I spent much of this week watching trains on the CSX North End Subdivision, between Richmond, Va., and Rocky Mount, N.C. Usually, you can count on spotting on this heavily trafficked, mostly single-track line the Four Horsemen of the Apocalypse, their names being Hunger, Death, Pestilence, and Unexpected Delays. But they and their black stallions were nowhere to be seen this time. The North End Sub operated like a well cleaned watch, the dispatchers seemingly trained by Peter Josserand (Rights of Trains, 1945), or maybe the fictional Eddy Sand (The Boomer, 1942).
No, what’s different about the North End Sub this trip is local politics. Every front yard — even the water tower in sleepy Stony Creek — seems to spout a sign, NO TOLLS. Virginia’s governor, Bob McDonnell, is proposing to turn Interstate 95, the Maine-to-Florida highway, into a toll road through his state, as is already the case north of Virginia. A similar proposal is being debated in North Carolina.
Two things are immediately apparent. First, the idea is immensely unpopular in Southside Virginia, one of the poorer parts of the state. It’s as of British redcoats had returned. Second, the state has an expensive road to maintain and expand, but not the money to do so. Something has to give, in other words. To put it in concrete terms, Virginia projects the need for $12.1 billion to maintain and enlarge the busy highway over the next quarter century, but can expect only $2.5 billion in funding.
This is the whole interstate highway problem in microcosm. Our interstates are crowded and crumbling, and we lack the money to maintain and expand them.
Of course, Interstate 95 has a competitor from New Jersey to Florida: CSX. The railroad takes no position in the toll proposal, perhaps wisely. Clearly, it’s to the advantage of CSX to block tolls and starve the highway. By the way, that’s the likely outcome. It is politically possible to finance new limited-access highways with tolls. But I can think of few roads (actually, none at all) that were built as freeways and later turned into toll roads.
On the other hand, why isn’t CSX exploiting its crumbling competitor? Driving home to suburban Washington, D.C., traffic in the opposite direction south of the capitol city grinds to a standstill. Trucks seem to occupy half of the space — hundreds, thousands of them.
The answer, unfortunately, is that CSX does a poor job capturing this highway traffic. It does best going wooing trucks that ply I-95 the entire distance to and from Florida, which describes but a fraction of the traffic. It is poorly equipped to market intermediate origins and destinations.
CSX is not alone in this. Railroads as a whole are best in dealing with the J.B. Hunt Transports and Schneider Nationals of the trucking world over the highest-volume, longest-distance routes. But institutionally, they all seem to lack the ability to pick at the smaller origin-destination pairs and to reach out to the smaller truck lines. To put it another way, the huge Class I railroads are no *** good at all retailing. Wholesaling is what they know.
This I do know: It would be tragic for this nation to have the worst of all worlds, that is, crumbling, overcrowded highways and railroads unable or unwilling to taking advantage of that opportunity. There has got to be a better way to go at this. — Fred W. Frailey
Bravo, oltmannd. You have hit the key points of profitability, and you have done so without resorting to old wive's tales. There always have been - and I suspect always will be - shippers who willingly make the trade between service and price. They're in business to earn a profit, too, don't forget. Even intermodal is differentiated these days. Imports can afford to take a bit longer to reach inland distribution centers, especially if the rate is lower. You don't see stack trains flying along at 79 mph very often. That speed is reserved for traffic that pays higher rates or is competitive with trucks on a given lane. Railroads pretty much have the import traffic in stack-train service. That leaves the domestic traffic as the competitive battleground. That just might be why NS and CSX have invested so much money in their relatively short-haul routes. They're not giving it away. They understand, though, that life isn't likely to get much better for truckers and they now have an opportunity that didn't exist 10 years ago.
In theory a business should invest in any improvement that returns more than the cost of capital. Investments that beat that hurdle by the largest percentage come first. Operating ratio is a simple way to track how the railroad is performing, although it embraces not merely operating performance but also changes in revenue per unit and volume--both of which lie within the marketing department's domain. As a measure of overall success and failure it is no substitute for return on equity.
Some of us recall when RR managements were criticized for relying on MGTM/TH, or thousand gross ton miles per train hour. That measure took the marketing factors out of the equation but had its own problems, such as encouraging yardmasters to let cars accumulate until big trains could be built, regardless of the delays.
Deregulation forced a new emphasis on correctly measuring success and failure, but the rail industry will always struggle to calculate ROE. If profitable new intermodal traffic can somehow be generated without new investment, great. But there are few carloads that do not require investment of some kind, starting with cars and the engines to pull them. The first problem is what to do with shared costs. Is the new traffic the thing that triggers the need to construct new sidings or yards? While Class I costing, pricing, and capital investment decision programs have become very sophisticated, their users seldom get into the assumptions behind them. A parallel issue, still essentially un-managed on most railroads, is how to decide whether a new service should be allowed to poach profitable traffic from other services offered by the same carrier.
