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Short line economics

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Posted by BRAKIE on Monday, April 1, 2019 9:36 AM

Doughless
Special runs on weekends. Its all good.

Dougless,Some short lines charges a surcharge for weekend service since the crew may be in overtime.

I know of one short line that offered Tuesday through Saturday service since that was some customers wanted  service.

Another now defunct  short line that  I visited back in the late 80s operated on a as needed bases until their last two customers went to trucks..

Their Alco S-1 was stored in their metal engine shed until around '92 or maybe '93 when the scrappers removed the rail and steel bridge.. I never did find out what happen to that S-1 even though down deep I suspect it was cut up on the spot along with the engine shed.

At any rate with the weekly feast or famine operation I marvel how many so/so short lines manage to stay afloat.

Larry

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Posted by Doughless on Monday, April 1, 2019 6:21 AM

BRAKIE

Dougless,Some short lines would love 7 car trains but,they hang on with 3-4 cars daily.

In that ten miles they may only have three customers and as we know the number cars a short line handles depends on the customer needs and to a degree whims..

And never forget the truckers get more then their far share of that customer's outbound and inbound shipments.

If you study short lines under GWI's ownership and look them up on Google or Bing maps you can see how many customers they serve by following their track.

Look at Corman's short lines customer base versus mileage.

https://www.rjcorman.com/companies/railroad-company/our-short-lines

Again those numbers may fall short.

 

4 cars x 5 days is in the same ballpark as 7 cars x 3 days.  Special runs on weekends.  Its all good.

- Douglas

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Posted by BRAKIE on Monday, April 1, 2019 4:29 AM

Dougless,Some short lines would love 7 car trains but,they hang on with 3-4 cars daily.

In that ten miles they may only have three customers and as we know the number cars a short line handles depends on the customer needs and to a degree whims..

And never forget the truckers get more then their far share of that customer's outbound and inbound shipments.

If you study short lines under GWI's ownership and look them up on Google or Bing maps you can see how many customers they serve by following their track.

Look at Corman's short lines customer base versus mileage.

https://www.rjcorman.com/companies/railroad-company/our-short-lines

Again those numbers may fall short.

Larry

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Posted by Doughless on Sunday, March 31, 2019 10:03 PM

BRAKIE

 

 
MIKE0659

Sorry about that Douglas, I dropped a zero there. It is 100 cars per mile per year.

Mike

 

 

 

A  "Dream" short line to be sure. A  10 mile long short line would need 1,000 cars a year. A 25 mile long short line would need 2500 cars a year..Good luck with that unless there is a major shipper or receiver on the line.

Those are nice crunch numbers but,in my studies of short lines that number falls short for the majority...

 

 

A 10 mile long short line would need 21 cars per week to break even.  That doesn't seem like a lot to me.  Three 7-car trains per week if you wanted to free lance.

- Douglas

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Posted by BRAKIE on Sunday, March 31, 2019 9:37 PM

MIKE0659

Sorry about that Douglas, I dropped a zero there. It is 100 cars per mile per year.

Mike

 

A  "Dream" short line to be sure. A  10 mile long short line would need 1,000 cars a year. A 25 mile long short line would need 2500 cars a year..Good luck with that unless there is a major shipper or receiver on the line.

Those are nice crunch numbers but,in my studies of short lines that number falls short for the majority...

 

Larry

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Summerset Ry.


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Posted by MIKE0659 on Sunday, March 31, 2019 8:14 PM

Sorry about that Douglas, I dropped a zero there. It is 100 cars per mile per year.

Mike

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Posted by BRAKIE on Wednesday, March 27, 2019 5:27 PM

Doughless

Ok.  That makes more sense.

 

Doughless,Your short line can operate two or three days a week and still have a black ink bottom line since that lowers the overall operating costs.

I knew of one shortline that operated as needed until their only customer closed in 1970. The Morehead & North Fork down in Ky. The owner was the engineer and when needed the brakeman. Traffic was inbound empty boxcars and outbound brick.

