Thoughts on rail......

[bobwilcox]

QUOTE: Originally posted by gabe

Dave (futuremodal),

No. I am very much in favor of competition. It is simply a matter of how much are we willing to sacrifice to facilitate competition and what level of competition is adequate.

I am learning a great deal about railroads on this forum; after another five or six years, I will consider myself to have worked my way up to amateur status. So, I can't say one way or another that your model to open access is too attenuated to work—the question is simply above my intelligence level.

That having been said, I do know that the ARR says a railroad needs an operating ratio of 80% or lower to earn the cost of capital, and as of right now only two railroads meet that mark (one just barely). More competition lowers prices. I am not sure railroads can afford less profit right now.

From my limited knowledge, I am not willing to risk as much as you for competition. I am dead-set against ANY future rail consolidations, I would have liked to see the government step in and save the Milwaukee Road (in 1974, when it could have—I don't think it was savable by 1980). But, risking the implosion of our national rail network on an unproven theory seems a bit risky to my picayune knowledge. Besides don’t trucks and barge traffic provide additional competition?

Gabe

Railroads take in about 15 cents of every dollar spent on intercity freight transportation in the US.

[gabe]

Dave (futuremodal),

No. I am very much in favor of competition. It is simply a matter of how much are we willing to sacrifice to facilitate competition and what level of competition is adequate.

I am learning a great deal about railroads on this forum; after another five or six years, I will consider myself to have worked my way up to amateur status. So, I can't say one way or another that your model to open access is too attenuated to work—the question is simply above my intelligence level.

That having been said, I do know that the ARR says a railroad needs an operating ratio of 80% or lower to earn the cost of capital, and as of right now only two railroads meet that mark (one just barely). More competition lowers prices. I am not sure railroads can afford less profit right now.

From my limited knowledge, I am not willing to risk as much as you for competition. I am dead-set against ANY future rail consolidations, I would have liked to see the government step in and save the Milwaukee Road (in 1974, when it could have—I don't think it was savable by 1980). But, risking the implosion of our national rail network on an unproven theory seems a bit risky to my picayune knowledge. Besides don’t trucks and barge traffic provide additional competition?

Gabe

[daveklepper]

Please remember that there still is competition between rail and truck. In the 1930's the Justice Department considered streetcar systems a monopoly and that it was unfair of electric power companies to own them. They forgot or chose to ignore that private cars, taxis, limousines, and walking provided competion. So who bought the trolley companies when the power companies were forced to sell? In about half the cases, National City Lines, a combination of Firestone, Texaco, General Motors.

Did that make for more competition? The reverse I would say!

[Sterling1]

Some people ought to realize that the taxpayer pays for the govenrment to do whatever is asked of it by the citizens . . .
The RR could very well use the money possibly wasted on taxes . . . grunt . . . asked for by taxes . . . to build and invest in their own RR.
. . . . .

[Anonymous]

QUOTE: Originally posted by gabe

Dave,

I mean this politely. But, I really am starting to see your argument as wanting your cake and eating it too or wanting someone else to pay for your cake.

(1) More competition equals more profits? Maybe more profit for the companies served, but surely not by the railroad. If competition equaled profit, there would be no need for anti-trust regulation. Are you really saying more competition equals more profit to you or your interests?

(2) Not "the" reason but "a" reason highway, waterway, and open-access European rail is successful is subsidy. To think that open access in America will profit American railroads without a like subsidy is like removing ham from ham and bean soup and expect it to taste the same. I suspect you would be one of the first people to cry when taxes were heightened to pay for the subsidy to allow railroads to function on an open access system.

Worse yet (for me), the requisite subsidy to make railroads work under your system would effectively make me (as a tax payer) subsidize the customer (yet again). I see your argument really coming down to you want someone else (the American tax payer) to pay for someone else’s (rail customer) benefit.

Gabe

Gabe,

Do you conversely think competition is a negative? Most economists outside the socialist faction surely wouldn't say so.

Competition is the essential element that makes a free market economy work. Competition forces innovation, innovation improves the customer base, and an increased customer base usually equals more profits for the best innovators. Without competition, there is less incentive to innovate. Monopolistic and oligarchic companies can become risk averse, and innovation subsequently becomes scarce. They begin to buy the notion of the zero sum gain (a favorite of the left), and thus when new ideas come along they see it as you described in your opening paragraph e.g. the innovators want to have their cake and eat it too, or to put it another way, the idea of synthesis becomes a nonparlance.

Also, be careful how you define subsidy. Is a user fee a subsidy? I would not say it is. Since the majority of highway funding comes from user fees as it pertains to interstate freight transportation, it is not out of the question that such could work for an open access rail system. John Kneiling thought so 30 years ago, before the term open access was even applied. He just thought correctly that the proprietary closed system was a waste of macro capital, since each rail transporter just had to have their own set of rails, rather than having multiple rail transporters share common trackage, not to mention the fact that under the closed access system the failure of a rail service provider meant the loss of the tracks that went with it. Under an open access system, the failure of a rail transporter will not harm the existence of the tracks, since the tracks are held under a separate entity.

