I see I have to address the point of "Amtrak's free ride."
Nearly all freight railroads used government assistance for original construction. In some cases this involved cash loans, investments, free land, etc. But it all cases they used the rigiht of emenant domain to secure rights of ways that avoided exta-ordinary or exhorbadant costs. They were able to do so because they promised public utility for both passenger and freight carriage. That promise should still apply today where appropriate. It is more efficient for them to subsidize Amtrak by receiving less than market valiue for track occupancy than it is to provide the service themselves.
PNWRMNM This is essentially a political statement, not a statement of economic fact. Historically, highways were the King's highways because only the King had the funds and the need to move soldiers. Mac
This is essentially a political statement, not a statement of economic fact. Historically, highways were the King's highways because only the King had the funds and the need to move soldiers.
Mac
Sorry, but the historical fact is that most roads in the US have been built by one of various levels of government, including the National Road by the Federal government, starting in 1811. Some roads were later paid for through tolls, but this was usually after construction. And much railroad ROW was subsidized and/or paid for by the Federal government.
C&NW, CA&E, MILW, CGW and IC fan
schlimm Infrastructure is essentially a public asset, essential in a modern state, which does not lend itself to the profit motive. It is historically a proper function of government. Ultimately, costs are born by both users and end users. The key is to prioritize what needs to be done.
Infrastructure is essentially a public asset, essential in a modern state, which does not lend itself to the profit motive. It is historically a proper function of government. Ultimately, costs are born by both users and end users. The key is to prioritize what needs to be done.
Sam1 "The higher tax is justified because trucks, the main user, are harder on the roads.... Several years ago, if I remember correctly, I read an article claiming that drivers of personal vehicles, i.e. cars, vans, SUVs, pick-up trucks, etc., made up 80 per cent of Interstate highway users. According to Face the Facts USA, A Project of George Washington University, big trucks make us 4.3 per cent of all highway vehicles. And they account for 10 per cent of total highway miles traveled. The same reports says that half of all big truck miles are racked up on Interstate highways and, in some areas, they account for 1/4 of all the vehicles on the Interstates. "In 2010, trucks transported 34.2 million tons of freight around the U.S. every day. These trucks pay extra taxes to offset extra wear and tear on roadways. In 2009, these taxes amounted to $3.2 billion – 11 percent the Federal Highway Trust Fund’s total revenue."
"The higher tax is justified because trucks, the main user, are harder on the roads....
Several years ago, if I remember correctly, I read an article claiming that drivers of personal vehicles, i.e. cars, vans, SUVs, pick-up trucks, etc., made up 80 per cent of Interstate highway users.
According to Face the Facts USA, A Project of George Washington University, big trucks make us 4.3 per cent of all highway vehicles. And they account for 10 per cent of total highway miles traveled. The same reports says that half of all big truck miles are racked up on Interstate highways and, in some areas, they account for 1/4 of all the vehicles on the Interstates.
"In 2010, trucks transported 34.2 million tons of freight around the U.S. every day. These trucks pay extra taxes to offset extra wear and tear on roadways. In 2009, these taxes amounted to $3.2 billion – 11 percent the Federal Highway Trust Fund’s total revenue."
Relevant fact: Damage to a road surface, be it dirt, asphalt, concrete, steel rail and ties, or whatever, goes up geometrically with weight and wheel/axle loading, not in a linear fashion. A 30-ton truck does not do 15 times more damage to the road slab than a 2-ton SUV; it does more on the order of 100 times more damage.What transportation engineers tell me is that the 3-10% of traffic that is tractor-trailers on a highway such as described above do about the same wear and tear as the 90-97% of the traffic that is cars, motorcycles, light vans, etc. The numbers are far worse on major freight thoroughfares like I-80 and I-81.Trucks and their owners/operators do pay substantially more into the overall Treasuries, state and Federal, through all the various fuel taxes, business taxes, licenses, fees, etc. than cars do through fuel taxes. Whether that additional "revenue" is enough to pay for the "wear and tear," or whether those funds ever actually make it to maintaining the road infrastructure, I'll leave to others and their lobbyists to argue.