Larry

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Summerset Ry.


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Posted by Doughless on Wednesday, March 27, 2019 4:55 PM

Ok.  That makes more sense.

- Douglas

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Posted by jeffhergert on Wednesday, March 27, 2019 12:24 PM

Doughless

 

 
MIKE0659

 

What you don't state is how long your shortline examples might be. If you find railroads that meet those numbers, you may find they don't actually operate many miles of railroad, or they don't run 5 days a week. The length of the railroad is a key to this. You have to have revenues sufficient to maintaining all those miles.

I know from the inside what it costs to run a profitable shortline and that number of 10 cars per mile/per year is pretty good. Up to that point you are fighting your fixed costs, but when you break over that point, it is nearly all pure profit. Until you hit that next level where you have to add people and equipment and up your track maintenance to meet the new traffic levels.

 

 

 

Mike.  Thanks for the inside info. 

Just to be clear about the rule of thumb.  10 revenue cars/mile per year.  For a 16 mile shortline, that's 160 cars per year, or about 3.1 cars per week.  (I can do the math, just wanted to example what you wrote.)

 

I think you need to recheck the earlier posts.  His earlier post, and one of mine also, said it's 100 cars per mile per year. Your 16 mile short line would need 1600 cars per year or about 31 loads per week.

Jeff   

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Posted by BRAKIE on Monday, March 25, 2019 8:09 PM

MIKE0659
It isn't cheap to run a shortline railroad. It is way more expensive than those outside the industry can imagine. It's why so many railroads fail, it just bleeds the owner dry.

I may not be a insider but,I've studied short lines since the 60s and seen many come and go only to be restarted by another short line operator under a new name.

Then,you have short lines that has turn unprofitable branch lines or urban industrial leads into money makers..

 

R.J.Corman and Jerry Jacobson was tops in their field as far as turning things around on trackage with few customers. R.Js Western Ohio Line is one example of what can be done after a Class One calls it quits over a certain piece of track.

While WE is a regional we can't overlook that sucess story no more then we can overlook former regionals Mid-South or Wisconsin Central.

We both know most class ones would rather not be in the local switching business.

 

Larry

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Posted by Doughless on Monday, March 25, 2019 7:53 PM

MIKE0659

 

What you don't state is how long your shortline examples might be. If you find railroads that meet those numbers, you may find they don't actually operate many miles of railroad, or they don't run 5 days a week. The length of the railroad is a key to this. You have to have revenues sufficient to maintaining all those miles.

I know from the inside what it costs to run a profitable shortline and that number of 10 cars per mile/per year is pretty good. Up to that point you are fighting your fixed costs, but when you break over that point, it is nearly all pure profit. Until you hit that next level where you have to add people and equipment and up your track maintenance to meet the new traffic levels.

 

Mike.  Thanks for the inside info. 

Just to be clear about the rule of thumb.  10 revenue cars/mile per year.  For a 16 mile shortline, that's 160 cars per year, or about 3.1 cars per week.  (I can do the math, just wanted to example what you wrote.)

- Douglas

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Posted by MIKE0659 on Monday, March 25, 2019 7:25 PM

Brakie, you are right in saying every shortline is different, I can't dispute that point. I've been in the shortline railroad industry as a Trainmaster for over 31 years and have met with a lot of very knowledgable people in the industry. In talking to other shortline people at national and regional meetings, it is something most everyone agrees on. This isn't just my opinion or a guess, it is based on fact.

It's not a "Dream Short Line", it is what you need to be profitable. What I stated has been the rule of thumb for a very long time. The key is that the rule of thumb number is what you need to be a financially viable - read that as "profitable" - shortline railroad. An old shortline industry joke is, "How do you make a small fortune in the shortline railroad business? Start with a large fortune."

What you don't state is how long your shortline examples might be. If you find railroads that meet those numbers, you may find they don't actually operate many miles of railroad, or they don't run 5 days a week. The length of the railroad is a key to this. You have to have revenues sufficient to maintaining all those miles.

