I was under the impression that only Amtrak was receiving subsidies from the Federal Government, NOT Freight railroads such as CSX and UP, etc. Does anyone have affirmative proof otherwise?
Some short lines may get some sort of subsidy from the state they operate in, but the big class I Railroads is NO. However they may get some state or federal money for a particular project, such as moving their track so it goes around a city rather than going through it. or for enhancing commuter traffic flow.
robscaboose Some short lines may get some sort of subsidy from the state they operate in, but the big class I Railroads is NO. However they may get some state or federal money for a particular project, such as moving their track so it goes around a city rather than going through it. or for enhancing commuter traffic flow.
Looking back in history, there aren't too many examples of the Feds subsidizing operations of major freight railroads. The major exception to this was when several major the northeast and midwest railroads collapsed in the 1970's. At that point, the Feds had to subsidize operations of these properties, or the service would have stopped, which would have had adverse ripple effects across the whole US rail system. They couldn't just wave a magic wand in the air and command the bankrupt roads to continue operations because (1) the bankrupt roads have the cash to do so, and (2) a requirement that a bankrupt company continue to provide services at a loss would be an unconsitutional "taking" of the bankrupt's property.
Going back further in history, the Feds arguably "subsidized" railroad construction through land grant, dright of way granst and other related measures, but did not subsidize operations. The reason I use the term "arguably subsidized" is that most historical works dealing with the land grants don't understand the entire system, which actually made money for the Feds. First of all, in return for the land grants, the railroads had to handle government traffic at free or greatly reduced rates, and this requirement remained in effect through two world wars. A Congressional study found that these requirements had paid for the value of the land grants many times over. Second, the land grants (as opposed to ROW grants) were typically made in alternate squares on either side of the ROW. (in other words, in one section, the railroad would get the property north of the ROW while the Feds kept the property south of the ROW; in the next section, the RR got the southern property, and the Feds kept the northern square). Once the RR was built, the squares the government retained were worth much more than the entire property had been worth prior to the land grant, and the Feds sold it and realized their profit (my understanding is that the Feds never allowed this property to be homesteaded). Third, in the case of a ROW grant (sometimes called a "map" filing), the RR only got the right to use the ROW strip, not ownership of adjoining property. Once again, the increase in the value of the adjoining property was realized by the Feds. The bottom line is that the Feds expected to make money from their railroad land and ROW grant policy, and they did. Today's tax and spend politicians in Washington could learn a lot from 19th century railroad land grant policy.
grayfox1119 I was under the impression that only Amtrak was receiving subsidies from the Federal Government, NOT Freight railroads such as CSX and UP, etc. Does anyone have affirmative proof otherwise?
How about this, from a thread captioned as "all that cash" started by ed/ MP173 on 12-18-2009, and a post on 12-19-2009, at - http://cs.trains.com/trccs/forums/p/165189/1818146.aspx#1818146
"CSX, UP, and NS all have significantly higher levels of cash than at anytime this decade."
MP173 I purposely excluded BNI since they are soon to be off the market. Here are selected cash for years this decade:carrier 2000 2004 2008 last quarter UP $105m $977m $1249m $1435m BNI $11m $322m $633m $1161 NSC $0 $579m $618m $999m csx $260m $859m $669m $1240 cni $10m $122m $335m $217m It appears the carriers correctly read the credit crunch that was developing and suspended most capex and cut costs. Even with reduced carloadings and revenue, carriers were able to generate cash...lots of it. ed
UP $105m $977m $1249m $1435m
BNI $11m $322m $633m $1161
NSC $0 $579m $618m $999m
csx $260m $859m $669m $1240
cni $10m $122m $335m $217m
It appears the carriers correctly read the credit crunch that was developing and suspended most capex and cut costs.
Even with reduced carloadings and revenue, carriers were able to generate cash...lots of it.
ed
So - to attempt to prove the negative here: Why on earth would the Federal Govt. be subsidizing these railroads, since they evidently have the ability to do quite well all by themselves ? And why would those same railroads subject themselves to whatever requirements would come along with that subsidy, when they wouldn't have to ? Both challenges being subject to the already-noted payments/ grants for special capital projects and passenger operations, etc. - another one that comes to mind is the BNSF getting some 'stimulus' money to replace a swing bridge across the Missouri River with a lift bridge, etc.
Unless somebody's getting all worked up over the printed words 'Federal Reserve Note' on the paper money in the railroad's cash coffers, too . . .
- Paul North.
Thanks for the inputs guys, great info! I had no knowledge of any Freight RR being subsidised by the FED especially the large carriers. two of my friends vehemently stated that the Fed does. I said maybe back in the 70's when they were regulated, but not now.
