The real estate used by interstate highways and airports

Trains Magazine General Discussion
1

One hidden subsidy for highway and air transportation, not included in any statistics produced by DOT or Mineta, is the amount of land air and highway transportation require. Has anybody estimated what the real estate taxes on all this land would total on a yearly basis? I know about ten years ago, the statement was made that one-tenth of the land of Massachusetts was devoted to highway use, streets, highways, and parking facilities.

If anyone had facts and figures, it would be of interest.

Freight railroads to pay taxes on their rights of way and yards and shops.

2

Did you consider in your post the tradeoff that us taxpapyers have of using the facilities you mentioned so that we can get from point A to point B quickly? Think that should also be taken into consideration when discussing subsidies of public lands. You may also add to your post parks, memorials, court houses, city office buildings, city gold courses & on & on. [:o)][:D]

[quote]
Originally posted by daveklepper

3

At least for airports, it’s very likely that O’Hare generates far more revenue from concessions, sales tax, ticket tax. fuel tax, commercial leases, and so on than would be collected in real estate tax. The airlines also have to pay for gates and kick in part of the construction costs. I would further guess that revenue from nearby commercial.property(hotels, etc.), including real estate tax, also far exceeds what would be collected if you demolished everything and replaced it all with subdivisions of nice suburban homes. I’d guess the same is true for JFK, Logan, LAX, etc.

4

Thanks for that I did not even think of those items. You can extend that to highways a motorist buy gas (pays taxes) goes & purchases food ( pays taxes) buys knick knacks (pays taxes). [:o)][8D][:o)]

[quote]
Originally posted by up829

[quote]
Originally posted by daveklepper

5

Dave is correct in the arguement he did not specifically make which is, to the extent that motor carriers use taxes do not pay real estate tax, which they do not, it is another hidden subsidy in comparison to railroads which do pay real estate taxes. Not that anyone who makes public policy cares.

His point is also true with airports but is complicated by the huge captial investment which is recovered to a greater or lesser degree by gate fees. Here, as in the highway case the big advantage to the carriers is the avoidance of the capital investment in the first place and the nonrecovery, partial recovery, or full recovery at less than private market interest rates. These are huge numbers but nobody cares and some of you think is a good idea.

The reason this policy is not good public policy, even though the consumer benefits from it, is that it represents a missallocation of resources. Take the simple case of highways. To the extent we subsidize motor carriers (which we do to a massive degree, but it is well hidden), they will transport some freight that should have, and would have moved rail but for the subsidy. The economic cost of the truck rate plus the subsidy is more that the rate by the unsubsidized rail. Society paid a higher cost for the transportation than if it had gone rail, but the shipper paid a lower rate than he would have by rail. We the taxpayers subsidized the shipper, not the carrier.

I have deliberately set aside service issues to focus on the central point which is, if someone subsidizes an activity more of that activity will occur than would have occurred without subsidy. Where there is a competitive substitute that is not subsidized that substitute is disavantaged by the subsidy. The buyer of the subsidized service pays a lower rate that he otherwise would have. The social cost of the entire system will be higher in the subsidy case than would have been in the non subsidy case.

This is basic microeconomics available in any underg

6

All these points are correct. When someone moves freight by rail, part of the cost is for real estate taxes. When he moves by air, he is excused from this tax. Regardless of gate fees, taxes on diesel and gasoline fuel, concessions, all the rest, the fact remains that this is a hidden subsidy for all who do not use rail transportation.

Gate fees, fuel taxes used to maintain highways, all that is part of running the airline and private car business. But they are excused from supporting schools and hospitals and police and firemen through real estate taxes. The freight railroads are not excused, and indeed some of their taxes benefit the airports and highway traffic control!

This subsidy also exists, now, for state-owned commuter rail systems. It did not exist when the railroads subsidized the commuter operations themselves, and the NYCentral did win a repreave, when they had to replace the important Halem River drawer bridge (north of the 125th St Station and south of Mott Haven) and the state and city multiplied their real estate taxes by four. The case of the Jersey Central was similar. I don’t know what the situation is with the Amtrak-owned portion of the NE Corridor and someone can tell me. But, still, since the freight railroads do pay enourmous real estate taxes, and Amtrak does pay fees to the railroads, Amtrak contributes to local real estate taxes.

