Manitou Springs gets on board for cog railway renovations

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Business owners in Manitou Springs are pleased at the prospect of the Pikes Peak Cog Railway reopening. But it will be more than two years before that could happen, and potential roadblocks could derail a final decision to rebuild the railway.

One hurdle was cleared Tuesday, June 12, when Manitou Springs City Councilors voted unanimously to approve a unique agreement with the railway’s owner.

Under the agreement, the railway would pay the city $500,000 this year and again in 2019 to partially offset the loss of excise and sales tax revenues while the cog is closed. The city would waive use taxes and tap fees in connection with the reconstruction project and cap future excise taxes at $500,000 beginning in 2020. The cap would increase periodically through 2070.

Manitou Mayor Ken Jaray called the agreement a “collaborative partnership” and said it gives the city and the cog opportunities to cooperate on other projects, including a transportation hub and national cog and Manitou Incline museum at the city-owned Hiawatha Gardens site.

The railway closed for the season in late fall 2017. This spring, Jack Damioli, president and CEO of The Broadmoor, shocked residents of the Pikes Peak region with an announcement that the railway needed major maintenance and repairs and would remain closed pending a study of the financial feasibility of necessary upgrades that could amount to nearly $100 million.

“Local businesses are very supportive of the cog coming back,” said Leslie Lewis, CEO of the Manitou Springs Chamber of Commerce. “It’s been a really good draw to Manitou particularly. We saw a lot of regional visitors come and bring their families to Manitou. It might be a day trip that includes shopping and dining; it’s that regional traffic we’re really losing right now.”

Terry Haas, co-owner of the Garden of the Gods Trading Post and several other Manitou businesses under the auspices of TAT Enterprises, said he felt “very positive” after Tuesday’s council meeting.

“The cog is a national and international tourist attraction that’s necessary for the economic benefit of the entire town,” Haas said, adding his business has seen a direct impact already from the closure. “Various group tours have cancelled that used to come to our businesses for lunch. Every week we get three or four [tour] buses that have cancelled.”

Haas said he and other Manitou business owners “stand ready to influence council and the city administration to act positively and not burden the cog with excess red tape.”

“The No. 1 question I get is when the cog is reopening,” said Roger Guzman, owner of the Pikes Peak RV Park and the El Colorado Lodge in Manitou. “I think the cog’s pretty important to this community.”

Rebuilding the cog

Gary Pierson, president and CEO of The Oklahoma Publishing Co., the cog’s owner, said at a community meeting Monday that a final decision on reopening the railway has not yet been made.

Pierson said the organization has undertaken a three-phase process to determine whether the cog, one of only two cog trains in North America, can be rebuilt.

The first phase, investigation, took six months and is 99 percent complete.

“All of the expertise other than in Manitou resides in Switzerland,” where most cog railways are located, Pierson said. “That’s where the designers, manufacturers and parts come from. About 80 percent of our construction process will come from Switzerland and Germany. It took us a long time to find the right engineers, the right manufacturers and the right price.”

Phase two would answer logistical questions about whether the renovations, repairs and upgrades can physically be done.

When the railway was constructed in 1891, “they built it with mules and pickaxes,” Pierson said. “There is no direct road that parallels the line. Just getting materials and workforce up and down the mountain is a complex project in and of itself. The big question is, can it even be done?”

Logistics of the project also depend upon coordination and a good working relationship with Manitou, Colorado Springs, El Paso County and the U.S. Forest Service.

In the third phase, bids for materials and construction must be obtained and contracts finalized. Pierson said he is concerned about the potential effects of steel tariffs on the cost of new rails and train cars, which will have to be ordered from Europe.

The production period for new trains is more than two years.

“That’s why we have to get underway, because this could easily spill over into a third year,” Pierson said. “Then the decision not to progress becomes easier.”

If the project does get going, construction will involve all-new track and ballast and upgrades to the historic depot.

“It’s fair to say this will be one of the most unique construction projects in North America,” Pierson said. “We’re going to promote the process and say this is worth coming to see in and of itself.”

And if the reopening of the railway should coincide with the opening of the new Pikes Peak Summit Complex, schedule for completion by the fall of 2020, “we can make great hay out of that,” Pierson said.

The agreement

The 50-year tax incentive portion of the agreement caused some attendees at Monday’s community meeting to express concerns.

The original agreement proposed that evening called for a 1.5 percent increase in the $500,000 excise tax cap every four years.

“What might costs be four years from now?” longtime Manitou resident and attorney Howard Morrison asked. “What was $500,000 30 years ago? Is there a way to modify that?”

After discussions that lasted almost until Tuesday’s council meeting began, Jaray and Pierson agreed to allow the city more discretion by allowing it to increase the cap amount by as much as 2.5 percent in certain specified years. That provision would commence in year 12 of the agreement.

Every year, however, the railway would be reimbursed for revenues in excess of the cap.

The city would also waive the 3.8 percent use tax on capital assets purchased by the cog and tap fees associated with the construction work. Jaray said he did not think there would be any tap fees but estimated that the use tax waiver would amount to $750,000 to $1.3 million.

The city’s return would come from “the largest single investment in Manitou Springs ever,” Pierson said. Manitou would retain all collections of the 3.9 percent city sales tax on tickets and admission fees after the railway reopens.

“We’re looking at every assistance we can, because the economics of this decision are very, very thin,” Pierson said. “We haven’t laid off our employees, and we could have. Right now, it’s costing us $2 million a year to keep them on the payroll. By the time this is over, we will be $5 million in the hole. That’s why we came up with this plan — let’s go ahead and pay tax we don’t owe in 2018 and 2019 to keep your city whole … and for us to make a profit.”

Opportunities to partner

Beyond the specifics of the agreement lie opportunities for additional joint projects, Jaray said.

If the project moves forward, the railway will add three 240-passenger trains, refurbish four current trains and permanently retire four more.

Jaray said the cog has offered to provide some financial resources to create a transportation hub at Hiawatha Gardens, where the retired train cars could serve as “a museum of national quality highlighting the history of the cog and the Incline.”

After perusing the museum, visitors could board a shuttle, Segway, scooter or bike, or walk downtown, leaving their cars parked at the Hiawatha Gardens lot.

“We don’t have answers to all the issues we have,” Jaray said. “I’m looking forward to engaging the community in robust dialogue.”

Manitou City Council will conduct a work session on the agreement at its next meeting at 6 p.m. June 19 and will vote on a second reading June 26.

If council finalizes the agreement then, “that will trigger the end of the second phase, and we will move quickly into the third phase,” Pierson said. A final decision could be made within 30 to 45 days; “then we’re probably under way in 30 days — it could be August.”

“I’m a little nervous, but I can’t think of a better organization [to partner with] than the cog railway,” Jaray said. “The opportunities it opens up for us are almost unlimited.”