Strathspey Railway

That issue of the ongoing cost has always been one of the reasons why I think a shareholding model for ownership of heritage railways is a poor one. (Look at the WSR share register and see just how many £5 shareholders there are, who likely joined in the 1970s and have had 40+ years of costs of being kept on the register). An annual membership of a membership organisation ought at least be set to a point where the costs of honouring the membership (typically a few magazines and one mailing with the accounts and AGM invitation) ought to be less than the annual fee. There's also a much better likelihood that members do in fact exist and are interested, since that is validated each year by virtue of the whether they renew or not.

Cue a discussion about "members - are they worth having?"

Tom

 

On the railway I'm most involved with we have a Duty Trustee scheme where each board member is expected on a rota basis to spend a couple of days visiting as much a possible of the railway to meet and talk with volunteers, staff and visitors. Having had personal experience of the benefits of "management by walking about" the aim was to make sure Trustees are aware of issues and concerns and to be more visible . They are expected to produce a report on their findings for board colleagues so that all are aware of their walkabout experiences.

 

It's interesting that the SDR are planning a new share issue. I can't remember hearing of one for a long time, but either they think the costs are worth it or someone hasn't properly looked at the long term costs and issues.

 

Perhaps the question could best be re phrased as "What's the purpose of membership?" As Tom points out shareholders have really made donations, typically with benefits attached such as free or discounted travel. There's a temptation to be over generous with those because it's tomorrow's problem but, if they're not time limited, they create an on going liability unmatched by further income. They also create a substantial administrative cost for AGM's/ postage/ maintenance of the share register. If it's a new public issue of shares there's the legal requirement to use an Authorised Issuer and the eye watering costs of a Prospectus.

Membership of an organisation such as an incorporated charity (which can't have shareholders) is easier but again, as Tom has highlighted , administrative and postage costs will typically consume around half of the annual membership fee. The real underlying challenge is complacency. Members may well believe that their fees are sustaining the railway. Of course, every bit helps but the total net income generated from annual subscriptions will in many cases be in the low single figure percentages of the cost of keeping the railway going.
Tom has also highlighted that members may be encouraged to join because of financial benefits such as discounted travel. It may make the membership figures look good but when the cost of providing those benefits is taken into account the net benefit may be minimal. It also creates a voting block of members whose primary interest may be what they can get out of the railway not what they can contribute leading to some of the discontent expressed on here about disinterested/uncaring voting.

Even if membership fee income is not the underpinning of heritage railway finances it has to be remembered that members generally (including shareholders) tend to be the principal donors to appeals and leavers of legacies so the situation is not straightforward. Nevertheless in an environment where running a heritage railway is increasingly unlikely to generate a surplus the financial role of membership, and especially of volunteers wanting to ensure they can enjoy their hobby, is likely to require close attention.

 

Don't forget for most railways you need to be a member to volunteer. Also a large membership is probably beneficial when you want to run an appeal as I suspect a good percentage will contribute. Probably a good base also for publicity on the railway.

Sent from my SM-A526B using Tapatalk

 

I think that this discussion risks missing an important point - how does an organisation that depends on donations and goodwill maintain positive connections with those who wish it well. I come from a church background; we do a lot of that by asking people to give regularly, and by retaining personal connections. These relationships vary between people who attend every Sunday and are actively involved in the life of the church, to those with only childhood connections who give because they think it a good thing.

Railway heritage has needed to start from a slightly different place, and to be much more project (line, vehicle, building) oriented. Organisations also reflect trends at the time of those projects - hence the preponderance of company structures. Interestingly, a culture of regular newsletters (precursors to modern magazines like "Main Line" or "Bluebell News") started very early, and has become a material part of expectations.

My own view is that such communications are an essential part of running a society, and that the cost of not providing them will in the long term be much greater than the print and distribution costs. They keep the organisation in supporters' minds, and provide an anchor against which major appeals can be driven. The same logic applies to member discounts. It's really easy to assume that if a member gets a 25% discount on fares, that is 25% of the fare income gone. However, setting aside any (IMHO overstated) views on secondary spend, that assumes that the member would have visited in any case - I know that I have travelled to railways, and used them more when staying in the area, because the membership discount has changed my perception of price and value. I find this especially interesting given NYMR's current fare policy, which embraces a similar logic to allow repeated visits in the expectation that use of this perk will be limited, and not fully offset the increase.

