Mergers, abandonments, limited capacity, and the taxpayer,...OH MY!!

[jeaton]

You are correct that the big question is will any of the routes be built, and I don't think that there is yet a lock on any particular route.

How will it all come out? Stayed tuned for the next 20 years or so and by then there may be an answer.

Jay

[Anonymous]

QUOTE: Originally posted by jeaton

If anyone wants to keep on top of the current status of "high speed" rail service for the Midwest I recommend checking the Midwest High Speed Rail Association's web site at http://www.midwesthsr.org/index.htm .

Jay

Hey, I really appreciate the link.

Looking at their map http://www.midwesthsr.org/graphics/newmapCurvesL.gif they are showing the Chicago-Toledo route as a lock, while showing the Chicago-Columbus route as "under study", while the maps I got at IDOTpresented them as "either or".

What I find fascinating is that there are people still walking the streets of Ft Wayne saying (with enthusiasm) "Hey, won't that HSR be great when they get it here?

Assuming ANY of it ever gets built...I wonder how long some of those bus routes will survive?

That would be the easiest way to cultivate voter support/... promise them a bus, and then cancel it in 2 years, blaming the voter for "failing to support the route with adequate ridership"...

[bobwilcox]

QUOTE: Originally posted by jeaton

But beyond the view that Mark or any other transportation comentator might have, I don't recall seeing any indication from the Class I's themselves that they are starting an effort to get government funding. I have heard that in 2005 some of the Class I's will be earning the cost of capital, and with that the this discussion becomes pretty academic.

The NS has dipped their big toe into the pond of government money but have yet to go for a swim. They have floated the idea that it makes more sense to divert governmet funds from an I81 expansion to a NS Chatt to Enola expansion. They are also talking to budding passenger agencies in VA about joint projects via Bristol-Lynchburg-Richmond and Bristol-Charlottesville-Washington.

[jeaton]

If anyone wants to keep on top of the current status of "high speed" rail service for the Midwest I recommend checking the Midwest High Speed Rail Association's web site at http://www.midwesthsr.org/index.htm .

Even if you oppose the expenditure of tax money for such projects, this can give you an accurate picture of the ideas being proposed, where the projects stand and who in government is supporting and who is not.

The last I heard, the Indiana Governor wants to raise up to a billion for a football stadium, but isn't interested in putting any money into rail passenger service.

Jay

[Anonymous]

QUOTE: Originally posted by nanaimo73

My analog unit upstairs is starting to remember the editorial you may be talking about. I believe that was about railroads asking for tax dollars to upgrade lines on which passenger trains (commuter rail) were going to be increased or added.
As for the high speed rail going through Fort Wayne instead of Elkhart, I would say that is because of the 110 mph goal. It would require some kind of engine control, perhaps like the RF&P had in Virginia. Every lead unit on every train would have to have it.

Dale

Well, thanks for the support. I think I remember a couple editorials over the last few years that touched on the idea.. Roughly around the time of the alameda corridor opening, I THINK. But, as I recall, there was no editorial suggestion that public participation be limited strictly to Alameda style projects. The prospects were left alarmingly open ended.

On the FW corridor selection for HSR,...I think it boils down to really this simple concept: "destination"...

The southern alternative would connect Chicago to Columbus OH and Pittsburgh... Not a lot of demand there, and continuing such a route to NYC has robust engineering requirements.

The Northern alternative would connect Chicago to Toledo, Cleveland, and Buffalo easily...and while more distanr extending the line to NYC is just a matter of building a railroad.

I'd be VERY VERY surprised to see the nod come south.

[Anonymous]

QUOTE: Originally posted by jeaton

TheAntiGates


I don't mean to say that this isn't an interesting topic, but as nanaimo noted, your tax dollars probably won't be tapped for a new siding somewhere.

Jay

well, thank goodness for that!! [;)]

Still, I never underestimate the gullibility if the public at large to spend "somone elses money" for even the slightest of benefits. There are some pigheaded oafs among us, or as my granny used to say 'spoons in the knife drawer'... [:D]


I shudder to think how many people would gladly spend $200 million of "somone elses money" if they were sold on the idea that by (hypothetical example) paying to double up a SP line through town, they will eliminate a 4 1/2 minute wait each day on their way home from work.