On return from the field and some reflection I can see Mac's point (my apologies), that BNSF's owners want $3-4 Billion a year off their almost $40 investment at the time of going private. In this consideration you would take that profit amount add in maintenance costs and this would be the indifference point to running freight or passenger trains assuming you can do only one or the other with fixed capacity, though this number would be the upper limit, as it would take the profits from train Operations and MOW, and force them only onto track charges. You could also prorate the expected owner profits by infrastructures's share of all $15 Billion in input costs to get a middle of the road trainmile fee.
I though am trying to figure out the cost functions for expanding capacity and comparing them to what I know, road capacity as I am a engineer for a state DOT, though I am heading back to private industry at the end of this month. So from my point of view, the profit on the original investment (land and contiguous ROW) is fixed, and if you add say for example sidings, you actually add utility to the existing operation in terms of less train delay for all trains. You might tap lower borrowing costs to do so by using Public Activity Bonds backed by owner's equity. But to be financially efficient you need several trains to share the cost of this extra capacity.
To me this is what a Transportation Bill should be about, figuring out how modes interact, but we don't do that now, we just stovepipe money. This seems like a valid Discussion Board topic.
Here is the conflux of public and private interests. AASHTO has estimated that investor owned railroads will not be able to raise enough private capital to expand their infrastructure (on even replace some grade separations, particularly in urban areas) to meet rising demand in an expanding economy, even for the current heavy haul market offerings. This would make sense as road freight haulage is underpriced, so in a marketplace the railroad would only take the low hanging fruit.
This leaves a public problem, do we want to try to make up for the capacity on the Interstates (using the pot-o-money in the Transportation Bill) for example where the extra capacity is also almost gone, fuel use is more intensive, and costs are much higher to provide the capacity as this would massively drive up economy wide production costs.
I would contend that infrastructure expansion is lumpy. To get the kind of improved reliability to begin restoring options at their price in a marketplace, there is going to have to be a railroad physical plant out there that can meet the demands of timely movement and once it is there passenger trains can access it at the prorated cost function, not the original prorated profit amount of displaced freight operations as they are not displaced in a expanded capacity scenario. So the public interest in expanding infrastructure to get timely freight movements off the road is the same as that of providing for passenger rail access.
In balance, the public interest would mean logically more spending in grade separations for example to remove operational inefficiencies and delay costs, or actually pricing road freight to recover costs and a constructed private infrastructure investment profit ratio (say 30% over costs). It is all linked. We as the public had our engineers invent the "time saved" methodology to justify a massive financial transfer from excise taxes off locally maintained roads onto the Interstates. The "time saved" method is not some economic truth as has been proven in studies of actual monitization rates for time but instead it was just a construct to try to get us to stop the accident carnage on the Depression era 2-lane highways.
$20 dollars per trailer train mile is a HUGE cost. Private company's manage money MUCH better than Government. ALL this will cost consumers MORE if the Govt does it at their low efficiency.
A rational public policiy if the American people did not care about supporting tourism, elderly and handicapped access to the continent, emergencies when air and/or highway transportation is crippled, and fairness in compensation for the rural population's tax contributions to keep our cities functioning transportationwise (cities where the subsidy is essenetial).
I also firmly believe that if all transportatiion modes paid their own way, including compensation for hidden subsidies, long distance passenger service could be cost competitive.
If the AT&SF had been able to reduce their passenger service to just the Super/El Cap, Texsas Chief, SF Chief, and the three San Diegans, they would have stayed in the passenger business . But they had no assurance they would be able to drop the biggest money loosers.
V.Payne "NRPC would gladly pay $3/trainmile extra to get this kind of infrastructure if they were wise (16 extra customers a trainmile would cover it), but they cannot pay $50/trainmile as though all the benefits were only assignable to them. Incrementally it would work and the full prorated cost would be passed on to the passenger operator, no free ride." NRPC currently pays $4-5/trainmile, you can back that out from a few sources, $3/trainmile extra as mentioned would not be too much from a cost/revenue standpoint for much improved hosting in this writers estimation, or $8 total. $3/trainmile is an estimate from this writer for prorating the costs of adding sidings at $4 million each. The $2.4 Billion from STB R-1 Schedule 410 includes already about $1.1 billion in capital depreciation calculated in Schedule 412, including it again is double counting. Also, switching Way and Structures is included in this number so for something like passenger operations the cost basis should be lower. Roughly, you get $80,000/route mile per year, $14/trainmile, yes profit goes atop that. Maybe a point was being made about market capitalization, but depreciation cannot be counted twice.