Is a tax credit for maintenance a subsidy? The shortline tax credit recently passed by the feds is something that could be expanded for use on a privately owned open access rail system. And before you say that a tax credit means someone else pays higher taxes to make up for the loss in tax revenue from the recipient of the tax credit, isn't it true that infrastructure improvements provide an important incentive for retaining and recruiting rail using businesses, thus actually expanding your tax base? Remember that if the tax credit means the rail lines can stay up on maintenance and thus provide a secure reliable ROW for rail transporters (on a more equalized basis with highways and waterways), the users of rail services will be more inclined to stay in the U.S. rather than relocating overseas, or change their minds about shutting down a factory in lieu of non capital intensive investments, or expanding the planting of grains in a field rather than putting a field into a conservation plan. Since a tax credit is something not sent to the federal treasury, you in essence get 100% of the return, whereas a de facto subsidy oft times returns as little as 20% on the dollar of original tax payment (with the rest going to fund the bureaucracy).

So you see, it is very probable to create an open access rail system without tapping the general fund or raising your taxes. Generally, I wouldn't have the confidence in the feds to not use tax receipts for such a venture, but given that they took the tax credit route for the short line maintenance bill, I believe they would take the same general approach for supporting a transistion to an open access rail system.

Of course, no such action is perfect. I would think that an open access ROW would be exempted by federal decree from state and local property taxes (one part of the "equalization" ideal), and thus those entities would have to make up for that loss of tax revenue in other ways. But some of those same locales would benefit from increased industrial investment, so at least they can make up for it.

To sum up, I believe an open access rail system can be supported without tapping the general tax fund, via user fees, maintenance tax credits, and property tax exemptions. I personnally am not opposed to using part of the highway trust fund as an additional supporting tool, but some might object. The easiest way to facilitate that is to tax all modes with the same federal fuel tax, and then lump all the revenues into an infrastructure trust fund, with each mode getting a guaranteed percentage of what they pay in, with some wiggle room for multimodal projects and general cross funding.

They proved in the 1980's that a nation can cut taxes and in return get higher tax receipts, so in that vein you can have your cake and eat it too. By reducing the capital funding burden on railways via tax credits and tax exemptions, and then opening up all major rail lines to head to head competition (resulting in additional infrastructure funding from an increase in rail transporter paying some sort of user fee), you can kill two birds with one stone e.g. reducing the transporter's share of capital outlay for infrustructure while also providing rail shippers with market based rate and service competition. Trust me on this one, fostering head to head rail transporter competition will end up increasing rail's macro share of the intercity freight market, because potential users of rail service will be more likely to fulfill that potential. Granted, some transporters will fall by the wayside, but those that do it right will prosper (as will their stockholders).

[gabe]

Dave,

I mean this politely. But, I really am starting to see your argument as wanting your cake and eating it too or wanting someone else to pay for your cake.

(1) More competition equals more profits? Maybe more profit for the companies served, but surely not by the railroad. If competition equaled profit, there would be no need for anti-trust regulation. Are you really saying more competition equals more profit to you or your interests?

(2) Not "the" reason but "a" reason highway, waterway, and open-access European rail is successful is subsidy. To think that open access in America will profit American railroads without a like subsidy is like removing ham from ham and bean soup and expect it to taste the same. I suspect you would be one of the first people to cry when taxes were heightened to pay for the subsidy to allow railroads to function on an open access system.

Worse yet (for me), the requisite subsidy to make railroads work under your system would effectively make me (as a tax payer) subsidize the customer (yet again). I see your argument really coming down to you want someone else (the American tax payer) to pay for someone else’s (rail customer) benefit.

Gabe

[Anonymous]

QUOTE: Originally posted by brazos87

Futuremodal,

Find a single country whose railroads are as successful as American railroads. Look at Europe, where the State of Texas is larger than most European nations!

If American railroads are so successful, why are they still unable to recover their cost of capital? Truck lines and barge lines can recover their cost of capital, why can't railroads? Because U.S. railroads choose to burden themselves with proprietary closed access infrastructure rather than risk having to compete head to head nationwide. To put it in the perspective of separating transporter divisions from infrastructure divisions, rail transporters in the U.S. are less successful at recovering capital cost than those rail transporters located in open access countries, because the latter are not burdened with infrastructure responsibilities, e.g. that burden is at least partly borne by government and by regulated infrastructure companies. This allows them in much of the region to focus on only one corridor of tracks for multiple rail transporter companies. By contrast, we usually just have to have one corridor of tracks for each rail transporter. Thus, we are wasting land and capital maintaining multiple tracks in multiple corridors, where one corridor of tracks would suffice. It would be like each trucking company needing it's own freeway into a city, and the result is three or five or so redundant freeways where one would do. Of course, companies could (and often do) share trackage, but this is true only in limited areas of the country.

Of course, comparing America to Europe begs the observation of comparing apples to oranges, since most European companies seem to get some sort of subsidy, and the tax structure in Europe is more burdensome than that in the U.S. What we do know is that in the area of railroad evolution of capital usage efficiency, those European nations with open access systems are light years ahead of our closed access system. Our response to the need for rationalization of rail capital is to merge or force out the redundant trackage (along with the competing rail transporter companies), even if the need of shippers is for multiple rail service providers to provide sufficient healthy competition.

What we needed was more efficient use of capital while maintaining head to head competition, not the elimination of rail service providers. Under open access this is possible. Under the closed access system, this is impossible.

[Anonymous]

QUOTE: Originally posted by greyhounds

To FM

"Here's another challenge: Find a nation outside North America where railroads engage in differential pricing. I haven't been able to find one. Perhaps someone with more motivation to prove the open access proponents wrong will be able to provide some examples."

Can you define just what you mean by "differential pricing"?

Charging captive customers much more than non-captive customers, all other cost variables being equal.