To a guy who cannot control the funds anyway, it MIGHT be sold to him as a great idea.....the best payback for $200 million of money not his own that he will ever see. Yet look at who REALLY would prosper from such a public dole...

granted, this hypothetical scenario depends upon a crooked politician secretly in kahoots with the benefitting railroad, trying to con the public into cooperation...but I don't think that such a scenario is totally unthinkable. Big money and big government are old friends..

[nanaimo73]

My analog unit upstairs is starting to remember the editorial you may be talking about. I believe that was about railroads asking for tax dollars to upgrade lines on which passenger trains (commuter rail) were going to be increased or added.
As for the high speed rail going through Fort Wayne instead of Elkhart, I would say that is because of the 110 mph goal. It would require some kind of engine control, perhaps like the RF&P had in Virginia. Every lead unit on every train would have to have it.

Dale

[Junctionfan]

Once upon a time, the NYC line between Buffalo and Cleveland was 4 tracks. I believe that ballast bed is still wide enough to add them one at a time without hitting someone else's property. I don't know about some of the rail bridging between Dunkirk, NY and Cleveland though.

[jeaton]

TheAntiGates

Not necessarily to speak on Mark Hemphill's behalf, but several months ago we had a conversation on the main theme of this topic. I recall that he expressed the view that any government funding for the Class I freight railroads ought to be limited to projects such as Alemeda and Chicago's CLEAR. In those cases the public benefit may be much more than just whatever might come from lower railroad costs. He may have raised the question as to the source of funding if there needed to be a crash program to expand capacity, but I did not hear him saying that the government should be routinely funding double track, sidings or terminals just because a railroad is in a tight spot.

But beyond the view that Mark or any other transportation comentator might have, I don't recall seeing any indication from the Class I's themselves that they are starting an effort to get government funding. I have heard that in 2005 some of the Class I's will be earning the cost of capital, and with that the this discussion becomes pretty academic.

I don't mean to say that this isn't an interesting topic, but as nanaimo noted, your tax dollars probably won't be tapped for a new siding somewhere.

Jay

[Anonymous]

QUOTE: Originally posted by nanaimo73

. Now it is the Chicago, Fort Wayne and Eastern and is the route of choice for the High-Speed Rail plan.

Heh, do you REALLY believe that?

I think it is the route of choice for the small fraction who would like to see HSR through Ft Wayne, but it's just a pony show designed to enlist the vote support of the million or so people who would be better served by the more southerly route, than the more logical northern route..

I'm sorry to say that the more northen route makes sense for more people, but as such serves absolutely no need that I have, whatsoever.

I'll be voting against any bills for local HSR funding UNLESS there is an iron clad guarantee for service to Fr Wayne.

[nanaimo73]

Does "Here" indicate Fort Wayne, or somewhere on the PRR line to Chicago that passed through Fort Wayne ? There was a slowdown in traffic in 1981 that allowed Conrail to shift Chicago-Pennsylvania traffic onto the ex NYC via Cleveland. This left locals and Amtrak's Broadway on the line and little else. The west end from Gary (Dunes) to Hobart (near Valparaiso) was closed at that time. The Broadway was moved off the line on November 11, 1990. I would guess the second track was removed in the 1980s. Now it is the Chicago, Fort Wayne and Eastern and is the route of choice for the High-Speed Rail plan. I guess they want to stay off the ex NYC line to the north so as not to mix high speed passenger trains and freights. East of Fort Wayne the HSR line is torn up or is now the Maumee and Western.

Dale

[Anonymous]

Dumb question time. The former PRR line through here from Chicago to points east used to be doubled,...who was it who pulled up the second main? Conrail or Norfolk Southern?