"NRPC would gladly pay $3/trainmile extra to get this kind of infrastructure if they were wise (16 extra customers a trainmile would cover it), but they cannot pay $50/trainmile as though all the benefits were only assignable to them. Incrementally it would work and the full prorated cost would be passed on to the passenger operator, no free ride."
NRPC currently pays $4-5/trainmile, you can back that out from a few sources, $3/trainmile extra as mentioned would not be too much from a cost/revenue standpoint for much improved hosting in this writers estimation, or $8 total. $3/trainmile is an estimate from this writer for prorating the costs of adding sidings at $4 million each.
The $2.4 Billion from STB R-1 Schedule 410 includes already about $1.1 billion in capital depreciation calculated in Schedule 412, including it again is double counting. Also, switching Way and Structures is included in this number so for something like passenger operations the cost basis should be lower. Roughly, you get $80,000/route mile per year, $14/trainmile, yes profit goes atop that. Maybe a point was being made about market capitalization, but depreciation cannot be counted twice.
Paragraph 1 Who made you business agent for ATK? I know of no basis for that statement. Can you cite a case where ATK said to a freight carrier "I will pay you more per train mile if you do WHATEVER"? I have never heard of that happening, which of course does not prove it has not happened. Your assertion that the extra $3 per train mile would be fair compensation is totally unsuported. It is simply conjured out of thin air.
Paragraph 2 you again use your mythical $3 per train mile additional payment to support an unknown number of sidings. Total fabrication and fantasy. FWIW, I agree that your $4,000,000 per siding is reasonable if don't need more r/w and are in flat dry ground.
Third paragraph. No, I did not double count. I did not count include or mention the something over $2 billion per year in capital maintenance. That would be double counting as against MofW expenses. Return on invested assets, that is the track structure, is a legitamate cost. For proof note that STB includes it as a cost item in line abandonment cases.
ATK is getting a very near free ride on the freight carriers. Rational public policy would either require ATK to pay full cost rates for access to the national network OR even better shut the whole LD operation down and make the capacity available to take freight off the highway. No need to fear that!
V.Payne Is passenger automobile infrastructure a good investment for a private company? The SH130 builder (segment 5&6) in Texas is about to default on bonds in June it issued per Moody's.
Is passenger automobile infrastructure a good investment for a private company? The SH130 builder (segment 5&6) in Texas is about to default on bonds in June it issued per Moody's.
Classification of a bond to non-investment grade does not mean automatic default. There are portfolios of non-investment grade bonds that do very well. However, when a bond is rated as non-investment grade, it usually means that the issuer has to correct the underlying revenue streams or restructure the bond issue.
You pick out exceptions and generalize them to the population. What is the outcome for all private/public infrastructure projects in at least the OECD countries?
Whether roads are built by government, private interests, or a combination thereof is not important. The key issue is whether the users pay for them. Ideally, the users pay a fair, proportional share. Ideally!
In the real world of power politics some users will pay more than their fair share and some will pay less. At the end of the day, however, as discussed in previous posts, American motorists pay for the roads that they use.
This is supposedly a forum for passenger trains. I don't understand your obsession with roads. I am done with the explosion of this issue beyond reason.
V.Payne As to rail line capacity, if just enough redundancy is there to get an intermodal over the road at a certain timeslot it practically has to exist throughout the day for multiple other time slots on a random basis. Say for example you cut the spacing of sidings in half to get that redundancy. That would mean an extra $3/trainmile charged to all trains. The moderate road diesel fuel tax increases proposed above for heavy trucks would more than easily cover that in a marketplace shift, while delay and HOS problems would radically drop, the shippers would get a better service, freight and passenger speeds would increase and cost drop. NRPC would gladly pay $3/trainmile extra to get this kind of infrastructure if they were wise (16 extra customers a trainmile would cover it), but they cannot pay $50/trainmile as though all the benefits were only assignable to them. Incrementally it would work and the full prorated cost would be passed on to the passenger operator, no free ride. But to get this kind of consideration in the transportation bill, rail freight intemodal has to be demonstrated to be much better to the public and industry.