The industry continues to get bogged down in debates over fixed vs. variable cost. Whether a cost is fixed or variable depends on the decision that is being analyzed, or in other words the frame of reference. Is it to fill slots on an existing train without adding a second section? Is it to add a new train? Is it to add more sidings and double track? Is it to abandon a line? A terminal? The president's salary is always offered as the example of a fixed cost, but if the company goes out of business even that is variable.
Intermodal acquired a bad name by playing games with these issues back in the day. Many short-haul piggyback operations were launched on the basis of rudimentary costing that was in effect between the operating department and the intermodal marketing group. Typically they died out after about a year, when the financial realities caught up with them and it had become evident that the much-touted TOFC venture was in fact costing the company money. Ten flats behind a pair of GP38-2's; anyone could see it. During the first decade or so after deregulation, many operating officials were a little smug about how the carload side generated all the profits--that is, until senior management began to focus on the cost of replacing freight cars.
In the last couple of decades intermodal has come into its own through more efficient technology, improved operating strategies, and heavy investments in equipment, terminals, and line of road to make it all work. These investments became possible because the profitable volume was there to justify them--volume driven to the railroads by truckers' rising costs. But today's thriving intermodal traffic exists in spite of the issues mentioned above, not because they had been resolved or went away. A renewed push into smaller and shorter-haul markets will revive some or all of those issues and test railroad managers' ability to analyze them.
Old Head: Amen!
Fred: That would be Eddie Sand, not "Sands". All time great fictional railroad character.
Thank you, Jon. I just corrected the spelling. Yes, Eddie Sand was one cool dude.
D.Carleton I don’t see your point about the Crown Point Bridge, do you see an unplanned emergency demolition of a large bridge as a success? According to the newspapers and my DOT friend, the concrete piers where so far gone that the bridge could have collapse without warning at any time.
It wasn’t just dangerous to motorists, but to boaters below in Lake Champlain. They actually where repairing the steel super structure when they found out the concrete piers where in a dangerous condition. One day it was open, the next day it was closed.
Yes they had just started public meetings on building a new bridge or rehabbing the old one in October 2009, NYSDOT apparently though they still had another decade of use from the old deteriorating span. Instead they blew it up before New Year’s Eve.
The Glen Falls Post-Star quoted one state legislator as stating…
“It's completely unacceptable and I can't understand how one week ago we were at a public meeting at Addison, Vt., and they didn't know that the bridge was in as bad a condition as it is," said state Assemblywoman Teresa Sayward, R-Willsboro, who chairs a citizens committee advising the DOT on replacement or refurbishing of the 80-year-old bridge.”
True the state did a great job getting the all-weather temporary ferry up and running, and they did get the new bridge built very fast, but it was all unplanned, and a lot of local residents and businesses where hurt.
D.Carleton, you make it sound like this was all planned out, no problems. Nothing could be further from the truth.
The explosion however was pretty cool; we all at my hotel watched it live on TV…
Lake Champlain Bridge, Crown Point, NY Demolition
I along with many others saw the Crown Point travesty as a symbol of the failure of our state, our nation to fund transportation at least adequate levels. Eyes soon turned south to Tappen Zee after the Crown Point failure, that span may have marine worms boring away at its untreated wood piles, which deep in the mud of the river bottom can’t be inspected. The Tappen Zee was actually featured on a TV doc highlighting our failing infrastructure.
Of course NY State has a Dedicated Bridge and Highway Trust Fund created by Gov. Mario Cuomo as a pay-as-you-go fund for highway projects. But first they decided to use the fund’s revue to support bonding, and then Gov. George Pataki in 2001 added the daily expenses of NYSDOT and the DMV. Next Pataki went to Wall Street and had the bonds refinanced, with a balloon payment at the end of the decade.
By 2010 most of the fund’s money was going to debt financing and agency operating expenses, not to repairing bridges or repaving highways. No wonder we have failing and even dangerous bridges like Crown Point or Tappen Zee!
Fortunately the NYS Senate recently passed a bill to restore the Bridge and Highway Fund back to a pay-as-you-go fund for highway projects. I hope the Assembly approves it… before Tappen Zee falls into the Hudson.
The biggest negative impact from inadequate highway funding however isn’t the risk of a catastrophic failure but the daily grind of stop and go traffic on “freeways” across the nation that undermines our economy and quality of life.