[Anonymous]

QUOTE: Originally posted by nanaimo73

TheAntiGates;
I can't come up with an example that matches your opening.
>-----snip-----< Your tax dollars are safe.[:)]

Heh, thanks.
As I alluded to earlier, there is a chance that I may simply be responding to overly motivating journalism, though it has been some time since i read the articles in question (and I'm too lazy to go digging for them) it just seems to me that the editorials in question were so broad in focus as to defy grasping many specifices...Perhaps there was an intent of sensationalism that I just took too much to heart?

Still, I could swear that "American Railroads choking due to capacity constraints" appeared in one breath, followed by "taxpayer participation" in the next, and I believe the SP southern transcon route received honorable mention in the 3rd breath, as a candidate for improvement...

Maybe I connected more dots than the author(s) intended?...[:D]

Bear in mind that if Pres Bush comes on the TV next week announcing a transportation crisis faced by all americans, calling for taxpayer participation to ease the texas rail national emergency,..I reserve rights to say "I told you so"...[:)]

[daveklepper]

I would note that the UP is now running a round trip via the Moffat. I am not sure whether or not this is combined with the BNSF trackage rights train or separate. So much of the whole Moffat line is required for coal, both east of Bond and west of Helper in particular, that keeping the whole line open for overflow and emergencies makes good sense and I doubt that we will see abandonment. I can even see Tennessee pass and Royal Gorge being reopened as traffic on the Joint Line reaches saturation and some of the coal from the Craig branch has to go via Donsero wye, avoiding Denver and Colorado Springs.

[nanaimo73]

TheAntiGates;
I can't come up with an example that matches your opening.
The major projects to increase capacity are in the west and I'm not aware of any taxpayer involvement or any cases involving the abandonment of a merged parallel line. The capacity constraints in the west are all caused by changes in trade patterns. Canadian Pacific is paying for their upgrades on their own and there is no merger involved. The increase in coal going to Asia and consumer goods returning are behind this. The BNSF is double tracking its former ATSF line on their own and this is because of Asian imports. Union Pacific is double tracking the Sunset route which SP should have done years ago. I don't think the former D&RGW through Colorado is involved at all. In this case a merger in effect created more capacity by using the ex Texas and Pacific east of Sierra Blanca. UP is expanding this route because it was not a main route before the SP joined the UP. The Powder River basin will probably continue to need upgrading as long as demand keeps increasing. Mergers have increased capacity with PRB coal. The C&NW would not have been able to buy their share without UP's financing and adding the MKT to UP helped as well. On BNSF adding the Frisco to BN was an end-to-end merger and ATSF+BN added capacity from Pueblo to Texas. The only taxpayer involvement in the west was on the Alameda corridor where three railroads were involved and the taxpayer is getting their money back through user fees.
Recent projects in the east involve CSX going around Cleveland (July 1998 Trains) and double tracking the former B&O mainline.These were caused by NS getting the ex NYC from Cleveland to Chicago and once again paid for by the railroad. Lines which were abandoned which should have been kept would be the B&O from West Virginia to Cincinnati, Western Maryland over Sandpatch and the SP&S from Spokane to Pasco. Stampede was closed and then reopened. I'll let Mark and Michael debate Snoqualmie. As far as Indiana is concerned, CSX and NS have good routes to Chicago and St. Louis from the east, and their Chicago routes from the south seem fine as well. The remaining trackage in Indiana consists of secondary lines and branches. The former PRR panhandle line through Fort Wayne has been a secondary for 20 years since Conrail routed the Pennsylvania traffic through Cleveland. That leaves the Chicago CREATE plan (September 2003 Trains) where the cost and number of railroads involved require taxpayer involvement. I don't think any abandonments are involved here. I must say there are no projects that involve your criterion. Your tax dollars are safe.[:)]

[Junctionfan]

I think it would be also a good idea to utilize certain lines of modest traffic and not necessarily that of their own. Does all of CSX's trains have to use Cleveland line between Buffalo in order to get to Michigan? Why not use CN's under utilized Ontario line. It might take longer but it will reduce traffic conjestion in Pennsylvania and Ohio. If it is high priority, don't route it there.

Don't have to do that either. What about some of the lines that are owned by shortlines? (New thought) Why not have the class 1s use some of the shortlines for mainline conjestion relief? If the tracks aren't too strong, upgrade them slowly and run stuff that isn't too heavy for the infrastructure. A little bit of track adding to get to another part of the railroad might not be a bad idea either.