As to rail line capacity, if just enough redundancy is there to get an intermodal over the road at a certain timeslot it practically has to exist throughout the day for multiple other time slots on a random basis. Say for example you cut the spacing of sidings in half to get that redundancy. That would mean an extra $3/trainmile charged to all trains. The moderate road diesel fuel tax increases proposed above for heavy trucks would more than easily cover that in a marketplace shift, while delay and HOS problems would radically drop, the shippers would get a better service, freight and passenger speeds would increase and cost drop.
NRPC would gladly pay $3/trainmile extra to get this kind of infrastructure if they were wise (16 extra customers a trainmile would cover it), but they cannot pay $50/trainmile as though all the benefits were only assignable to them. Incrementally it would work and the full prorated cost would be passed on to the passenger operator, no free ride. But to get this kind of consideration in the transportation bill, rail freight intemodal has to be demonstrated to be much better to the public and industry.
Mr. Payne,
I can not follow the logic of your first paragraph above. The first sentance is gibberish. In the second you propose doubling the number of sidings to increase line capacity. I agree that would increase capacity, but without detailed dispatching simulations is no way to tell by how much or how much service reliablity would improve at a given volume and mix of traffic. Neither of us have any idea how much this would cost.
Where does this $3 per mile charged to each train come from and how does it relate to anything?
What are you saying a road tax increase will do?
Second para you say ATK would glandly pay $3 per mile to get this benefit. Are you suggesting they would pay $3 more per train mile, or that they would gladly add more trains paying $3 per train mile? Then you plainly say ATK can not pay the full value of the slot ($50 per train mile). Here you are admiting that ATK is an almost free rider on the back of the freight railroads.
Why would any freight carrier willingly invest its funds to earn less than adequate, or even negative, ROI to support ATK?
To get a rough idea of what it costs to produce a train mile of railway service I looked at BNSF R-1 report to STB for last year available, think it was 2013. Way and structure operating expense was $2,359 million and dispatching was $55 million for a total of $2,414 million.These are expenses necessary to produce train miles.
Net Investment in Road was about $3,400 million. At STB approved ROI of 11%, that is $3,740 million per year.
Total train miles was 167.5 million. That means operating expenses were $14.45 per train mile and capital costs were $22.39 per train mile, a total of $36.84 per train mile.
Paying $3 per mile for something that costs $36 looks like armed robery to me and to the freight carriers.
henry6 So what you guys are saying is that since everything costs money it should be discarded and nothing be done? And that anything which involves taking care of people, even if for the benefit of society and business, should be disregarded? That spending any money is spending too much money?
So what you guys are saying is that since everything costs money it should be discarded and nothing be done? And that anything which involves taking care of people, even if for the benefit of society and business, should be disregarded? That spending any money is spending too much money?
I don't know how you extracted that conclusion from what I have said.
My initial post on this topic, if I remember correctly, was to point out that trucks are not the majority users, i.e. by vehicle count, of the Interstate Highway System. Subsequently, I pointed out that in addition to the user fees paid by trucks, most trucking companies (private and common carrier) pay substantial corporate income taxes, which flow to the general fund. Some of these monies flow back to the highway funds at various levels and, therefore, cover some of the incremental damage done to highways by heavy trucks.
Mr. Payne is correct in that he has highlighted a serious financial shortfall in the Highway Trust Fund, and it has serious implications for the future of our roadway systems. If he believes that anyone (CBO, Joint Committee on Taxation, etc.) can come up with a hard clad projection that has a high probability of playing out over the long run, i.e. more than a couple of years, he probably is wrong. In any case, for a solution to be workable, it must be politically doable.
Whatever we want, someone has to pay for it. If the users don't pay for it, the taxpayers have to pick-up the difference.
