photo by: John Young

Smoke and steam bellow from Flagg Coal Company Steam Engine Number 75, better known as "Hank," as it departs from the Midland Railway Depot in Baldwin City during the annual Railfest event in August 2013.

The relationship between Baldwin City and Midland Railway has unraveled to the point the company is vowing to move its tourist train operation to Franklin County and the city is demanding the railway immediately repay more than $300,000 it received last year from a Kansas Department of Commerce grant that the city administers.

A.J. Stevens, chief financial officer of Baldwin City & Southern Railroad, a wholly owned for-profit subsidiary of the nonprofit Midland Railway, said BC & Southern will move its tourist train operation to property it owns in rural Franklin County outside Ottawa after negotiations to transfer the lease of the old depot at 1515 High St. in Baldwin City to Midland failed. The lack of a lease left BC & Southern no place to board passengers on tourist trains in Baldwin City, Stevens said.

In March, Midland and the Santa Fe Trail Historical Association asked the city to negotiate a dispute over control of the depot after the historical association evicted the railway from the depot for not paying a scheduled lease payment of about $6,400.

The BC & Southern suspended tourist rides with the eviction and called off planned events for the rest of the year because of the COVID-19 pandemic. During normal times, Midland operates excursion train rides on vintage railroad equipment between Baldwin City and a rural area near Ottawa. It also provides service for the Kansas Belle Dinner Train company, and it occasionally hosts other themed events, like the Thomas the Train or Polar Express-themed rides.

The city has leased the depot to the historical association for $1 a year since 1977. The lease was established after the historical association helped save the depot from destruction when the Burlington Northern Santa Fe Railroad discontinued service on the line through Baldwin City.

The historical association has in turn leased the depot and adjacent park it owns to Midland since 1987.

The agreement the city developed would have paid the historical association $100,000 for the park. It also would have leased the depot and park for 20 years to Midland for $5,000 a year and ended a utility credit worth about $4,000 annually that Midland now receives.

Stevens said Midland agreed to the city’s terms, but the agreement fell apart when the historical association decided last month it was no longer interested in selling the park.

photo by: File

Baldwin City & Southern Railroad, a wholly owned for-profit subsidiary of Midland Railway, is vowing to move its tourist train operations out of Baldwin City after an agreement to lease the old depot to the railroad fell through.

Roger Boyd, president of the Santa Fe Historical Association, said the historical association decided not to part with the park because its membership is convinced the BC & Southern has no intention of using the depot or the park as a base for tourist rides. The historical association fears the park and depot would be used to support the BC & Southern’s freight hauling operations, he said. The Journal-World reported in January that BC & Southern was exploring the feasibility of some freight service between Baldwin City and Ottawa, in addition to its tourist train operations.

The historical association is suing Midland in Douglas County District Court to recover lease payments owed and to force the railway to remove its materials from the building, Boyd said.

Meanwhile, the city, with the backing of the Kansas Department of Commerce, is seeking repayment of the $321,000 that was loaned to the BC & Southern as part of a Community Development Block Grant the city helped the railroad secure last year, said Baldwin City Administrator Glenn Rodden. The grant terms required the city to hire a grant administrator to keep track of the railroad’s use of the money.

Rodden said BC & Southern is not in compliance with requirements to submit required paperwork.

The city’s attorney is now preparing to notify the BC & Southern that the city is demanding repayment of the $321,000, Rodden said. The action is being taken at the direction of the Department of Commerce, he said.

A statement to the Journal-World obtained Friday from a Commerce Department spokesperson said the department was aware of the city’s planned action toward the railroad, but it doesn’t indicate the department is behind the action.

The statement reads: “The Department of Commerce is aware that Baldwin City is pursuing the railroad for repayment of the CDBG grant funds. Commerce granted the funds to Baldwin City, which then sub-granted those funds to the business. It is the city’s obligation to ensure performance on the loan, and our understanding is that the city is doing so.”

Stevens conceded the BC & Southern was not in compliance. He said paperwork was submitted, but the city didn’t think it was satisfactory.

As a result, the BC & Southern has obtained a loan from a Lawrence bank to pay off the CDBG loan, Stevens said.

“We don’t want any ties to the city anymore,” Stevens said. “It’s too contentious.”

The CDBG loan has an attractive commercial interest rate of 4%. It also didn’t require the BC & Southern to start making payments for 20 months after the loan was approved in November 2019. That delay was to give the railroad time to meet employment obligations in the agreement that required the railroad to hire 22 employees, of which 51% had to meet low- or middle-income criteria. Stevens said the BC & Southern currently has eight employees, including himself. He said, however, meeting the employee milestones would not have been a concern.

The BC & Southern hasn’t offered rides since March but has developed one new revenue source. Stevens said the BNSF railway started parking unused coal cars last week on the BC & Southern tracks. The arrangement is worth from $60,000 to $90,000 a month to the BC & Southern, depending on the number of coal cars parked, Stevens said.

At least one Baldwin City councilman holds out hope that the city’s relationship with Midland/BC & Southern can still be salvaged. Cory Venable, who was on a City Council subcommittee negotiating with the railway and historical association, said the BC & Southern had agreed to the city’s terms before the historical association decided not to sell the park. It’s in the railway’s best interest to continue to operate out of Baldwin City, he said, because the Franklin County site is rural and likely a farther distance to travel for many of the railway’s Kansas City area visitors.

“Baldwin City is big part of the tourist train’s appeal,” he said. “Are you telling me Johnson County people are going to want to go somewhere in the county by Ottawa, or wherever they build a depot in Franklin County?”