[Murphy Siding]

Future Model: I would guess that some of your posts come across as "theory" rather than "reality". If you haven't worked in a competitive work situation,some of your theories don't pan out. I'm glad you have opinions and that you express them. Sometimes I do go "hmmmm"

[jeaton]

Futuremodal

Your notion that a business should be in the battle every possible piece of business is just naive.

On the matter of a company's decision to not bid for a particular contract, faced with 29 other bidders, there is a good prospect that the company that wins may have come in at a price below its own and any other bidder's cost just because of a cash flow need. Depending on many circumstances, that action may be a prelude to going out of business. Many long term successful companies will chose not to employ "loss leader" marketing strategies.

In our current business system, any entity has the right decide if it wants to compete or do business in any given market. In some cases a company may find that, either because of its own actions or outside conditions, it is not able to compete in a given market. Other times it may decide that even though it has no cost disadvantage, the revenue on a given potential sale will not provide a great enough profit margin to meet company goals. Further, companies will sometimes completely abandon profitable markets and business lines, simply because cash resources can be invested in more profitable businesses.

I won't argue with your point that competition in a market place will improve products, promote cost efficiencies and most likely give the consumer a better price. However, competition also produces something you seem to oppose, and that is the shift from markets with a multitude of producers to many fewer much larger companies. Obviously, the big incentive for growth is the potential economies of scale. If such economies exist, then growth becomes an imperative to retaining a competitive position.

The farming scenario describe suggests that the sole cause of such action would be the monopoly pricing activity of your favorite railroad. I would submit that there are many other factors that have an impact on these farmers, not the least would be the productivity of the land and the weather patterns and their proximity to markets. I grew up in an area of Northern Wisconsin where at one time almost all tillable land was used to support thousands of family sized dairy farms. Today such farms are virtually nonexistant and they have been replaced by huge "factory" dairy farms, most located in a better growing environment and closer to markets. The decline in farming in the area where I lived caused changes in the economy which took time to work out, but I do not think the local economy was devistated, nor did it produce any wide spread recession.

As for your last contention, I have yet to see any company claim that anything other than lower wages, lower health costs, less environmental and other regulations, lower facility costs and lower taxes. Transportation costs? I'd bet it wasn't even an item on the decision matrix.

Jay Eaton

[MP173]

Dave:

I will agree with your statement "industrial investors have taken their projects out of the country" but I doubt if it has been due to lack of choices in rail service. I could be wrong, but it is my belief those investments are leaving the US due to much lower overall costs, the majority of which are labor related.

So, in effect....open access is available on those investments, since a considerable amount of the transportation is via overseas containers, which as we know, are not captive to one rail system, or even one ocean vessel company.

Regarding my employer...let me say that we are in a specialized printing/advertising field. Typically our customers are companies which utilize our services for branding identification. We are non union. We are owned by the original founder. He is not only active, but extremely knowledgeable in the industry and also in sales/marketing. His background prior to founding the company was sales. He understands the marketplace.

"Open access" in our industry has enabled a number of new competitors. By "open access" I mean advanced technology. I dont bemoan this competition. My sales have risen, as has the company's. We do fine. What the "open access" in our industry has done is open doors for new bidders. Large corporations are very smart in allowing those to participate in the bidding process.

The newer companies seldom secure the larger company's business, but they do drive the prices down thru the bidding/on line internet proceedures. The customer always has a provision in the bidding documents stating they are not obligated to take the "low bidder". And they dont. They use the economic leverage of "open access" to drive down pricing to the low bidder's level, yet keep the business with the current supplier (if they are happy with them).

This is all well and good. It is legal. It is moral. It is business. A company may choose to either play....or go home.

I realize that at some point in time, it is inevitable that a customer of mine will go the route of on line bidding. And I will either lose the account, or lose all margins. That is why it is critical, not only in my little sales kingdom, but also in the business world to constantly seek new opportunities, new business, and new applications. Growth is critical.