Freight rail in the United States is a good investment. As a result the freight railway companies have little difficulty raising capital for their operations. Truck companies, airlines, and water borne carriers are also able to raise funds in the capital markets. They too can obtain funds in the capital markets. Passenger rail, at least in the United States, is a different kettle of fish. It is a poor investment. Everyone in the private market knows it; no one is likely to lend money to a passenger rail operator. However, the folks sponsoring the Texas High Speed Rail Project may prove us wrong.
The problem with the CBO projection I was trying to explain above is that they are just extrapolating against what we have been spending the last few years, which has been sorely depressed, particularly in such things as tons of asphalt placed each year in mill/fill contracts. We had some asphalt contractors recently state that they would stop attending a conference if we didn't stop talking about the various chip seal and emulsion type operations that try to wring some pavement preservation out of the limited dollars out there.
There is something called the FHWA HERS model that tries to predict future costs based on measurements, but it doesn't really account for a pavement just wearing out deep in the base or structures and the costing has not been updated since before the 2007-2008 price spikes. I see true reconstructing projects costing 2-3 times what it would say.
As to rail line costing, the current negotiated passenger trackage access rates are about 1/5 of what a typical freight train might be internally charged, relative to the physical damage caused that is overpayment.
We haven't even begun to talk about finding money to rebuild all those urban rail grade separation structures built in the 1920's and 1930's that are still standing. At some point there is going to be a massive public policy discussion and if there is no passenger/intermodal freight rail angle to the discussion I would be afriad the industry will loose.
RIDEWITHMEHENRY is the name for our almost monthly day of riding trains and transit in either the NYCity or Philadelphia areas including all commuter lines, Amtrak, subways, light rail and trolleys, bus and ferries when warranted. No fees, just let us know you want to join the ride and pay your fares. Ask to be on our email list or find us on FB as RIDEWITHMEHENRY (all caps) to get descriptions of each outing.
According to "Projections of Highway Trust Fund Accounts Under CBO's February 2014 BaselineBy Fiscal Years, in Billions of Dollars", the short fall in the HTF for 2018 is projected to be $12 billion.
The average annual cumulative shortfall through 2024, according to the same table, is expected to be $12.9 billion per year. Apparently the table has been updated since I first checked it.
Anyone familiar with regression models knows or should know that there is a considerable amount of wiggle room in financial (statistical) projections, especially those that go out more than a year. Moreover, as soon as someone states a future number, unless it is for tomorrow, I know that it probably is or will be wrong.
CBO projections are based on statistical samples. To really understand the numbers one has to know the constructs for the sample, as well as the regression techniques used to develop the trend lines and forecasts. If one is using a statistical sample to project a future outcome, the result cannot be projected to the population as a single number. It should be projected as a range of possible outcomes.
As long as transportation in the United States, as well as other OECD countries, is influenced heavily by politics, which it is, any proposed outcome that is not politically doable is DOA.
PNWRMNM Henry, Passenger traffic is not business to the freight railroads. It is a burden to be carried with no contribution to the fixed plant, to overhead, or to profit. The spare capacity of 50 years ago that you so fondly remember, and widely existed, is not there. The network is running close enough to absolutely full that the "slop" of the old days just is not there. Freight service quality standards have had to be raised to try to keep up with competitors, so the ability to tolerate 30 to 60 minute delays to meet a passenger train has also disappeared. ATK gets a virtually free ride by statute. It that marginal cost pricing. Passenger proponents always start out thinking "their babies" should have a free ride. Some learn that can not work. Others never do. Mac Well said. And the virtually free ride is getting better. In FY10 Amtrak paid the freight carrier $136.5 million to hoist its trains. By FY12 the payment had shrunk to $110 million.
Henry,
Passenger traffic is not business to the freight railroads. It is a burden to be carried with no contribution to the fixed plant, to overhead, or to profit.
The spare capacity of 50 years ago that you so fondly remember, and widely existed, is not there. The network is running close enough to absolutely full that the "slop" of the old days just is not there. Freight service quality standards have had to be raised to try to keep up with competitors, so the ability to tolerate 30 to 60 minute delays to meet a passenger train has also disappeared.