That is mostly true, but it does not negate the huge benefits the railroads received. The lands granted to the railroads in the original act could be sold by the rails, with the limitation that any land not sold within 3 years of the completion of the route could be sold at a price not exceeding $1.25 acre.
Beginning with the Pacific Railway Act of 1862 , the transcontinental lines (all except for Hill's GN) were given the following aids:
1. Land grant tracts of 10 sq. miles for every mile of track laid alternating on each side of track in tracts measuring 0.2 wide X 10 miles in height. During the period 1850-1871, the railroads received175 mil. acres, which is about 9% of the total acreage of the lower 48 states..
2. 30 year US bonds issued for construction (at federal rate of 6%) which were repaid with interest by the railroads. I'm not sure if the 6% was lower than the corporate rate at that time. It was instrumental in raising capital. The railroads were also authorized to issue their own mortgage bonds in an amount not greater than the US bonds.
C&NW, CA&E, MILW, CGW and IC fan
Please read Falcon's reply carefully; he is exactly correct.
I would not be inclined to say that the railroads received benefits as such. What the Pacific Railway Act did do -- and it is necessary to read the financial history of the times to see this -- is to reduce the perceived risk of investing in the railroads. Prior to the PRA, while investing in a railroad was a popular thing to do, and there were almost literally countless railroads proposed -- some of which actually got some construction done -- it was also exceedingly risky, and it was difficult to get any significant real money involved. Further, at the time of the PRA, there was a war on and capital of any kind was spread a bit thin on the ground.
In a sense, this was a benefit, in that it made it easier for railroads to attract the capital necessary to build.
For reference, the 6% bond rate, while a little low for high class bonds at the time, was not significantly low. Again, though, it should be realised that the availability of the US bonds was almost essential in raising the capital required for construction; without them, and without the land grants, it is highly unlikely, in my opinion, that the transcontinentals could have been built.
I would also note that the Canadian government did much the same thing, in assisting the Canadian Pacific Railroad; in that case, it could be argued that without the Canadian Pacific, Canada as we know it today would not exist at all.
schlimm [snip] Beginning with the Pacific Railway Act of 1862 , the transcontinental lines (all except for Hill's GN) were given the following aids: 1. Land grant tracts of 10 sq. miles for every mile of track laid alternating on each side of track in tracts measuring 0.2 wide X 10 miles in height. During the period 1850-1871, the railroads received175 mil. acres, which is about 9% of the total acreage of the lower 48 states.. [snip]
[snip]
That 9 % figure seems excessively high to me. Also, I thought the tracts were squares of 1 mile on each side, which would be more consistent with the nominal 6-mile squares of the 'Township and Range'system; the 0.2 figure isn't consistent with anything.
I have no great expertise in this subject, though, and defer to anyone else who does.
jchnhtfd [snip] I would also note that the Canadian government did much the same thing, in assisting the Canadian Pacific Railroad; in that case, it could be argued that without the Canadian Pacific, Canada as we know it today would not exist at all.
You betcha ! See most especially -
Thoughts on the railway that made Canada whole Trains, August 1980 page 22 Canadian Pacific ( "BACHMAN, BEN", CANADA, CPR, HISTORY, TRN )
It's worth reading, and re-reading. Even though it's about Canada and not the US, the plot is the same, the characters are similar, and just as colorful, if not more so.
Good info guys, thank you !!
Paul_D_North_JrThat 9 % figure seems excessively high to me. Also, I thought the tracts were squares of 1 mile on each side, which would be more consistent with the nominal 6-mile squares of the 'Township and Range'system; the 0.2 figure isn't consistent with anything.
Paul: Here are the numbers: 175,000,000 (acres land grant) / 1,900,000,000 (acres in lower 48) = 9.2%
The dimensions I noted before weren't quite accurate, but it is 10 sections per mile, i.e., 10 square miles per mile of track. I found the actual document:
"Sec. 3. That there be... granted to the said company, for the purpose of aiding in the construction of said railroad and telegraph line, and to secure the safe and speedy transportation of mails, troops, munitions of war, and public stores thereon, every alternate section of public land, designated by odd numbers, to the amount of five alternate sections per mile on each side of said railroad, on the line thereof, and within the limits of ten miles on each side of said road."
Anyway you slice and dice it, that was a lot of land, worth a lot of money. Falcon's contention does not jive with reality. It doesn't matter that the government made money as well. After all, it had been federal land. The real point is that in the case of the transcontinental rails, the construction was aided by the government. Some of that was government bonds, to be repaid by the private railroads. Ditto for the southern (Wilmington on south) part of the PRR electrification in the 1930's. Seems to me, that was a good model that we could use again today.
In the case of the southwestern railroads, like the Santa Fe, it has been well documented (see Myrick's excellent book series on the history of the Santa Fe) that the land grant was a lot of miles worth precious little money. Much of the granted land is and was of such poor quality that it is not even suitable for ranch land. It is bleak, arid, desert.