I know from the inside what it costs to run a profitable shortline and that number of 10 cars per mile/per year is pretty good. Up to that point you are fighting your fixed costs, but when you break over that point, it is nearly all pure profit. Until you hit that next level where you have to add people and equipment and up your track maintenance to meet the new traffic levels.

The Class I railroads refer to that turnover of customers as "Churning", and expect to have ten percent turn over every year. It may not be that bad on your average shortline, but it happens just the same. Customers, even good ones, will come and go no matter what you do.

I stand by that metric. If you could see the financials of a shortline, or a few shortlines, you would see it plays out that way. Over the years we were approached to take over operations at shortlines owned by industries or state/county governments and it proved itself over and over. Go through all the financials and the traffic and you can look back and see that formula being proven true.

It isn't cheap to run a shortline railroad. It is way more expensive than those outside the industry can imagine. It's why so many railroads fail, it just bleeds the owner dry.

Roanoke & Western Railway Company
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Posted by BRAKIE on Monday, March 11, 2019 9:21 PM

MIKE0659

A loose rule of thumb in the prototype shortline railroad community is you want 100 revenue cars per mile, per year as a break-even operation. Speed doesn't really affect this equation.

 

That would be a dream short line however the majority is lucky to see 2500 cars a year which works out to be roughly 10 cars a day for the normal 5 day work week.

Then you have the day to day operations of short lines that handle less then 1200 cars a year.

When it comes to short lines there is no real rule of thumb because every short line is different  as far as car loads handled annually.

The livelihood of a short line is keeping and finding new customers as well as  finding replacement customers for former customers  lost to trucking or plant closures. A vicious cycle to say the least.

As one short line operator put it this way in a issue of Trains many years ago(the 80s?),its either feast or famine.

 

Larry

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Posted by MIKE0659 on Monday, March 11, 2019 6:39 PM

A loose rule of thumb in the prototype shortline railroad community is you want 100 revenue cars per mile, per year as a break-even operation. Speed doesn't really affect this equation.

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Posted by richg1998 on Friday, March 1, 2019 12:22 PM

You might be interested in a short line a few miles from me. It use to come through my small ciy which is now a rail trail.

Lots of product distribution in the Westfield area. It has expanded the past ten years. Big box companies require a lot of products. Even local lumber compnies.

In the Yard, many trailer trucks pickup plastic pellets from tank cars. One coating company takes a few cars for unloading for product production.

https://www.pinsly.com/services-solutions/pioneer-valley-railroad/

The line is sixteen miles long. I sometimes go to the yard in Westfield, Ma and watch from an overhead bridge near the CSX interchange.

It has a track past a company I use to work at in Holyoke. I use to have lunch at a siding in the good weather. A turnout in front of me had no lock. I see cars parked there now on GPS so it must have a lock now.

I do remember seeing a high rail pickup when I would come into work stopped at the beginning of the siding.

Nearby, they connect with Pan Am Railways mainline.

You can see everything on Google maps.

Many times rolling stock are stored in Holyoke on sidings near old mills.

Last I saw a CF-7 being used. I did see those on a roster list sometime ago.

Rich

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Posted by BRAKIE on Thursday, February 28, 2019 9:16 PM

NHTX
es that would add to traffic flow and, tie in to the forest products basis for the shortline. If the shortline is set post 1985 or so, how about a plant that takes the waste generated from manufacturing plywood and compresses it into fireplace logs? This material was at one time simply burned on site, to dispose of it. With enlightened environmental policies, this became unacceptable and gave rise to the processed fireplace log. The angle for the railroad would be hauling in tankcars of a bonding agent. If the plywood plant didn't generate sufficient waste, it could be brought in by truck or, woodchip gondola. The logs are wrapped for sale and, the paper wrappers could also come in by rail in boxcars.

Great idea! Another would be to ship the waste to a processor also the compress fire logs could be shipped out in boxcars to distribution warehouses.

