Why Public Investment?

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Unlike trucks, barges, and airlines and automobile drivers, railroads operate over tracks they maintain. The New England Central Railroad has invested over $30 million dollars in capital upgrades to it's line through Vermont since 1995.  Nationally, according to the American Association of Railroads, freight railroads invested approximately $440 billion from 1980 to 2008 (more than 40 cents out of every rail revenue dollar) to maintain and upgrade infrastructure and equipment.

The following was written by  J. William Vigrass.

Click here for the full-text - it's quite interesting

When railroad companies invest in improvements to their physical plant with internally generated funds, they must be assured of an internal rate of return equal to or better than the cost of borrowing money in the private market. In contrast, when the Corps of Engineers makes improvements to the inland waterways system, the barge operators do not put up any investment dollars. When the FHWA and state DOT’s improve highways, the trucking industry does not have to directly contribute to the investment. ...

Tests done under the auspices of the American Association of State Highway and Transportation Officials (AASHTO) have proven highway damage is geometrically related to heavy loads. There is good reason to divert heavy loads off highways onto railroads since the latter are engineered to handle heavy loads.

With several good reasons to add more railroad service, why has not more been done? The answer is, very simply, the railroads cannot afford to make the necessary investments. Their margin of profit is held down by truck competition for the most part. Common carrier truck rates are held down by the ubiquitous owner-driver who often works for bare wages, fuel, a contribution to maintenance and little or nothing for depreciation.

[Nationally, demand for freight traffic is expected to increase 88% by 2035, according to the US Department of Transportation, requiring a $135 billion dollar investment in facilities.  Railroads anticipate being able to generate approximately $96 billion of that through higher earnings and productivity gains leaving a $39 billion funding shortfall, or around $1.4 billion per year, that needs to be supplied through public investment.]

The trucking industry is using an Interstate and Defense Highway System designed and built since 1956, and incorporating improvements in design from time to time. It is largely an up-to-dateJ

The enormous capital invested in the Interstate and federal aid highway systems has been generated by motor fuel and other motor vehicle related taxes borne by the entire motoring public. Past studies have found trucking does not cover about 30% of costs related to truck operation. This allows the trucking industry to offer rates less than their true economic costs. Every time taxes on trucks or trucking have been increased, the industry has lobbied intensely and successfully for increased length and weight limits which in turn allowed freight rates to remain lower than they otherwise would have been. This has attracted more freight to highways, which in turn caused more wear and tear and congestion.