge of the previous lease arrangement for the 261, I would be surprised if Mr. Sandberg had any of his own money tied up in the locomotive itself, whereas if he were to own it, Mr. Sandberg's personal finances would be about the only source of funding for a rebuild. The financial risk of owning a locomotive is, what happens if something significant fails?  Suddenly the engine you just spent a million dollars on is now a million dollar piece of scrap metal.   It is a very foolish way to tie up your money.  You either need a non-profit or someone with more money than common sense to run these things.  Steam locomotives do not pay for themselves. [/quote] I don’t know if Sandberg personally invested money in #261, but I thought the Sandberg group or whatever operating entity it is, has a lot of their money invested in the engine.  There was the initial total rebuild, which must have cost at least $500,000, if not three times that amount.   <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p> I understand that their lease with NRM cost $10,000 per year over 15 years.  Sandberg was willing to renew that lease and invest another $500,000-700,000 in boiler work to certify the engine for another 15 years.  So overall, that is a commitment for spending up to $850,000 to operate the engine for another 15 years.   <o:p></o:p> So they are willing to gamble on a major breakdown, which would cost them their investment if they walked away from the engine rather than repair it.  I don’t know if that original lease obligated them to the full 15-year term for $150,000, or whether they were on a year-to-year basis, and not obligated to the full term. <o:p></o:p> With this recent negotiation, the NRM wanted to raise the lease price to $25,000 per year, and reduce the lease term to 10 years.  The deal breaker was the 10-year term.  Sandberg did not want to invest $700,000 in boiler certification work good for 15 years, and give a third of that investment away by returning the engine only after 10 years.   <o:p></o:p> I don’t know if he would have accepted the new lease price of $25,000 per year if he could have gotten a 15-year term.  If so, he would have paid $1,075,000 for the next 15 years for the lease and boiler recertification.  If he bought the engine today, that price would be $925,000 for the next 15 years.    When the lease negotiations broke down a month ago, NRM was asking $800,000 for the engine, whereas today they are asking $225,000.  Assuming there is a relationship between what NRM thinks the engine is worth and what they want for a lease, it seems strange that they killed the deal by asking so much for the lease, and then turned around and cut the sale price by 72%.
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