The NS commerical that has been playing for several years, the one with the congested highway, says it all about today's highways and the railroads.
You can still buy that old novel on Amazon.com...
The Boomer: A Story of the Rails by Harry Bedwell, copyright 1938-42
Eddie Sand is railroading with a capital R. A “boomer,” Eddie travels the country making a living as a telegraph operator wherever he finds himself. Never content to sit behind a desk or undertake “the upkeep of a blonde,” Eddie’s courage, restlessness, and cunning lead him to high adventure. Harry Bedwell’s The Boomer portrays an elite fraternity of railroad men—men who were driven by one of the defining elements of the American character: a desire to wander. They were the glamour and glory of railroading, and no one was better equipped to tell their story than Bedwell. He reveals the behind-the-scenes battles that were fought to keep the trains running.
This edition also includes a glossary of railroad slang and a bibliography of Bedwell’s work. Originally published in 1942, Harry Bedwell’s The Boomer is widely considered the best railroad novel ever written. “An exciting yarn in sinewy prose . . . it has almost everything except sound effects.” — New York Herald Tribune Harry Bedwell (1888–1955) is the author of more than sixty short stories. The Boomer is his only novel. James D. Porterfield is the author of several books, including From the Dining Car: The Recipes and Stories behind Today’s Greatest Rail Dining Experiences.
US-50 from Emporia, KS through Newton to points west is also way overcrowded with trucks, to the point of being dangerous. This route was built right beside the original Santa Fe main to Los Angeles. Here just west of Emporia, the BNSF is still running lots of double stacks on this section of road. The transcon, which splits off just before Strong City, sees more traffic, but not that much more. The ability to pick up and drop off at some of the cities along US-50 would sure help our traffic problems. Oh, and yes there are still active yards all along this stretch of the BNSF.
To the commenters and Fred, this is fascinating reading. I compliment all of you for providing a lively and informative discussion.
Yes BJ, the Crown Point Bridge replacement was in planning at the time it was found to be too-far-gone; that kicked everything into overdrive. Two years later there is a new bridge and we all lived happily ever after.
But then there's the Tappan Zee Bridge. Who's bright idea was it to build a bridge at the widest part of the Hudson River? Trivia: The Port Authority of NY/NJ has jurisdiction over all highway tunnels and bridges in a 25 mile radius centered on, get this, the Statue of Liberty. How far is the TZB? 27 miles; Albany didn't want to share the toll revenue. The TZB was a joke when it was built and, due to circumstance, any replacement will be expensive and still a joke. Again, a no-win situation.
One item not previously noted...
Tolls on I-95 would not significantly add to the cost of operating a truck on per per-mile basis, and the cost would be simply passed on to consumers in the price of everything we buy instead of higher taxes. We will all pay to repair the interstates one way or the other - as John Knelling used to say, there ain't so such thing as a free lunch.
The real cost escalator in trucking is going to be the cost of people to simply drive the "reliable trucks".. Even in the face of the recent recession, most companies struggled to find enough people who could pass drug and background checks and would also accept a compensation in the $35K-45K range. The lifestyle of a driver deteriorates rapidly once their trips move beyond the "out and back today" radius of 300 miles or so. As employment level crawl back to normal, I foresee that driver compensation will have to rise by 20-25% if the industry is going to continue to attract and retain qualified individuals.
With that, railroads will have the chance to charge enough to move containers in the 250-1000 mile lanes at a profit - in the I-95 corridor, think Augusta-Richnond, Charlotte-Jacksonville, Raleigh-Baltimore, etc.
OK, I'd be happy (for now) if the railroads would just go after some of the long haul business that they basically ignore.
West coast produce is the prime example. It's long haul, high volume and good revenue. (something like $2.40/mile minimum for the trucker.) The railroads can successfuly handle this commodity. They do driibs and drabs now. (Maybe 8% of the market) They've handled it for over 100 years. But can you think of one major UP or BNSF marketing initiative targeting this business? This freight market is worth, conservatively, over $3 billion per year. The key is getting westbound loads for the intermodal reefer equipment. The truckers need those loads too, and they get a lot of them by hauling animal protein west. California may produce a lot of lettuce, but it needs to bring in chicken, pork and beef.
Chicken production is concentrated in the southeast. Pork is concentrated around Iowa. Beef is more west, concentrating in SW Kansas and the Texas panhandle. But it's all basically over 1,000 miles to the coast. Do you think anyone at the UP or BNSF is working on this? I don't.