ATK gets a virtually free ride by statute. It that marginal cost pricing. Passenger proponents always start out thinking "their babies" should have a free ride. Some learn that can not work. Others never do.
Well said. And the virtually free ride is getting better. In FY10 Amtrak paid the freight carrier $136.5 million to hoist its trains. By FY12 the payment had shrunk to $110 million.
Some railroads don't think passenger traffic is a burden if it is not their responsibility to supply the train and market its service. In fact, at that point, it is just another train and income product. Those roads who participated in the Amtrak start up may have other problems with passenger rail but there might be opportunities in places to maintain a track for freight service because there is a passenger train or two daily, something to keep the rails shiney and the signals lit. In some instances it might be the price to be paid to get help from governments for infrastructure repair, replacement, or maintenance. Or it just might be a cash income. Some railroads might have their own service but more than likely someone will come to them with a train and schedule so that the railroad has no investment in equipment or people.
Have freight train quality standards been raised that much? I ask that because too frequently I hear the question is that yesterday's 205 that late or tomorrow's that early? Besides, freight schedules are excuses from the operating department and marketing schemes from the sales department. If they were met 90 to 100% of the time everyday, I'd go along with them, but more often than not they are not that reliable to be taken seriously.
I don't think passenger advocates look for a free ride...nor should they be a plague upon the freight carriers. I say that only because until Amtrak the system worked without hindering freight but rather helping freight. When First Class trains had timetable authority then everything else on the road had schedule responsibilities to be someplace at a particular time instead of today's operations where freight trains have a right of track because they are a freight train. Yeah, maybe I'm being simplistic with the concept but it worked better for everyone. I get the feeling sometimes that there is more outlawing, more "late" freight connections than by older standards and it is happening where there are no passenger trains. Investing in infrastructure to the point of handling perceived traffic to benefit stockholders is short sighted. If you improve a line to a certain standard to be able to handle the business be it freight and/or passenger traffic, then the commodity has to be charged to cover the expenses. No body is asking or saying passenger trains want or warrant a free ride.
V.Payne Take for example the CPR Expressway roll-on/roll-off trailer service. The timings for this service and the input costs are significantly lower than what seems to be the containerized example worked through above. But CPR has said publicly that they will not expand the service without some public assistance to provide infrastructure, which would go to the point that recovering over the road trucking costs incrementally might allow CPR to instead self-finance the infrastructure expansion. Once you add additional sidings to get timely delivery of intermodal, there is additional capacity available at little incremental cost for passenger trains on mixed use lines.
Take for example the CPR Expressway roll-on/roll-off trailer service. The timings for this service and the input costs are significantly lower than what seems to be the containerized example worked through above. But CPR has said publicly that they will not expand the service without some public assistance to provide infrastructure, which would go to the point that recovering over the road trucking costs incrementally might allow CPR to instead self-finance the infrastructure expansion.
Once you add additional sidings to get timely delivery of intermodal, there is additional capacity available at little incremental cost for passenger trains on mixed use lines.
Lets stay with this example and lets assume that what CPR means by infrastructure is more and longer sidings and/or double track as opposed to terminals, which is not clear on its face. If CPR expands line capacity, they will expand it sufficient to handle the business they plan to handle. They would be stupid in the extreem to invest stockholder funds in assets to provide a free ride (AKA incremental rates/costing) to passenger trains.
Until passenger advocates get off the notion that passenger trains should get a free ride, they and their trains will be a plague upon the freight carriers.
Well said Henry. The current white house occupant said energy prices would "necessarily skyrocket" back in 2008. Interestingly enough, gas consumption has gone down as unemployment has gone up, by about 20% since 2009. This Bill takes away much local control from the Rails. The Govt runs at about 50% efficiency and Amtrak actually isnt that bad. With the closing of multiple coal fired power plants, a higher gas tax would really burden business that are already paying the highest corporate tax in the world.
I try to avoid saying things don't make sense as a response... it seems like at the end there was agreement on the margin theory of a marketplace... "if rail service is offered, there are always some customers on the margin, meaning that a slight change in cost or service will cause them to change modes or shift some traffic from one mode to another. That is why it is important that trucker taxes reflect AT LEAST the costs they impose on the highway network". Full agreement here.