Even if it isn't necessary to be a member to volunteer (insurance policies seem to vary!), that membership pool - and the regular communications that go around it - seem to be a good way to draw in volunteers, especially first time or irregular.

That leads to the power of members and their votes. One aspect of membership is a sense of ownership, and voting rights in the organisation are an expression of this. Where issues arise, the dominant theme seems to be a disconnect between board and "ordinary members/volunteers", where things get "political" because people deeply invested in the organisation are dissatisfied with direction. While the specifics at Strathspey are unclear, the general trend in these disputes (SVR, NYMR, L&B, WSR) is that people don't want to walk away, but wish to use their influence to seek change. Looking at the characteristics of those debates, a minority (weighted towards volunteers) vote, and proxies are in particular used by incumbents to bolster their position - helping tie down the safety valves where matters are serious.

 

You'll note that I was careful to say that the membership fee should cover the fixed costs!

To take an example, in our case the costs of "Bluebell News" were given as £48k in the most recent set of Society accounts. Since there are ~ 10,000 members, that gives a per member cost of around £5/year to receive four printed magazines. That's against a one year adult membership of £30. The accounts show an income of £156k; costs of £84k (of which Bluebell News was £48k); surplus available of £72k.

Your other point is about the other costs of delivering benefits. I'm wary about ascribing too much of that cost directly, since if a member occupies an otherwise empty seat, it hasn't cost much for them to be sitting in it. But in our specific case, the member benefits are structured in a way that requires a purchase, since members get any number of discounted tickets, not a limited number of free ones. In which case, if a BRPS member buys a £14 half-price ticket, that is £14 of income to the railway, which may otherwise have hauled round an empty seat. If that discount in turn makes the difference between someone visiting or not, I can't see the problem. It only becomes an issue if you are in the fortunate position of having such loadings that discounted member tickets deprive someone paying full price from travelling (or, equivalent, if you have to run more / longer trains to cope - that's a luxury problem to have!)

At which point, you then get the soft benefit of a large membership, which is a captive audience of people from whom you will draw both donors and volunteers.

My own view is that, given the way we have structured our membership benefits, I can't see any reason to follow any other strategy than growing that membership.

Tom

 

I very much agree that the membership should be as large as is practicable so long as Tom’s test of income generated exceeding cost incurred is met. I’m not doubting Tom’s figures but as a general rule the costs of printing and postage are making electronic communication attractive at least for basic membership. As suggested previously the question of the purpose of membership leads to is it primarily to generate income? If it is the net levels from periodic fees may need looking at. Ideally the membership base is one that can be used to attract additional income whether that’s higher fees, donations or legacies.

 

I always thought another aspect of large membership was when organisations were negotiating with councils and other public bodies. A small membership is less likely to have the influence with politicians of a large one.

 

Is a prospectus actually required for the size of issue a heritage railway is likely to make? I once tried to follow this through the various legislation, and I was not convinced you did, but with your access to Practical Law or whatever, you may have a definitive answer.

 

Steering clear of the politics, I travelled today and had I not seen the press articles I would not have known there were issues behind the scenes. Seemed plenty of staff about at the stations and we enjoyed the light lunch service, which was well presented and very good value. 5025 was in fine fettle and gave a good run to Broomhill and back. Train was probably 50 to 60% full, with good numbers taking advantage of the beavertail obbo saloon - not bad for last day of the season.
I hope all parties can work out their differences, this remains one of my favourite lines to visit.

 

I was the driver today, I don't know if you were one of the many people that I spoke to today, but I am glad that you enjoyed your visit.
Keith

 

It’s a complex subject! A smaller heritage railway might manage with a private limited company which is restricted to a maximum of 50 shareholders who can apply for shares which would typically be bought as an investment with a view to dividends and/or capital growth. For many heritage railways purchase of shares in a limited company is more like a donation with benefits attached. Dividends may be excluded and although shares can be transferred they are unlikely to have any value. Neverthless, where the railway issues an invitation to more than 150 people to buy shares ( or to a very narrow category of professional investors) it’s a public offer and the issuing company must comply with the Prospectus Regulations. In most cases a share issue will be to raise funds from a large number of supporters purchasing relatively modest quantities. The costs of preparing and issuing a compliant prospectus are substantial and can easily swallow up a significant proportion of the funds raised.
If the railway has an incorporated membership charity in its structure its probably more attractive to encourage donations via that vehicle especially if they can be Gift Aided.
Just to add to the complexity some railways are converting to Community Benefit Societies where the legislation relating to share issues can be less burdensome.