Obviously, there were some nice parcels of ground that did make money for the railroads and I'm not disputing that at all--but at least in the case of Santa Fe--there were a whole lot of parcels that were of questionnable value at best.
I believe one of Myrick's or McMillan's books says the Santa Fe finally divested itself of all the land grant holdings not needed for railroad purposes as of sometime during the 1990's--at which time they closed their real estate subsidiary.
Also--regarding government subsidies--the State of PA recently invested about 80 million dollars to help NS/CSX achieve double stack container clearances. Some of that money may have been federal transportation funding, but normally the freight railroads are just not handed or granted money.
John
In SoCal, Metrolink is evenly sharing the cost of triple-tracking the BNSF Transcon from Fullerton to the LA River, where the passenger and freight lines part. This is only fair, IMO, since Metrolink uses this route heavily. Amtrak uses it also, but I don't know if they contribute to the project.
It is about half done and visible evidence of the continuing work can be seen alongside the tracks as you ride trains into LA. In one place all that is needed is a one-track bridge to connect two long and brand new sidings to make a goodly stretch of main line track.
There seems to be some work planned to increase capacity near LA Union Station; at least someone is stacking ties, rails, and switch assemblies there. I haven't noticed any work there so perhaps they are just using the space as a convenient storage yard for other projects.
This kind of co-operation between public and private rail companies is popular in CA, but I don't think of it as a subsidy, since the public rail authorities get a large benefit from it.
Jack
I thought this page had a good explanation of some of the issues with Land Grants. They accomplished what was intended, and the federal government got a complete return on any investment.
Visit look4trains.com
Here is info about land grants to railroads:
92% of the railroad mileage in the US was built entirely by private enterprise; the primary purpose of the grants -- limited to a few trail blazing RR's -- to open up a vast new area, mostly west of the Mississippi, for settlement and development.
The grants were not gifts but part of a business transaction that ultimately resulted in the RR's which received them repaying the government more than ten times the value of the lands received. Most RR's were required by law to haul government freight and personnel at reduced rated averaging 50%. Mail was hauled at a 20% reduction. When these reduced rate requirements were finally repealed by Congress in 1945 a Congressional committee reported: " It is probable that the railroads contributed over $900 million in payment of the lands that were transferred to them .... Former ICC Commissioner Eastman estimated the value of the lands at the time they were granted was not more than $126 million." Reduced rates applied to the vast government traffic carried in WW II and remained in effect until October 1, 1946 raising the estimated the estimated total value of RR's contributations to $1.25 billion which is about 10 times the value of the lands received.
RR's benefitted from the grants of course, but the greatest beneficiaries were the people and government of the United States. Prior to 1850 the government offered land in Illinois, Mississippi and Alabama for @ $1.25 per acre. When RR's were given land grants in those states the government immediately raised the price to $2.50 per acre. Similar comparisons may be made for the western land grants.
The governments objectives were achieved. Land grants made it possible to do what had never before been done: provide transportation ahead of settlement. Within less than one generation after thr first railroad land grant, railroads - both with and without land grants - touched off and made possible the surge of developement that transformed the West from a wilderness to into a burgeoning community.
By the way, according to the records compiled when the ICC completed their Valuation of the RR's holdings the RR's received a total of 131,250,534 acres -- specifically for the purpose of providing them the necessary security for borrowing the money needed to finance construction. Without this there was no incentive to build into areas where there was no immediate of foreseeable source of revenue.
diningcarthe primary purpose of the grants -- limited to a few trail blazing RR's
Those few trailblazing RR's were all but one (the GN) of the so-called Transcontinentals. Where would we be without that act of political foresight? It was a sound federal infrastructure investment in the future of the nation.
Paul_D_North_Jr I purposely excluded BNI since they are soon to be off the market.
What do you mean by BNI being off the market? I know it is pretty much all owned by Buffet's Company.
Amazing!!
I really expected several of our participants to have some follow up about RR Land Grants, but thus far only one.
The 'land grant' matter and related history, statisitics, and depictions, etc. has been so propagandized and distorted by the anti-railroad agitators and uninformed academics that I just inherently don't trust any source on that which I don't have the opportunity to 'vet' for myself, or which is not vouched for by someone in whose credentials or capability I have considerable confidence. And right now I'm too time-constrained/ lazy/ less interested in that than in some other rail-related subjects to devote any more time to that 'old news', which can be done just as capably or more so by others here - such as yourself, I believe. Sorry !
schlimm Paul_D_North_Jr That 9 % figure seems excessively high to me. Also, I thought the tracts were squares of 1 mile on each side, which would be more consistent with the nominal 6-mile squares of the 'Township and Range'system; the 0.2 figure isn't consistent with anything. Paul: Here are the numbers: 175,000,000 (acres land grant) / 1,900,000,000 (acres in lower 48) = 9.2%
Paul_D_North_Jr That 9 % figure seems excessively high to me. Also, I thought the tracts were squares of 1 mile on each side, which would be more consistent with the nominal 6-mile squares of the 'Township and Range'system; the 0.2 figure isn't consistent with anything.
