Having done a small bit of digging around the web I’ve come across documents on things a person might expect to see leased like locos, cars, land, equipment. Most of the loco and/or car lease info I’ve seen say something to the effect of “Subject to lease on file with the Interstate Commerce Commission” or something similar.
Today I found a new one - leased rail. In a document I found I saw where a Class 1 had installed at one time (maybe still there?) CWR. The markings were “136R94 - L94CW Leased Rail”. Other notations suggested that this was on long term lease, possibly related to the long term lineage of the RoW.
My questions:
Is this common or no longer done?
Why to #1?
Why not to #1?
What might terms be for such a lease if there was a good reason to do that “today”?
What would those reasons be vs. purchasing the CWR?
Thanks in advance to anyone who can lend some insight.
Not surprised and can understand. Instead of buying rail and installing it and maintaining it, it may be that the railroad pays a company to lay and maintain the rail with or without an option to buy at the end of a given period. It may make the expense deductible or otherwise written off in a certain manner, it may or may not be cost savings for not having to employ track gangs, so many little financial or tax loopholes to be explored and used. Or the RR couldn’t afford or did’t want to buy a the time…or CWR was experimental and it was the way to try it at the time (no date given for when this happened).
Some municipalities (that own rail lines) will sell the line to an investor and then lease it back. I suppose it is like a reverse mortgage, and they get some operating cash up front. I will let others decide if this is a wise business decision.
Dan, I’ll try, as time allows, as I don’t have much at the moment. There might be a half-dozen of us here interested in such things, and it’s akin to seeing pigs fly or pink elephants, etc., but here goes:
Attempting to decipher the markings a little: the 136 likely meant 136 lb. section weight/ size rail, and the CW meant Continuous Welded. The 94 may refer to the year 1994, and the R could stand for Rolled, and the L for either Leased or Laid (installed).
Extremely rare - this is the only instance I’ve ever heard or read of. Was it on the Wisconsin Central, by any chance ?
The most common reason for a long-term "finance’ lease such as this is that the user (“Lessee”) doesn’t have or doesn’t want to use its cash to pay for the entire cost of the asset “up front”. Also, the user might not have enough operating profits from its business to be able to fully utilize the Federal income tax benefits, such as investment tax credits, accelerated depreciation, etc., that the purchaser of such an asset is entitled to.
In contrast, the “Lessor” such as a large conglomerate or leasing outfit does have the cash, and operating profits from o
This was former CNW that was (if I am understanding what I’m seeing correctly) then FRVR that would become WCL but was not yet…or was done at the very outset of being WCL.
Ther are reasons other than tax law and cash flow to lease something. In “Logging Railroads of Alabama” there are numerous instances of logging operations leasing rail from a connecting road. No big cash outlay required, and the rail was probably marginal for the connecting roads operation. Moreover, it makes the logging operation beholden to the connecting road, in a situation where there may have been more than one potential connection.
I can envision the OP’s situation like a life insurance policy. The lessor ( or would be seller) of the rail claims a life of X years.The lessee (would be buyer) says " I don’t think it will last that long and I don’t want to take a chance on it. A good compromise might be: "lease it. The term is the promised life or the actual life. If it wears out early , the lease is up, with minimal cash up front and you only paid for what you received. If it lasts longer the lessor(seller), gets paid even more than he wanted initially. There must be a buy-out somewhere. Everything is negotiable.
This is just one scenario that popped into my mind. It could easily be like the logging roads, minimal cash up front but the needed rail gets in place.