Railroad's growth is generally neutral, by that it means it is very similar to the flucuations in the GNP. Plus there is business which is simply not profitable. Generally speaking you raise the rates on that or simply walk away.

My fear of "open access" is what I described above. It is very similar to the airline industry. High fixed costs, high variable costs and heavy competition. Generally the airline industry is a mess and has been for quite some time. Ease of entry into the field is easy. Go lease a couple of 737's and fly. Capacity is available, usually out in the desert somewhere.

Railroads are big business. they do not need me to state their case. As I have stated previously, I own one rail stock, CN. I bought in early with the old Illinois Central and have done quite well. But, for the most part, the party is over with that investment. Other railroads do no interest me, due to the lack of pricing power they currently possess.

Thus, as an investor, I do not find today's railroads attractive investments. A system with considerably more competition will place downward pressure on pricing. As an investor, I cannot visualize that being attractive.

However, if I owned a business, I would be pounding the table long and hard to reduce transporation costs. Open access would work for me in that case, at least for a while.

ed

[Anonymous]

MP173,

Not knowing what it is your business is involved in, I can't relate a more specific answer. Is there a cost factor in your bidding process that negates the statistical likelyhood of your firm winning the contract? Is your firm a union shop having to bid against non union outfits? I can see the logic of your firm's action if the cost of bidding is itself an onerous expense or the statistical likelyhood of winning the contract is too low to make an offer. It sounds like your firm may have some internal constraints that prevents maximum flexibility from being exercised.

Regarding you point on consumers having choices, don't forget that one of those choices can be to reduce or eliminate economic activity altogether. This in turn has a negative effect on the economy. If enough potential consumers of a good or service decline to participate in a particular sector, the effect on the economy can be akin to death by a thousand slices. Take your grain growers. If one or two decide to put their land into a conservation program rather than grow crops and deal with onerous transportation costs, that's no big deal. But if that action is taken by a few hundred farmers, then the effects on the local economy can be devastating. Get enough areas of the country in that fix, and pretty soon we got ourselves a full blown recession.

It is my view that federal transportation officials are implicitly charged with taking pre-emptive action to prevent such eventualities from occuring. We have to ask ourselves how many inustrial investors have taken their projects out of the country rather than having to deal with captivity to one railroad? Granted, being a captive rail shipper is just one negative aspect that industrial investors have to deal with along with environmental regulations and overburdensome regulations. Then again, it only took that last straw to break the camel's back.

[Anonymous]

QUOTE: Originally posted by Murphy Siding

Future: Your non-answer answered my question. Thanks

And your non-followup question answered mine. Take care.

[Anonymous]

While we talk about rail and the taxpayer, the House passed a bill that would provide $3.6 billion to upgrade facilities on the Mississippi and Illinois Rivers "to lower shipping costs". Who in their right mind would want to compete in the private capital markets against that?

[MP173]

Future:

I have no problem with competition. I simply want to control my business environment as much as possible. If the 29 "bidders" want to pursue the business mentioned above, so be it. I dont.

Why? With that many competitors and with "open internet bidding" the end result is that one company wins and that is the buyer. I do not enjoy participating in situations in which one company controls the shots.

Now, you will probably say that I just contridicted myself in that I want to control my business, yet I do not want to participate when the buyer controls it. It seems a bit contridictory, doesnt it?

No. I work for a market leader. Our business model was based on creating and adding value to the equation and charging accordingly. If there is no value to be added, it is simply a commodity. With commodities it is based on pricing.

We have discussed ad nauseum the "open access" issue. My IQ is not on your level and I thus it is hard for me to philosophically discuss Adam Smith, et. al. My talents lie in the business world, not the world of theory.

In a capitalistic environment, the key is to service customers to the point that the returns justify the investment. Service, you will say is lacking in the close access world. Perhaps, but customers have choices and exercize those choices.

Until we move to open access, we can discuss this all we want, but we simply wont know how it will work.

You state your case well. It appears you have large shipper interests. One of my customers last week commented about how they purchased a rail line for $10 million and then were able to secure $20 million in rate reductions immediately. Good for them. They invested and yielded the results.