Larry

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Posted by Doughless on Thursday, February 28, 2019 9:07 PM

Or a maybe a charcoal briquette factory, for many eras. 

Kingsford has plants in KY, OR, MO, and WV. 

Charcoal briquettes are made from wood and a little bit of coal, along with a binding agent like corn starch and an ash whitener like lime.  

 Google satellite.  Kingsford plant in Oregon. Rail served.

https://www.google.com/maps/place/Kingsford+Manufacturing+Co/@44.064384,-122.9806909,563m/data=!3m1!1e3!4m5!3m4!1s0x0:0x3abed50db76aabbf!8m2!3d44.0641139!4d-122.979202

 

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Posted by NHTX on Thursday, February 28, 2019 7:41 PM

     One aspect of this discussion that interests me is the potential to add industries that would add to traffic flow and, tie in to the forest products basis for the shortline.  If the shortline is set post 1985 or so, how about a plant that takes the waste generated from manufacturing plywood and compresses it into fireplace logs?  This material was at one time simply burned on site, to dispose of it.  With enlightened environmental policies, this became unacceptable and gave rise to the processed fireplace log.  The angle for the railroad would be hauling in tankcars of a bonding agent. If the plywood plant didn't generate sufficient waste, it could be brought in by truck or, woodchip gondola.  The logs are wrapped for sale and, the paper wrappers could also come in by rail in boxcars. 

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Posted by BRAKIE on Wednesday, February 27, 2019 8:17 PM

MJ4562
Are short line employees usually union members?

Some short liines are unionized while others pay top wages.

The reason is simple.. Railroading is a harsh career where train service employees put their life and limb on line while working  in all types of weather so short lines need to pay top wages..

Recall railroading doesn't suffer fools or carelessnees.

Short lines usually hire former class one employees but,will consider those that have went through training at one of the railroad trainig schools..

Larry

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Posted by MJ4562 on Wednesday, February 27, 2019 7:35 PM

Are short line employees usually union members?  Do short lines train their employees from scratch or do they hire former Class I employees?  For some reason I thought that was part of the cost savings was more flexible work rules and pay structure. Just curious. 

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Posted by Doughless on Wednesday, February 27, 2019 7:14 PM

BRAKIE

Douglas,A short line must maintain a customer base in order to survive. Relaying on seasonal car loads  can doom a road to failure by their connecting road withholding the needed covered hoppers or worst their connecting road offers better rates and the grain is trucked to a transload point on the bigger railroad.This was covered in one of Trains yearly short line issues. These issues should be a must read by any short line fan.

On the other hand some short lines seen  gain in carloads from hauling frac sand to processors.

 

That's what I was talking about.  Grain elevators/feed mills pop up along the line where there was none before.  They provided more than just seasonal traffic.  As does the auto plant of course, and the transload facility.

Brand new industries that formed after the class 1 sold the line to a short line.  These aren't stragglers from days gone by.

OP could play God in the same way.  If the economics says 100 loads per year for the shortline, OP can divide that up over several brand new industries, as long as they are compatible/plausible for northern Minnesota.

- Douglas

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Posted by BRAKIE on Wednesday, February 27, 2019 3:35 PM

Douglas,A short line must maintain a customer base in order to survive. Relaying on seasonal car loads  can doom a road to failure by their connecting road withholding the needed covered hoppers or worst their connecting road offers better rates and the grain is trucked to a transload point on the bigger railroad.This was covered in one of Trains yearly short line issues. These issues should be a must read by any short line fan.

On the other hand some short lines seen  gain in carloads from hauling frac sand to processors.

Larry

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Summerset Ry.


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Posted by Doughless on Wednesday, February 27, 2019 9:46 AM

BRAKIE

 

 
Doughless
Not resurrecting old ones, but brand new industries that never existed on the BN line.

 

Doughless,This is exactly what short line goes for since every inbound or outbound  car load is mone and gettingy old rail customers back is as important as finding new customers.

But!!!!