[greyhounds]

To FM

"Here's another challenge: Find a nation outside North America where railroads engage in differential pricing. I haven't been able to find one. Perhaps someone with more motivation to prove the open access proponents wrong will be able to provide some examples."

Can you define just what you mean by "differential pricing"?

[kevarc]

A few things

Electrical Transmission - Under the new FERC guidelines, they want utittiles to set up tranmission into Regional Transmission Organizations (RTO's). This is being done to "open" the tranmission to all users. So far this has been a huge mess. Why? Each RTO STILL has the same managers as before. Who says that they will not give preference to their former owner, even though they are supposed to be independant. We are having problems with the transmission owners trying to screw to death muni's and other small operators in this scheme. Will it ever happen, maybe, but it will take a lot of ORDERS from the FERC to make it happen.

Captive shippers

Again, I speak from experiance. We are captive. And it costs us at a minimum of $7 a ton for the coal we burn. $7/ton adds up in a hurry. Figure one train of 100 cars carrying 100 tons/car - that is $70,000/train that is an added cost to us and it DOES get passed on to the consumer. We do have the option of doing a build out to the KCS. We can recover the cost in less than 5 years and this includes a major bridge of the Red River. KCS will not pay for it. Their view is if you build it, we will quote you a rate. They will not build it as they fear that after 5 years (that is if you can get a 5 year contract, which has become almost impossible in the last couple of years), the other RR will come back with a competitive bid and take the traffic back and they have a lot longer cost recovery period.

Government involvement

You really do not want that. What has the goverment got involved with that was not totally screwed up in a few years.

[daveklepper]

Here is a new thought for open access. Leave the present structure alone. But let the Goevernment build a series of links that bypass particuilar RAIL & HIGHWAY congestion points and treat these rail links as open access toll highways . The first one that should be built is New Haven, CT - Trenton, New Jersey, including a rebuild of the Poughkeepsie River Brisge. It should be built as a high-speed electrified line so Amtrak can bypass New York City and the slow non-tilt running on Metro North to operate a Boston - Washington high speed service that can reduce running time to 5-1/2 hours to start being competitive with. 4:45 to Batimore, and 3:15 Boston-Philadelphia. At the same time CSX and NS could run trains directly to southern New England and not have to go all the way up to Albany (Selkirk or Mechanicsville) and back to reach Bridgeport, New Haven, New London, and Waterbury. This might return some decent industries to those locations and should reduce food prices for those living there. The Port of New Haven would become more competitive.

The Flordia East Coast might consider becoming a private open access toll road with CSX and NS offering competitive service. Mike make more money that way than as a private short line.

I could also suggest it for the Providence and Worcester, with Guilford, CXS, NS, and some of the other New England short lines competing for traffic, but the P&W is itself doing a terrific job for its shippers and making money. It does have some of its own trackage rights on the NEC and in some places is the only freight carrier on the NEC.

This is really just a large application of what has happend for the Ports of Los Angeles and Long Beach in CA.

[brazos87]

Futuremodal,

Find a single country whose railroads are as successful as American railroads. Look at Europe, where the State of Texas is larger than most European nations!

Most shippers are located sufficiently close to another Class 1 to short haul their switching carrier to route the long haul to a competitor Class 1. It happens more often than you might think. Open access is not the answer, nor is government involvement, which open access would involve. Capacity is certainly an issue, but in many cases, (not all certainly), the capacity is an issue of too much business being routed to rail.

In this case, it certainly behooves the carrier in question to decide what business they will be able to handle. Guess what? The business which provides the most most profit! A carload of scrap will not interfere with a with a unit coal, stack, or UPS train. Dollars count in railroads just as they do in every other business. While intermodal has a low profit margin, intermediate handling is minimized, so a railroad makes its' profit by running the blazes on said train.

If you want to screw up a good thing, get the Federal government involved. The free market has spoken since the Staggers Act was passed, yes, some shippers are slighted, but the vast majority of shippers do much better. Congestion seems to be the biggest issue, but the railroads are victims of their OWN success. As Mr. Blysard has said, railroads are NOT public utilitilies, but for the most part, publicly traded stock.

If a shipper must look elsewhere other than shipping by rail, chances are it doesn't make financial sense for the railroad to provide that shipper the service they need, providing the revenue the railroad would generate. Remember, the railroads are in business to make profits, not just revenue.

Look at this way, if you run a successful business out of your home, someone says they want open access, and to provide this, the government says you have to open your home to your competitor. While you provided the means to get your business off the ground, someone is able to use your hard work and open their own business with the infrastructure you paid for. Doesn't sound like such a good idea, does it?

I'm an Ilk, hoping to become a member of the Ilk's Lodge, and a recovering Unihead.

[Anonymous]

Ed,

I sincerely appreciate the tone and content of your last posts. You made some truly valid arguments.

Speaking of captive shippers, you really can't argue that captive shippers are captive simply because no other railroad wants the business. Most captive shippers did not start out being captive to a single Class I with "differential" rates. Take a look back a few decades, and there were more Class I's competing in most areas of the country, and doing so under rate regulation. The oft dissed Montana farmers at one time had three separate transcons to select from (GN, NP, and Milwaukee), with a fourth weak link in the form of UP coming up from Pocatello. Now it is down to one transcon and the same weak UP link in Silver Bow. Or take the case of most manufacturing facilities in the U.S. Most of those still in operation today were built when there was a multitude of Class I's under rate regulation. Does anyone think such facilities would still have been constructed where they are at (and in the same numbers) if they knew they would be subject to no head to head rail competition and differential pricing? Read through the energy press regarding the duress captive coal fired power plant owners are having with delivery rates suddenly being doubled by the two western Class I's. One can easily paraphrase their owners lament today - "If we had known the railroads would do this to us, we would not have located our plant or our source of coal on only one Class I line."

