Financial Missteps Lead Iowa Pacific To Give Up On Hoosier State Line

Jan 31, 2017

The brown and orange Iowa Pacific trains will stop running on the Hoosier State line starting March 1st.
Credit Stan Jastrzebski / WBAA News

Indiana Department of Transportation officials say an unreasonable request led to Iowa Pacific Holdings removing itself from a deal to run the Hoosier State passenger train.

But Iowa Pacific’s CEO says a quirk in the contracts between his company, INDOT and Amtrak doomed the partnership.

Ed Ellis says his firm’s compensation from the deal decreased each time on-time performance improved.

“The way the contracts worked, we ended up getting less money as the train ran more on time,” Ellis says.

That’s due in part to a contract stipulation that INDOT paid Amtrak before Iowa Pacific when there was any profit. It meant Amtrak got deposits totaling almost four million dollars in 2016, but Iowa Pacific got just half-a-million bucks.

That led Ellis, late last year, to try to renegotiate the deal, asking for $150,000 a month in guaranteed revenue. INDOT spokesman Will Wingfield says that’s more than the original deal stipulated and more than was reasonable for Iowa Pacific to seek.

Ellis says he didn’t realize the contract would swing the payments so far in Amtrak’s favor, and says he’ll learn from the experience if his company enters into another public-private partnership.

“The one thing that I would want to change going forward is to make sure that we put some kind of a floor under what our monthly revenue would be from the contract so that we don’t get into a situation where, at the end, we’re several hundred thousand dollars less than where we thought we would be,” Ellis says. 

Wingfield says the national passenger rail carrier has verbally committed to trying to add some of the amenities Iowa Pacific offered, including WiFi service.