Most shippers do not want to make the investment. They want the benefits of a regulated system with the pricing of an open market.

Gotta go to church.

ed

[Murphy Siding]

Future: Your non-answer answered my question. Thanks

[Anonymous]

Starting a thread on HSR... Heh, *yeah*,,[B)] I did that, before you joined us, maybe a bit over a year ot so ago. And there are a handful of guys here who haven't spoken with me since.....

Obviously they take the prospect of HSR very seriously, and that's fine. But, the offers I've actually seen talked about locally in the paper, look suspiciously like "pig in a poke" opportunities... And in saying so, I fear I made some enemies.

But, I've concluded that the deal being fished around for public support probably looked dishonest for a reason, because it was...or at the very minimum because the folks behind it were not completely forthright.
Just looked too much like they were fishing for "suckers"

[nanaimo73]

TAG,
Thanks for mentioning
www.in.gov/dot/modetrans/train/high_speed.html
Have you thought about starting a thread on it ?

This thread is very interesting. I hope Murphy Siding can find out who O.S. is. We have not heard from him in two weeks and it would be nice to know he's still okay. His thoughts on this topic would be interesting.

Do you know anything on Terre Haute ? Penn Central did a major screw-up in town in 1968 so that ISU could have a new parking lot. About 1 mile of the ex PRR was taken out resulting in a 25 mph s-curve on the west side of town. Was this ever fixed ?

[Anonymous]

QUOTE: Originally posted by Murphy Siding

Future Model : What do you do for a living? While I don't always see eye to eye on a lot of your lines of thinking, it's obvious that you take a lot time and effort to think through your opinions. However, sometimes your opinions can seem so off the wall that I wonder if you live in the same world as the rest of us. I sell lumber to housebuilders. I think I have a pretty good understanding of how competition works. Do you work in an evironment of competition? Some of your posts seem to indicate that you don't always have the best real world grasp of how some business things work . I'm not trying to challenge,because I can respect that you seem to have a differing point of view, I was just wondering. Thanks

I'm basically an Average Joe trying to make ends meet. However, I was fortunate to have been educated by a wide array of economic professionals from both sides of the political spectrum, so that's probably why some of my points don't fit into the stereotypical schisms of left and right. At one time I actually scored a 181 on an IQ test, but that was more than a few beers ago. It's more than likely to have slipped a few points since then, I'll grant you.

What specific points have I made that you need expounded?

[Anonymous]

QUOTE: Originally posted by nanaimo73

Up here in British Columbia a few years ago CP Rail needed to replace an old bridge at the town of Sicamous. This was a swing bridge used by boaters, some of them living in town. As soon as CP built the new bridge, the town doubled the taxes they had been putting on the bridge. I would hope towns along the Sunset do not use a newly laid second track through their town as a reason to increase taxes. They should be happy that the trains are probably spending less time blocking their streets.
In Indiana there was a major project to remove a Norfolk Southern line through Lafayette (May 2000 Trains).In this case the taxpayer paid for the work and got the benefits. I think there must be places were railroads could increase capacity with their own money that would make sense if they were non-taxable, and the public would still get other benefits.

Yeah that line through Lafayette was a menace,had the train going right down the middle of a city street... Pretty wild when you think about how that once was seen as normal.

There was a short segment like that here on the old old NYC, but that line was next to dead already by the time I was born. I still shake my head just looking at the remnants., wondering how folks could tolerate it.

[nanaimo73]

Up here in British Columbia a few years ago CP Rail needed to replace an old bridge at the town of Sicamous. This was a swing bridge used by boaters, some of them living in town. As soon as CP built the new bridge, the town doubled the taxes they had been putting on the bridge. I would hope towns along the Sunset do not use a newly laid second track through their town as a reason to increase taxes. They should be happy that the trains are probably spending less time blocking their streets.
In Indiana there was a major project to remove a Norfolk Southern line through Lafayette (May 2000 Trains).In this case the taxpayer paid for the work and got the benefits. I think there must be places were railroads could increase capacity with their own money that would make sense if they were non-taxable, and the public would still get other benefits.