I challenge you to take the time to contact rail oriented businesses that are looking for a site for a new facility, and ask them if they are willing to locate that facility with access to a sole Class I rail service provider. You will find that they are on to the differential pricing schemes of the Class I's, and will only locate (all other factors being equal) where they can access rates and services from more than one Class I.

If you are coming from the perspective of a railroad insider, it is legitimate to say that the industry ain't broke, so don't fix it. If you are coming from the perspective of a rail shipper, the consensus is that it IS broke. The U.S. is losing ground in manufacturing and production to other nation's, and part of the blame lies with differential pricing.

Here's another challenge: Find a nation outside North America where railroads engage in differential pricing. I haven't been able to find one. Perhaps someone with more motivation to prove the open access proponents wrong will be able to provide some examples.

[Junctionfan]

It is possible that the government could give out tax breaks on line with high density traffic and lower taxes on multiple lines as to discourage the railroads from ripping up multiple lines in order to save money on taxes.

This allows the railroad to operate the way we socialist want it without conflicting the way the business capitalists want it. This way the railroad has the capacity to increase traffic when needed without having to buy land back to run another parallel line. It also give the railroads the benefit that by having the extra line, they can keep it for siding space when the extra mainline isn't needed, and can be used for storage or crew changes without effecting the other "main" and it wouldn't cost them as much in taxes.

Because the railroads are private and certain laws are governed by constitutional law, it is also better to try to get the railroads to "do what the people want" and invest in them. As an investor, the government has the respected weight that business prefers to listen to other then listen to "intrusive profit hinderers".

The basic idea of open access is an interesting idea but right now the way the laws and constitution reads, I can't see it happening as I don't feel that there is enough support to change it just for that purpose.

[edblysard]

True,
If you want to own a major league team, you gotta pony up. and play by the same rules as the other teams...

And, if your city can not or will not create the infrastructure to support a major league team...ya cant play baseball!

And, the legalities of the franchise system does, in a fashion, mirror railroading....

Ed

[gabe]

I am not taking a stand on anything anyone has said on here thus far. But, I would point out, referencing Ed's post, one might be surprised at some of the legal and practical similarities between the railroad business and baseball.

Gabe

[edblysard]

Perhaps the best idea is just to let Capitalism play its hand and the market will bear what it can bear. If rail can't compete, the companies will be forced to make some changes; the same as any company in any industry must.
--------------------


88gta350,

Exactly...

And the converse is just as true...

If a shipper can't compete, the shipper(company) will be forced to make some changes; the same as any company in any industry must.

Was picking on the open access guru, that all.

Gov. regulation was the norm for quite a while, and it did allow small shippers, like the Montana wheat growers, to "share" in the lower cost on shipping fees....they paid what everyone else paid per ton mile, because the feds set the rate....
Railroads couldnt compete with each other, because the basic cost was fixed in place...so it boiled down to the guys with the fastest/most efficent route made the money.

Now, this is a simplistic version, it would take several volumes to even make a dent in why open access isnt the solution, right now.

You are off to a good start, though, because you seem to understand that railroads are a business...

They are not public utilities!

Therefore, the people who invested in them, (me, you, and a lot of other folks) expect them to make a profit.

As the Senior Ilk pointed out, highways allow many trucks to use the same piece of roadway at the same time.
One of them wrecks, drag it off to the side, and while that is going on, the other 4 or five lanes are still in use...

Have the same thing on a railroad, every train behind the problem is stuck...


And, contrary to the open access proponents, the railroads of today are not broken, in fact, last year we moved more tonnage than ever before....
So if it aint broke, why try and "fix" it?

Because a small, select group of people want the same style of rates they had before, where the feds were keeping rates on some things atrifically low....now that they have to pay the same as everyone else, they gripe...because now, instead of paying the same rate a shipper a few miles from a major interchange pays, they have to pay for the extra mileage, at a proportionally higher rate....

If you shipped a package from Key West to Nome, Alaska, would you expect to pay the same rate as if you were shipping it to Penscola Florida?

Why shouldnt you pay more for the extra service?

Because it isn't fair?

So, neither is any other type of business, fair play is what little league baseball is all about, not billions of dollars worth of railroading...

I want BNSF to get every dime they can from every shipper they service, and I want then to dump the shippers who cost them money...same for UP...because I am one of those who invested in both railroads...I am a stockholder, and I want the most return on my investment.

Because BNSF spent "my" money on "their" tracks, I dont want anyone else to use them, unless the other person using them makes me as much or more money as BNSF can in the process.
I could care less if someone dosnt see that as fair...

If you have a product, and want to ship it by rail, and only one railroad serves your town, then your stuck using that railroad, and paying what that railroad wants to charge, even if it is more than what another manufacture of the same product pays elsewhere.

If you dont like that option, then either move your plant to a more profitable location, use trucks to ship, or change what you charge for your product to make up the difference in cost...

It aint rocket science!

If there is only one railroad serving a paticular area, the reason might be that what is shipped from that area is not all that profitable.

Or, on the other hand, the product from that area is very valuable...in which case almost any railroad is free to buy land, build track, and enter the area to do business...if they dont do so, then the return on the cost isnt there...