As to Florida. "There ain't no loads out of Florida" is bull hockey. People eat a lot of bananas. The banana boats call on Florida ports. Heck Fire, Dole even stops its container ships in Florida to partially unload, then they go up the coast to Wilmington, DE for total unloading. From Wilmington they go directly back to Central America for more bananas.
Do you think that anyone from CSX has ever even talked to Dole about the possibility of using the northbound banana loads as a balance for the inbound domestic loads to Florida. I don't. (Del Monte brings its bananas in to Tampa.).
A long time ago I read in Progressive Railroading that using the words "railroad" and "marketing" in the same sentence marked you as an innovator. Things haven't changed much.
There are some wonderful rail marketing opportunities today:
1) Rail coal is drying up quickly due to the EPA and the price of natural gas releasing considerable rail capacity.
2) The price of oil/gas is coming down and is forecast to continue, the perfect time to increase highway fuel tax on highway users.
3) Long Haul truckers drivers shortages but no shortage if drivers are back home at night.
4) Railroads can hire terminal third party operators to reduce risk and capital costs.
5) There is a lot of truck freight available to pick and choose from.
6) Your best intermodal customers already know where their freight is and where your opportunties are
Any half decen t marketing man should be thrilled - it is a career building opportunity!
D.Carleton you make a great point about Tappan Zee, the puzzling and perhaps hilarious fact that it was built at the widest point in the Hudson River. “Zee” is Dutch for “Sea”.
It is the longest bridge in NY State, some 16,013 feet long, and is located just a bit more than 25-miles north of Midtown Manhattan, safely putting it outside the jurisdiction of the Port Authority of New York and New Jersey.
This was done of course at the time to ensure that the NYS Thruway Authority didn’t have to share any of the toll revenue of the new bridge with the Port Authority, which also wanted to build a bridge. The Authority when frustrated by Gov. Thomas Dewey in their own bridge efforts, swore to oppose any other party from building a bridge north of the George Washington Bridge.
Thus Dewey chose the location he did, because it was beyond the legal reach of the Port Authority. This allowed for all the toll money to go to the Thruway Authority, important because this revenue is what made building the entire Thruway from NYC to Buffalo financially feasible at the time.
I have heard an audio clip on WMAC Northeast Public Radio in which Dewey tells an audience that indeed the brilliance of Tappan Zee is that so many commuters from the growing post-war suburbs of Rockland and Orange Counties west of the Hudson River will use the new bridge, that this enormous revenue will pay for hundreds of miles of new highway across the state.
Unfortunately, after choosing a 3-mile wide section, they didn’t give us the Golden Gate, a bridge to last centuries. Instead, they gave us a structure design to last only 50-years. This was in part because of escalating costs due to the Korean War; it also was likely to ensure they could maximize money for the rest of the Thruway.
Thus the deteriorating steel superstructure and untreated wooden piles we have today, now almost a decade past the bridge’s design life. It was prominently featured on the History Channel’s “The Crumbling of America” in 2009, complete with a computer animation of it collapsing into the Hudson.
The good news is that money is now in hand and construction of a new bridge should start soon. The plan is very controversial because there is not a rail transit component, building the miles of new track to the span could have added +$15 billion to the cost of the now $5 billion project.
The joke among my rail group during our bi-monthly meetings to our downstate members is asking if Tappan Zee is still standing. The answer is always… “At least it was when our train went under it this morning”. I know people today who do not drive the Thruway to New York City, fearful of the safety of Tappan Zee.
If it had to be closed, before the new span was finished, it would create a traffic nightmare, but be a boon to Amtrak’s Empire Service and MetroNorth. Like the Northridge Earthquake in California.
I would say one of the biggest problems of our highway system was that it was built on the cheap. Now decades after the orginal interstates where built, the bill is coming due on rebuiling them, as well as the need to add to capacity.
Compare this to a lot of railroad infrastucture. Yes, while orginally American railroads, especially compared to the British where build very cheaply (wood bridges and lots of curves), they where significntly upgraded in the follwing decades.
The bridges that replaced the early wood or iron stuctures are often massively over built. The old NYC Bridge across Erie Blvd. in Schenectady is huge, and its only crossing a highway. Often when you look at a river crossing, the railroad bridge always at least looks stronger and heavier than the highway bridge.
Unfortunately, here in the Capital District rail infrstucture like the Livingston Ave Bridge that connects the Albany-Rensselaer Station with the rest of the Empire Corridor west of Albany, now has to be rebuilt as well. Still, thats not bad for a structure that dates to the Civil War (new steel superstucture early 1900s).
And no one thinks that its unsafe, just that the rotating swing bridge has become more difficult to maintain and gets stuck some times, causing delays. There is also a 15-mph speed limit. Plans are afoot to replace the span.