The number for land originally granted that I've seen is 155,504,994 acres. Of that only 131,350,534 acres were actually given. The rest was reclaimed when the projected railroads weren't built.
Those numbers appear in American Heritage's Railroads in America and appear with two maps, one the distorted view and one of the actual view of land grants on P118 & 119. It notes the maps were taken from the book Story of American Railroads and I presume so were the numbers. FWIW.
Jeff
Those are the best 2 sources that I have at home, too - but see what I mean ? It quickly becomes kind of a 'round-robin', or 'Whisper down the lane', or ''He told me that it was, because someone else told him . . .'', etc.
The 1,900 billion acres in the 'Lower 48' is quite credible to me - I'll spare you the math, though. The 131+ million acres that Jeff quotes is 6.9 % of the Lower 48, not 9.2 % - but that still seems high to me. No comment yet on the 'squares' or Township-and-range' aspects.
I thank DiningCar for stepping in this time and debunking the 9.2% garbage this time. It just will not die and go away. He and I are probably the only ones here who have seen the massive hand carried spreadsheets maintained by GLO/BLM over the years with what was granted, actually taken, etc. (Fascinating reading, just looking at the railroad names in the first column that you may never of heard from, plus the pre-1852 grants including that to part of B&O's original line in the tidal flats)
IMHO-Far too many authors of rather dubvious reputation, political leaning or scholastic ability have propogated the stupidly high number of acres granted (the 9.2% myth) for their own reasons. Like RWM said on another thread, "can some of these railroad related fallacies please die and go away once and for all?" (The research / public room archivist at BLM here in Denver keeps a ledger book copy handy just because of this nonsense. A lot of these "legends in their own minds" will not get off the subject. Wishing it were true does not make it fact.) The effort required by the railroads to patent and then sell what they did acquire is staggering - All you have to do is look at the cash entry and homestead exemption books in the PLSS states.
It is hard to NOT find the 175 million acre number cited in many places; if the other number is more accurate, then the correction is useful, although the American heritage source cited may not be definitive, either. Your use of the terms "garbage" and "myth" suggest a less than scholarly perspective. In any case, my point was that the railroads did receive a very large subsidy of land grants, along with bonds as assistance, which they repaid in full, and which was a highly worthwhile federal investment in the future of the USA. Are you disputing that?
Here are the pertinent sections from PRA:
(1) The lower number is closer to the truth. Inside of that, you must start by realizing the Acts of 1862 and 1866 are far different than what happened before or after. Acts of 1872, 1875 through 1909 etc did not usually come with the checkerboard (even or odd, spelled out to the individual RR by Congress) or the "20 mile limit". The blind adherence to the 175 million figure is pure editorial malfeasance/malpractice (stupidity). Misinformation runs rampant in this area. The one-shoe-fits-all baloney will not quit.
(2) IMHO - The grants and the acts were a Win-Win arrangement. Both sides and the country in general prospered. (The complaints about the grants largely fall into the same stupid vein that claims ALL railroads were run by robber barons and are a populist evil.- The current equivilent might be construed to be the global warming circus.)
schlimmIn any case, my point was that the railroads did receive a very large subsidy of land grants, along with bonds as assistance, which they repaid in full, and which was a highly worthwhile federal investment in the future of the USA. Are you disputing that?
I would not necessarily dispute that, but I would not conclude that it proves anything about the correctness of modern era government “investments," if that’s what you are getting at. The land granted was already a federal asset so to speak, and therefore did not require the redistribution of wealth that today’s extravagant public expenditures do. There was nothing to lose in the granting of undeveloped land to the railroads. In fact the railroads had far more to lose than the government in the land grant deal.
mudchicken(2) IMHO - The grants and the acts were a Win-Win arrangement. Both sides and the country in general prospered. (The complaints about the grants largely fall into the same stupid vein that claims ALL railroads were run by robber barons and are a populist evil.- The current equivilent might be construed to be the global warming circus.)
I agree, except for your final political opinion.
In closing, I found this source, which seems fairly balanced and cites a number of other monographs. It also adds in state land grants of an additional 50 mil. acres to the 130 federal acreage figure: total 180 million.
Considering that a subsidy for one is a tax on another, I would submit that everyone who pays taxes is being subsidized to the extent that their tax rate is less than 100%.
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