Think of it this way, when Powder river basin coal was not a profitable venture, there were only a few railroads in the area...now that is it a big part of the business, everyone wants to build a line into the area...

If you have only one line left in your area....?

Captive shippers are "captive" for a reason...no other railroad wants the business bad enough to invest in the area, or there isnt enough business to support another railroad.

No where in the US Constitution is the concept of business having to play fair mentioned, not in any of the amendments, nor in any of the business laws I have read....what is mentioned is that business has to follow the current version of the law that governs that paticular business.

Its business, not baseball....

You said you were looking to be educated on this concept...great, do some more research, on both sides of the issue.

Let us know what you find out, and I will bring it up at the next meeting of my Ilk...they meet on the first Monday of the month, or the first full moon, whichever comes first![:D]

Ed

[SALfan]

QUOTE: Originally posted by edblysard

Actually,
Its kinda funny...
All you gotta do is ring the bell, and watch Uncle Pavs nephew start slobbering about open access....
Talk about knee jerk reactions!

Ed

Well said! And it is amazing to me how futuremodal never misses an opportunity to work in an endless rant on open access, no matter how tangential the connection between the topic at hand and open access. Thank goodness the posts are marked with the poster's name.

[88gta350]

QUOTE: Originally posted by edblysard

Sent in by some of my Ilk,
(and who would have though they could type so well with their big hooves!)

"Many people say it's not fair that the trucking industry gets their transportation system (the roads/interstates) subsidized by the government while the railroads have to build their own physical plant."
My answer: What does fairness have to do with anything? Some people are born to millionaire parents in the U.S., while others to beggared farmers in Somalia. No business was guaranteed a fair playing field beyond what's contained in the U.S. Constitution. Each individual, corporate or personal, is welcome to negotiate for whatever they can obtain. If truckers got a better deal, I say "good on ya." Now, if you'd asked if the system gives the best results for the resources that have been invested by the public, that might lead to different answers. But you didn't ask that question. In my opinion, the "it's not fair" argument is not only wrong, it's a losing argument. It's only effect will be to further distance the entity making the argument from the success that entity desires.
"Roads are financed through taxes and tolls. Would it be advantagous for the railroads if the government owned all the rail?"
My answer: Who are "railroads" in this case? The current companies? The industry? The transportation mode? I think you're referring to the current companies, so the answer is: it's impossible to tell. The deal could be structured so that the operating companies raked off immense profits when the taxpayers subsidized all the costs of the fixed infrastructure. Or it could be structured so that no viable, honest operating company would even touch the deal, because it would not return them enough profit. In other words, define how you want to structure the deal, and I could make some projections.
"Obviously this would save the railroads a lot of money in maintaince and labor charges, and it would cost the government a lot. The government would have to make up that deficit through higher diesel fuel tax or some type of set toll for usage of the tracks."
My answer: Not necessarily in any case. The government could make up the shortfall from the general fund.
"But I can see this creating a whole host of problems. Because no one now owns the rails, everyone would be free to go as far on them as they like. Railroads would compete on cost of shipping alone. Every road in the country could travel from coast to coast. So how would you handle this traffic. At least on the road there is room for all the trucks. On rail you'd have a traffic nightmare. You'd now need some type of independent control center to route all the traffic. If a shipper wanted to build rail access, who would build and pay for it? The shipper or the govt?"
My answer: All good questions. These parameters would have to be established. Any problem can be solved with enough money, but unless there's enough money, the problem might not be solved.
"Perhaps a better solution is to give some type of credits back to the railroads in direct proportion to how many miles of rail they own. Rather than the gov't building the physical plant for the railroads as they do the trucks, perhaps they could subsidize it through tax breaks or lessening the fuel tax railroads have to pay, or something else to that affect."
My answer: Why do you want to fix what may not be broken? What makes you think the present system is all that awful? Bottom line: everything MUST be paid for, either focused onto the direct consumer or spread out over the indirect taxpayer. There is no other source of money. If you're proposing a tax on the public to subsidize rail transportation to shift freight from highway to rail, I think a taxpayer has the right to ask how he gets a positive return on his investment in rail. Otherwise, it's just a wealth transfer from taxpayers to rail stockholders, suppliers, and employees.
"Anybody have any feasable ideas as to how the gov't could level the playing field between trucks and rail? Is the ROW considered real estate that gets taxed by the state/local authorities? If so, perhaps the gov't could proclaim railroad real estate exempt from all taxes, federal, state, and local?"
My answer: I think you're attempting to solve a problem before you've even defined the problem! What specifically is the problem you want to fix? Market share between rail and road is not a problem, it's merely an indicator of the respective attractiveness to transportation consumers of each transportation mode in the North American transportation marketplace under the present rules at the present time. Saying that "rail market share is too low" has no inherent truth or appeal (to anyone beyond than the partisan railfan), anymore than saying that "rickshaw market share is too low." If you want to change the rules in order to shift market share between modes, it would be essential for you to state why the current shares result in a problem.

First, perhaps you want to establish a hypothesis that the current system is less cost-effective than some alternate system; second, iterate a number of alternate systems and assess their costs and benefits; and fourth, compare your alternate systems to the status quo system and see if any offer lower costs and higher benefits. But right now, you're assuming the current system is "broke," and you have no way of knowing that without having something else to compare it to. Nor will you find any rational person willing to entertain an experiment with trillion-dollar risks until those alternatives are established to be better.*


*(submitted by an a senior member of Ilks United, a non profit group dedicated to getting a Ilk in every American household)

Got Ilk?