V.Payne Wouldn't a shipper end up paying more at the tipping point of say a 500 mile haul between road and rail if the rail infrastructure is not out there to support timely operation of freight and passenger trains? By default in a binary choice the shipper has to select the higher priced service. I fully appreciate what you are saying about economy wide effects of a business but that would not seem to make up for the deficit in spending. I also am not aware of any of the ARRA projects getting anywhere close to being a large portion of the total track and structures spending. I would argue that charging Class 8 trucks the full cost, or closer to the full cost, is politically viable with the people, but not with the lobbyists. A future prediction on the hole in the HTF is always hard to figure. I will dig up my numbers. The April CBO link I have says $10 Billion in 2015 and $21 Billion in 2016, but it is off to the races after that $43 Billion by 2018 and rising.
Wouldn't a shipper end up paying more at the tipping point of say a 500 mile haul between road and rail if the rail infrastructure is not out there to support timely operation of freight and passenger trains? By default in a binary choice the shipper has to select the higher priced service. I fully appreciate what you are saying about economy wide effects of a business but that would not seem to make up for the deficit in spending. I also am not aware of any of the ARRA projects getting anywhere close to being a large portion of the total track and structures spending.
I would argue that charging Class 8 trucks the full cost, or closer to the full cost, is politically viable with the people, but not with the lobbyists.
A future prediction on the hole in the HTF is always hard to figure. I will dig up my numbers. The April CBO link I have says $10 Billion in 2015 and $21 Billion in 2016, but it is off to the races after that $43 Billion by 2018 and rising.
V. Payne,
The first two sentances of your first paragraph above makes no sense to me. First, forget passenger trains as they are not relevant to the shipper's decision. Your statement that the shipper will chose the higher price offering is false on its face.
If the freight railroad is capacity constrained, then the railroad simply will not offer 500 mile intermodal service because the margin is much lower than on other traffic. All traffic in the lane will move truck. Period. End of story.
If rail capacity is not capacity constrained, a rare situation these days and one exacerbated by free riding passenger trains which consume capacity while making no contribution to increasing it, the railroad may still not offer service in the lane because of insufficient margins. If truck costs also increase reflecting the true cost they impose on the highway system the railroad may offer intermodal service in the lane. Rail service certainly will not be time competitive with truck. Any trucker could complete this haul in not more than 10 hours.
By rail, in the first 10 hours the origin dray could be completed and the box be checked in at the origin terminal. Run time will be about 15 hours. Figure another 10 hours to unload and make out and back dray. The shipper sees only half of each dray, so he sees a 25 to 30 hour schedule vs. 10 by truck. How much of a rate break does it take for rail to buy the traffic? The answer will depend on the customers and their perception of the need for speed and relaibility.
On the cost side the railroad has to pay for a lot of stuff the trucker does not. First is the cost of two drays. The combination of drays plus location of rail terminals typically results in the rail option involving substantially more miles than a straight truck move. Those costs show up in the dray cost. The other big cost is for terminals. For talking purposes you are looking at $200-500 million each. A busy terminal does 250,000 lifts per year. If my terminal capital cost was $250 million, and my capital recovery rate is 15%, that is $37.5 million per year of capital cost, or $150 per lift, or $300 round trip, assuming no deadhead into or out of the terminal. Terminal operating costs are yet another cost, say $200 round trip. The railroad has $1.00 per mile in terminal costs before drays and before rail cost. Why would anybody want to do this if truck rate is $2 per mile?
That said, if rail service is offered, there are always some customers on the margin, meaning that a slight change in cost or service will cause them to change modes or shift some traffic from one mode to another. That is why it is important that trucker taxes reflect AT LEAST the costs they impose on the highway network. It is an economic effeciency arguement.
Mac McCulloch
I appreciate the honesty as well as a chance to debate the point of a financial marketplace.
A future prediction on the hole in the HTF is always hard to figure. I will dig up my $16 Billion number. The April CBO link I have says $10 Billion in 2015 and $11 Billion in 2016 as you say (Corrected myself on using cumulative numbers). But, this number would be operating under an obligation limit and isn't what is needed to keep everything patched together.