For every customer a short line looses they must find a replacement if there is any candidates.

A short line marketing staff must be aggressive in finding customers knowning every customer counts...

 

Just speaking from railfan experience, two shortlines in Indiana benefited from new grain mills springing up on the line.  Brand new huge concrete structures on each line. 

As time moves on, companies find plants and facilities becoming outdated or too expensive to refurbish.  A viable company might just build new plants near rail lines.

And if the class 1s aren't interested in switching, the short line has a location advantage.

Also, Honda Motor Company built a huge assemebly plant on a short line, although, CSX has trackage rights and does some of outbound switching directly, but not always.  The short line motive power does the other switching.  In these cases the line exists, but some of the motive power is class1.  A rare situation, but plausible for a layout.

Notice that these examples are bulk commodities or bulk inventory, like finished automobiles.  No new small mom and pop shops are looking for rail service, IMO.

But I think transload facilities are becoming popular rail served industries also. 

- Douglas

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Posted by Doughless on Wednesday, February 27, 2019 9:09 AM

deleted. See below.

- Douglas

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Posted by BRAKIE on Wednesday, February 27, 2019 7:58 AM

Doughless
Not resurrecting old ones, but brand new industries that never existed on the BN line.

Doughless,This is exactly what short line goes for since every inbound or outbound  car load is mone and gettingy old rail customers back is as important as finding new customers.

But!!!!

For every customer a short line looses they must find a replacement if there is any candidates.

A short line marketing staff must be aggressive in finding customers knowning every customer counts...

Larry

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Summerset Ry.


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Posted by davidmurray on Tuesday, February 26, 2019 1:21 PM

On the  economic front:  The GM parts plant I worked at paid the tax on the rail line that served it.  (16 to 25 cars a day).  A new owner said he would not pay this tax, CN said the line is coming out,  It did, the plant closed six years later.

If similar tax laws apply, a similar arrangment would be possible.

Dave

 

David Murray from Oshawa, Ontario Canada
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Posted by wjstix on Tuesday, February 26, 2019 12:59 PM

Re-reading the OP, I think it might make more sense to have your shortline run the entire distance between Brainerd and International Falls, even if you're only modelling the 30-40 miles between Pine River and Brainerd. You could sometimes have through trains that don't stop at any of your industries, or way freights that have cars to drop off at the industries on your layout plus cars going to or from industries not on your layout.

Stix
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Posted by jeffhergert on Tuesday, February 26, 2019 10:35 AM

The old rule of thumb was you needed 100 loads per mile of track annually. (I orginally posted one load per mile per day, but I did some searching and found the formula in an old Trains article.)  Forty miles would need 4000 loads a year.  Could be a combination of inbound and outbound as long as it made a minimum of 4000 loads annually.  That's about 16 loads per day, in or out, for a 5 day week.

Jeff

 

 

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Posted by Doughless on Tuesday, February 26, 2019 6:33 AM

IMO, shortlines that created from abandonments of class 1 lines exist for the purpose of serving a major industry that still needs rail service.  OPs plywood/forest products company would be the reason the railroad exists.

A viable operation could also attract new businesses over the years.  Not resurrecting old ones, but brand new industries that never existed on the BN line.  Times change. 

From Brainerd to IF, I would think heating fuel would be in big demand, and an LP gas or oil dealer could have located a new facility on the line.

Also, concrete is needed everywhere, so a cement distribution structure, like Walthers Medusa Cement, could have located on the line as well.

Looking at current satellite imagery of International Falls, there is a huge packaging plant and a huge forest products yard that both look to be railserved from the north ( I assume CP or CN).  These companies could be served by your short line in a small way.  Although its normally more economical for large companies to simply use the class 1 for their large volumes, they like the option of keeping the Class 1s from having a monopoly on their business.  They could regularly throw some traffic your way just to keep the shortline open and use it as a bargaining chip if the Class 1 gets too expensive in rate negotiations.  ( I assume they ship by water too).  

- Douglas

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