See, even Ilk get it.....

Ed

Ed, I'm not trying to solve any problem because I don't know enough about the system to know whether a problem exists or not. I've merely heard a lot of griping on this forum before that trucks are given gov't provided roads etc while the railroads fend for themselves. I know next to nothing about the business or operation side of rail, so I was looking for information and not trying to give answers. The "answers" I threw out there were just to show what direction I was hoping the debate would take.

Futurmodal, thanks for the Rail 101. I'm glad you likened the system to the electrical grid, because that's something I can understand, working in that field. While third party ownership of the rail infrastructure does sound like a good idea, I imagine it would be a lot more complicated to introduce and employ than it is with the electrical grid. but again, I don't know enoguh about either system to say for sure.

Perhaps the best idea is just to let Capitalism play its hand and the market will bear what it can bear. If rail can't compete, the companies will be forced to make some changes; the same as any company in any industry must.

[adrianspeeder]

"We got Ilk commin in from all directions!!! Position is about to fall! 50 cal supression fire has NO effect! Send in an Alco to do an emergency evac. Over."

Adrianspeeder

[edblysard]

Sent in by some of my Ilk,
(and who would have though they could type so well with their big hooves!)

"Many people say it's not fair that the trucking industry gets their transportation system (the roads/interstates) subsidized by the government while the railroads have to build their own physical plant."
My answer: What does fairness have to do with anything? Some people are born to millionaire parents in the U.S., while others to beggared farmers in Somalia. No business was guaranteed a fair playing field beyond what's contained in the U.S. Constitution. Each individual, corporate or personal, is welcome to negotiate for whatever they can obtain. If truckers got a better deal, I say "good on ya." Now, if you'd asked if the system gives the best results for the resources that have been invested by the public, that might lead to different answers. But you didn't ask that question. In my opinion, the "it's not fair" argument is not only wrong, it's a losing argument. It's only effect will be to further distance the entity making the argument from the success that entity desires.
"Roads are financed through taxes and tolls. Would it be advantagous for the railroads if the government owned all the rail?"
My answer: Who are "railroads" in this case? The current companies? The industry? The transportation mode? I think you're referring to the current companies, so the answer is: it's impossible to tell. The deal could be structured so that the operating companies raked off immense profits when the taxpayers subsidized all the costs of the fixed infrastructure. Or it could be structured so that no viable, honest operating company would even touch the deal, because it would not return them enough profit. In other words, define how you want to structure the deal, and I could make some projections.
"Obviously this would save the railroads a lot of money in maintaince and labor charges, and it would cost the government a lot. The government would have to make up that deficit through higher diesel fuel tax or some type of set toll for usage of the tracks."
My answer: Not necessarily in any case. The government could make up the shortfall from the general fund.
"But I can see this creating a whole host of problems. Because no one now owns the rails, everyone would be free to go as far on them as they like. Railroads would compete on cost of shipping alone. Every road in the country could travel from coast to coast. So how would you handle this traffic. At least on the road there is room for all the trucks. On rail you'd have a traffic nightmare. You'd now need some type of independent control center to route all the traffic. If a shipper wanted to build rail access, who would build and pay for it? The shipper or the govt?"
My answer: All good questions. These parameters would have to be established. Any problem can be solved with enough money, but unless there's enough money, the problem might not be solved.
"Perhaps a better solution is to give some type of credits back to the railroads in direct proportion to how many miles of rail they own. Rather than the gov't building the physical plant for the railroads as they do the trucks, perhaps they could subsidize it through tax breaks or lessening the fuel tax railroads have to pay, or something else to that affect."
My answer: Why do you want to fix what may not be broken? What makes you think the present system is all that awful? Bottom line: everything MUST be paid for, either focused onto the direct consumer or spread out over the indirect taxpayer. There is no other source of money. If you're proposing a tax on the public to subsidize rail transportation to shift freight from highway to rail, I think a taxpayer has the right to ask how he gets a positive return on his investment in rail. Otherwise, it's just a wealth transfer from taxpayers to rail stockholders, suppliers, and employees.
"Anybody have any feasable ideas as to how the gov't could level the playing field between trucks and rail? Is the ROW considered real estate that gets taxed by the state/local authorities? If so, perhaps the gov't could proclaim railroad real estate exempt from all taxes, federal, state, and local?"
My answer: I think you're attempting to solve a problem before you've even defined the problem! What specifically is the problem you want to fix? Market share between rail and road is not a problem, it's merely an indicator of the respective attractiveness to transportation consumers of each transportation mode in the North American transportation marketplace under the present rules at the present time. Saying that "rail market share is too low" has no inherent truth or appeal (to anyone beyond than the partisan railfan), anymore than saying that "rickshaw market share is too low." If you want to change the rules in order to shift market share between modes, it would be essential for you to state why the current shares result in a problem.

First, perhaps you want to establish a hypothesis that the current system is less cost-effective than some alternate system; second, iterate a number of alternate systems and assess their costs and benefits; and fourth, compare your alternate systems to the status quo system and see if any offer lower costs and higher benefits. But right now, you're assuming the current system is "broke," and you have no way of knowing that without having something else to compare it to. Nor will you find any rational person willing to entertain an experiment with trillion-dollar risks until those alternatives are established to be better.*


*(submitted by an a senior member of Ilks United, a non profit group dedicated to getting a Ilk in every American household)

Got Ilk?