V.Payne "trucks, pay substantial federal and state income taxes, excise taxes, inventory taxes, and property taxes... Some of the monies flow back to dedicated transportation funds to cover the financial shortfall between the cost of supporting trucks and the direct revenues generated..." If we are going to consider these general taxes as partially funding the $16 Billion yearly hole in the Highway Trust Fund, why not return the same types of funds to investor held railroads in the transportation bill with a provision they be used for extra trackage.
"trucks, pay substantial federal and state income taxes, excise taxes, inventory taxes, and property taxes... Some of the monies flow back to dedicated transportation funds to cover the financial shortfall between the cost of supporting trucks and the direct revenues generated..."
If we are going to consider these general taxes as partially funding the $16 Billion yearly hole in the Highway Trust Fund, why not return the same types of funds to investor held railroads in the transportation bill with a provision they be used for extra trackage.
Several of the railroads got substantial taxpayer support to upgrade certain aspects of their capabilities under ARRA. One project that comes to mind is the raising of the heights in the tunnels on the line that runs northwest from Norfolk. The outcome was that the railroad, I believe it is the NS, could move its container trains more directly to the Chicago area. I don't recall the amount of time saved, but it is something like a full day.
The railroads receive substantial investment tax credits and R&D tax credits (individually and collectively) for a variety of projects. Also, if I remember correctly, they don't pay any taxes on the fuel that they use. The railroads are investor owned, and they have been successful, thanks in large part to the Staggers Act, to make it without a lot of government support.
According to the U.S. Treasury, Highway Trust Fund 69X8102, Income Statement (Unaudited), For the Period October 1, 2012 through September 30, 2013, the transfer to the Highway Trust Fund from the General Fund was $5.9 billion. The CBO rounded the number to $6 billion and projects a transfer of $9.7 billion for FY14. According to the CBO's projections, sans any change in construction needs or funding, i.e. increasing the fuel taxes, the HTF will have an average annual shortfall of approximately $12 billion per year through 2024. Of course, this assumes that nothing will be done to address the shortfall, which the Administration is attempting to do.
The key point that I was attempting to make, however, appears to have been lost. If one just looks at the fuel, license, and other road taxes paid by trucks, he misses the complete picture. Truckers pay a lot of corporate tax, and some of it flows back to the road funds.
Oh, I forgot to mention it. Actually, JB Hunt, as per my example, does not pay any taxes. Depending on the elasticity of its demand/price curve, the cost of the transport, including any taxes baked into it, is passed through to the end users in the form of higher prices for food, medicine, etc. So, raise the tax on trucks - I believe they should pay the full cost of the infrastructure that they use - and the cost of 10s of thousands of goods will go up. The truckers are not going to absorb it in most instances. Not exactly a strong selling point for politicians to push.
I have long argued that the best way to ensure a balanced transportation system in the United States is to pass the true cost of each mode through to the users at the price point. If motorists, for example, saw the true cost of driving at the pump, many of them probably would opt for smaller vehicles, use alternate modes of transport, etc. Many of them would not; they are willing to pay a lot to drive. The same concept applies to all modes of transport.
No matter how sound a proposal may be from a technical, economic, etc. point, if it is not politically viable; that is to say, the benefits are not crystal clear to a substantial majority of the voters, it is dead in the water.
Deggesty I could look over to the interstate, and seemed that the trucks were less than a trucklength apart. How safe can that be?
I could look over to the interstate, and seemed that the trucks were less than a trucklength apart. How safe can that be?
It is always interesting when a transportation bill comes around, as the majority of the surface transportation network operates with freight and persons on the same right of way. I do see the key to resolving a lot of the inefficiency problems in correctly pricing road freight relative to its costs, or one could even argue the cost plus a markup to reflect a private capital rate of return.
The only group arguing that road freight pays its way is the ATA, but there is pretty good evidence that the general public is getting fed up with the volume of trucks on the main interstate routes.
Honestly, I think you could get significant public support if the transportation bill included two levels of diesel tax, a higher undyed tax level for heavy trucks and a yellow dyed diesel that inherited the old on-road diesel tax.
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