 

Thanks, I know it is complex, partly because of all the EU legislation that had to be accommodated and a quick search online suggests several amendments too. Most corporate finance professionals' experience will I suspect also not extend into a not for profit (or even unlisted) situation.

 

Thank you for a very enjoyable ride Keith, that black 5 is a cracker!

 

From FaceAche -

TIMETABLE UPDATE

Our main 2023 timetabled services have sadly come to an end and we are looking forward to our 2024 Season.

A big thank you to all our passengers for supporting us throughout 2023.

Unfortunately, for various reasons, we are unable to offer our Santa Express service as before but...

Watch this space for announcements of our Festive Services, which may include Santa, if he is not too busy!!

 

Didn't see this reported elsewhere but a few inches in one of the magazines I perused in the station Smiths but Andrew Barclay 'Salmon' has moved from Royal Deeside to Aviemore for what has been described as a "contract overhaul" that'll see collaboration between the two groups. This joins RSH "Birkenhead" which I think is owned by a member of the RDR.

 

Latest article in the Strathspey Herald. 11.11.24

Rescue plan to be thrashed out to 'salvage' Strathspey steam railway

A rescue plan is being put together to ‘salvage’ the Strathspey steam railway operation, the Strathy understands.

The Strathspey Railway Association – the largest shareholder in the Strathspey Railway Company – held its AGM a week ago in the Boat Hotel in Boat of Garten.

There were around 63 members in attendance and the meeting was held in private.

The heritage railway has recently been hit with two major setbacks potentially putting its future at risk.

The world famous Flying Scotsman was involved in a collision on the line at Aviemore at the end of September which resulted in two people being injured and a six-figure loss in income and an insurance claim to be dealt with.

A source, who did not wish to be named, told the Strathy earlier this week: “The association made it quite clear at the AGM they would not bail out the company and that they would not give the company a loan as they could not justify it as a charity.

“However, they have a plan in which they hope to rescue the company.

Then last month there was a walk-out by some key staff and volunteers after the SRC’s directors refused calls to stand down amid allegations of bullying and poor management.

 

46464's boiler passed its boiler test so is heading into he final phase of its restoration.

 

The latest Strathspey Express has hit the mat and is quite a heavy read, but credit to the authors for being very open and candid (as far as possible) regarding the significant difficulties the line faces. There is no doubt some big (& overdue) changes in governance and management are required. The railway is also now in a perilous financial position having spent, rather than replenished, reserves this season - seems a lot was bet on the visit of a certain A3..
A full article on the Flying Scotsman incident is also included (from the railway's perspective). Points of note:
-Royal Scotsman set had been deposited much further north than usual by a GBRF driver, this was to facilitate the attachment of an SR diesel to the rear of the set.
-The driver of Flying Scotsman was fresh on and was (correctly) signalled into the station by someone on the footplate (who had also conducted the stabling of the GBRF diesel).
-The guard of the train was waiting on platform 3, he was awaiting a call on the radio from the footplate crew, this never came.
-Vision was inhibited by the curvature of the line, the corridor tender and lack of access to the cab window by the fireman, due to the number of people on the footplate (X2 owner reps and Crew, 1 owner rep was in the fireman's seat).
The article concludes: 'The collision occurred...because the distance to go was not effectively communicated to the driver by the three people on the footplate who knew or could see the position of the...train. The fireman was inhibited from accessing the cab window...to assist with sighting..due the number of persons on the footplate. "
The RAIB conducted a re-enactment on the 5th October and are carrying out a full investigation. The ORR visited the 12th October and immediately issued an improvement notice surrounding 'failure of managing risk during a special event' & 'managing access to the driving cab' as an additional area of concern. The railway has until 31st January 2024 to address the ORR shortcomings.
The RAIB report is due later next year.
A lot of information provided, but also a lot more questions. Also noted elsewhere in the magazine that future Royal Scotsman work is now considered in doubt.