See, even Ilk get it.....

Ed

[Anonymous]

88gta350,

Here's my best attempt at a primer. "Closed access" is the term I use to described a transportation system in which the owner of the right of way is (usually) the sole provider of transporting services. Most if not all of the railroads in North America are closed access. In other modes, it used to be that the sole owner and user of transmission lines was the energy company/electric utility. Ditto for pipelines. Now, much of the transmission and pipeline infrastructure is owned by third party entities, with access to the infrastructure allowed for online electricity or natural gas/petroleum producers.

"Open access" is the term used for any transportation infrastructure in which the owner of the infrastructure does not engage in any of the actual transporting services. Highways are open access, in that any truck line can provide transporter services to any online shipper, e.g. it is not limited to one trucking company. Ditto for waterways. There was a time long ago when some roads and canals were operated by the sole provider of transporter services, but (and this is my opinion) these modes evolved into open access by natural order, e.g. it just made more sense for these modal forms to be operated as open access, whether by a private toll company or some level of government. Unfortunately, the U.S. rail system did not evolve in a likewise manner, and therein lies the problem.

The problem that is growing today for closed access rail systems is that many of the shippers on the line are "captive" to that sole company for the most logical form of transporter services. Captive rail shippers can pay more than double the rates of rail shippers who have access to more than one railroad (or have alternative access to barging or pipelines, depending on the commodity in question). This is called "differential pricing", a less ignominious term used by the railroad industry to paint over what it really is, which is monopolistic pricing. It is unfortunate that the federal regulators have turned a blind eye to this practice, but the belief in the rail industry is that "differential" pricing is essential for railroads to keep their financial heads above water. The consequence of this practice is manyfold: Some plant owners will relocate a manufactering plant overseas, some will shut down the plant and re-invest elsewhere in industries not constrained by transportation issues, some will turn to less efficient forms of transportation such as truck and/or some will turn to less speedy forms of transportation such as barges.

Speaking in global terms, it is producers and manufacturers in the U.S. that are bearing the brunt of monopolistic rail service pricing, and thus it is making it harder for the U.S. to compete with foreign competitors for the world markets, since most other rail systems outside North America are either open access or are heavily regulated/subsidized by their respective governments. It cost more on average for a captive U.S. producer to deliver his product from point of origin to the nearest U.S. ocean port, than it does for his competitor overseas to do the same to his nearest ocean port. Additionally, it is cheaper to deliver foreign goods into the U.S. to the consumer markets via rail than it is for domestic producers to access the U.S. consumer market, because virtually all import ports have access to two or more railroads which all connect to the major consumer terminals, whereas many domestic producers are captive to one railroad, so they pay much higher rates to get their similar goods to the same U.S. consumer terminals. When you consider that with the devalued dollar we should be able to whittle down the trade deficit, yet we are still runnning record deficits, it is clear that the closed access rail system in the U.S. is a major culprit of the U.S. trade deficit.

There is a way for the government to ameliorate this problem, without resorting to either re-regulation of rates (pre-Staggers Act) or some form of nationalization. They can use the AT&T breakup as a legal template to do a similar thing for the railroad system, e.g. breaking up the rail oligarchy into rail infrastructure companies and rail transporter services providers. I've already gone over a list of the possible benefits of such a move. The others on the forum can provide a list of reasons why such a move would be bad for the U.S. economy, if they can come up with any....

Note to Overmod: Yes, some rail ROW's are being purchased by local and state governments, but they are still not open access in the sense that most of these governments simply turn around and assign a single rail operator the sole rights to provide rail transporter services. Even if the government entity itself runs the trains, in most cases there is only one connecting Class I, so the shippers on the line are still subject to captive rates.

[edblysard]

Uhhhh..

'02 F-250, Black, XLT, Crew Cab, Short bed, 4x4, 7.3L Power Stroke Turbo Diesel, 4R100 auto
'92 Bronco, Black, XLT, 302 V8, M5OD FIVE SPEED!!!
'84 Bronco, Black, XLT LARIAT!, 351HO V8!, C6 auto
'97 F-150, Black, XLT, Ex Cab, Short Bed, 4x4, 4.6L V8, Mazda M5OD FIVE SPEED!!!
'85 Chevy, Sand, Reg Cab, Long Bed, 4x2, 305 V8, threespeed auto
'66 F-250, Orange, Custom Cab, Long Bed, 4x2, 352 V8, Three on the tree!!!

Yeah, thats what I though....[:P]

[adrianspeeder]

QUOTE: Originally posted by edblysard

Wow,
I have ilk!


Are those free range ilk?


Anybody know how to chicken fry ilk?

Do baked potatoes go good with ilk?

Hey mudchicken,up for a ilk fry?

And what season can you hunt them in?

Ed[:D]

I have no clue about any of this stuff, but I will say that your post ed made me laugh. And whats up with puttin a hemi sig line in a train forum.....[:D][:D][:D]

Adrianspeeder

[Overmod]

This was another of those wacky 'automatic' multiple posts... but let me take this opportunity to add that we're already seeing a potential path to partial "open access" variants as states and other public agencies acquire ROW that railroads no longer care to operate.

Not entirely just for grins: Assume the ITS architecture is expanded to include on-rail control as well as crossing interactions, as a standard. You might get some interesting results from even poorly-maintained Midwest granger feeders used as routes for 'hy-rail' equipped farm trucks with multiple trailers, either optimized for elevator transloading or actually fitted with intermodal bodies of some kind...

[Overmod]

I waited for years and years to see whether the FRA would redirect their corridor research away from pure passenger operation (at 110mph) and start developing joint models that were tolerant of the 'right' kind of freight operations as well as passenger -- this would have state and Federal funds providing the initial capitalization, and the expensive/unproven parts of the maintenance and infrastructure development, and at least some of the cost of high-speed signaling, PTC, and the systems that PTC and NDGPS make practical for train handling and customer service.

The most recent letter to the Administrator I saw indicated that FRA was indeed redirecting its research emphasis away from passenger rail, as being an unrealistic application of Federal funds in our current era of [insert reasons for scarce resources as you like in this space]. Unfortunately, as soon as you eliminate public transportation, you lose most of the political attractiveness for allocating funds to rail development -- even at best, the shipping community is an oligopoly, only relevant to the average voter if there is CLEAR and DIRECT evidence that support for rail decreases actual cost of goods and services to that voter.

I think it is a given that the United States Government will not at any time move to take over the ROWs of the 'national railroad network'. I think it is also obvious that the Government will not allocate funding, or assume debt, sufficient to finance purchase of the ROWs, even assuming some incentive could be found to get the railroad companies to sell (and to get the local taxing entities to give up their money pots!)

This leaves comparatively little that can be done, meaningfully, to achieve even limited open access. Most of the systems that I think have some practicality involve some opening up of trackage rights accessibility in return for Government incentives or integration -- there's a writhing can of worms involved with this idea, make no mistake, but in the hands of fair-minded people it might be made workable (which the purchase-based schemes to me obviously aren't) [And yes, I know, "fair-minded government" is often an oxymoron...]

Let the government, for example, coordinate and administer a more advanced system of dispatching (analogous in scope, but of course not in detail, to the current air controllers' system). It is not a big jump to give this agency oversight and control of the standards needed to qualify a train and its personnel for 'access' to a given system and route... signals, training, maintenance, union representation, whatever might be considered appropriate... and then assume legal responsibility or provide indemnification to the 'track providers' for any lapses or problems in this qualification which lead to damage, delays, etc. Note that, just as with airport capacity, there will be just so many available 'slots' available to handle trains, and this translates into something that might look like the 'medallion' system for taxis.

I think there's no reason formulas can't be developed that fairly allocate maintenance expense, improvement capitalization, etc. for the marginal increase in track utilization/occupancy generated by the additional 'trackage rights' -- or to provide a Government guarantee of funding, resource allocation, tax-writeoffs, etc. to cover anything that isn't directly billable to the service providers.

In my youth, I wondered whether railroads might try to fill up capacity of an expanded dispatch and control system with their own trains. Answer: yes, they might, but I recently note quite a few instances where additional service isn't provided because the amortized capital cost of the locomotives needed to render it effectively (even at our current very low iinterest rates) isn't something the railroads involved care to engage in. Perhaps better to take a piece of the guaranteed profit from a train's operation than 'compete' and perhaps lose more than the opportunity income...

One place the Government could make a positive difference would be in establishing open standards -- and even more of a networked enabling technology -- for systems efforts like RailDocs. I believe the Government is already a major partner in implementation of NDGPS, and would logically be a partner in implementation of standards for advanced PTC, if indeed not subsidizing key parts of the infrastructure. Sometimes a 'foot in the door' can be a good thing, not a threat to return to the bad old pre-Staggers mentality... ;-}

[88gta350]

I can't really make an informed opinion because most of the arguments that are being made by both sides are a bit over my head. I'm not very familiar with railroad processes, history, or even the terminolgy being thrown about. Open access, closed access, regulation, deregulation, reregulation.... it's all greek to me.

I originally posted this thread to solicit ideas on how the givernement could make rail more competetive, or "subsidize" it as it does with the trucking industry. While gov't may not set out to subsidize trucks by directly giving them money, incentives or tax breaks, the industry uses governement supplied highways and it's only real costs are labor, fuel, and maintainance on it's fleet. Imagine what rail could do if it had those same 3 major costs and didn't have to worry about maintaining or replacing rail or ballast or signals, etc. However, short of turning the entire rail network over to the gov't, I'm not sure how the playing field could be leveled like that. That's what I'm looking for opinions on.

And for all I know, that's exactly what you've been discussing and I just can't understand it. Let's pretend you were explainging this to Joe Blow out on the street.... what could gov't do to help the railroads be more competetive or "level the playing field" if you want to use that term, without bankrupting either the roads or the gov't.

I appreciate all the replies, and let's keep the discussion civil and informative! I'm learning!

[brazos87]

[C):-)][dinner][C):-)]

QUOTE: Originally posted by edblysard

Wow,
I have ilk!


Are those free range ilk?


Anybody know how to chicken fry ilk?

Do baked potatoes go good with ilk?

Hey mudchicken,up for a ilk fry?

And what season can you hunt them in?

Ed[:D]

As the dairy ads say "Got ilk?". As far as ilk goes, it must be a minimum of a 6 point ilk, ilk is best grilled over mesquite, ilk goes great with others "whine" and cheese. Unfortunely ilk season is over, but snipe season is here!![:D]

[edblysard]

Wow,
I have ilk!


Are those free range ilk?


Anybody know how to chicken fry ilk?

Do baked potatoes go good with ilk?

Hey mudchicken,up for a ilk fry?

And what season can you hunt them in?

Ed[:D]