Another idea. Ask Bush if he believe America should be a “Christian Society.”

If we have any welfare at all, then yes, according to all Christian doctrine, all denominations, and taken from Judaism, 10% off all highway expenditures should go to public transportation of all types, including intercity, for people who cannot afford to or medically are not able to drive cars.

Finally, a UN survey of all citiies in the World concluded that Zurich, Switzerland has the highest living standard, that in total, its people are better off than anywher else.

Zurich has a subsidized

7

Whoa when you bring religion into a discussion time for me to bow out. I thought that this was a forum for TRAINS not RELIGION. Am I incorrect in my understanding what this forum is for? [:p][:o)][:D]

[quote]
Originally posted by daveklepper

8

Picking one tax and claiming unfair subsidy is a vast oversimplification, like Bush saying his tax cuts will put money in your pocket, when the reality is the burden is just being shifted somewehere else. All real estate taxes, user fees, gate fees, fuel taxes, income taxes are costs to a business and I doubt the company accoutants disguinsh betweeen those that support schools and those that don’t. In addition it’s not that clear cut, trucking companies DO pay real estate tax on their terminals and airlines pay it on maintenance facilities, usually located in populated areas. Railroads don’t pay a per ton/mile fee and there are cases where Port Authorities have built Intermodal terminals(Long Beach and the new one in New Jersey) using the same bonding power used for airports, while Air Freight terminal facilities are usually built with private capital.

I’m not saying he playing field is level, but it would take a whole lot more analysis to find out. Just deciding how to measure would create disagreement. Do we meaure based on ton/miles, percentage of gross revenue, or? And how do we account for technological propgress - for example what will the new Airbus super-jumbo do for air-freight costs?

9

Here we go again with the tax issue. I have been on the trucking side of industry and believe me, trucking companies pay taxes. They even pay property taxes. Dont believe it…drive around any community of decent size and take a look at the trucking terminals…UPS, FED EX, FED EX Ground, Yellow, Roadway, USF Holland, Schneider, et al.

Fuel for vehicles is taxed.

I dont know the exact tax, but it is HUGE. Federal excize tax is assessed on new equipment. It goes on and on.

I am not sure where you are going with this. If you want to pay higher taxes, contact your Representative and Senator. They will certainly oblige. Corporate taxes are simply a pass thru.

The argument that rails have an unfair tax and therefore cannot compete is rather tiring. They simple have failed to compete based on service. There have been many ills on the railroads and many of those were addressed about 25 - 30 years ago. Passenger and commuter trains are gone…at least out of pocket expenses are. Five man crews are gone. Five man crews on branch line locals with 3 cars are gone. Accounting rules have changed. With all of the positive changes…with the rails running at almost 100 percent capacity, they still cannot make a decent return on invested capital.

On the other hand, I watched NS 25A last evening and was amazed as it had 166 containers and trailers. That is 166 trucks not on our roads. Another way of looking at it is there were 166 trucks NOT paying federal and state fuel taxes last night.

Economics is a wonderful science, isn’t it?

ed

10

I think the price for non-taxable diesel fuel is somewhere around 1.40, 1.50 per gallon, so that’s a good starting point for how much of the price of fuel is taxes.

Randy

11

I think everyone is being a bit hard on Dave, and though I am not saying everyone’s over-simplification arguments are incorrect, no one has proved–to me–that Dave’s basic premise obviously wrong.

If a truck company has a terminal in St. Louis and delivers freight to Toledo Ohio, it only pays property tax on its terminal in St. Louis, despite the fact that it is using 8-900 miles of landed roadway. If CSX ships from St. Louis to Toledo, it has to not only pay property tax on its terminal but on the 8-900 miles of roadbed that it takes to make the delivery.

How is the argument that this constitutes a hidden subsidy obviously wrong? Sure truckers pay gas taxes, but so do railroads. Also, last I checked the tax on Diesel is not that much more expensive than gasoline, despite the fact that a truck does 453 X (number given by governor of Illinois) the amount of damage to a highway.

I am not saying Dave’s argument is correct, and I concede that there are many issues that make it more complicated than that, but I don’t think we are being fair to Dave to dismiss him in such a facile manner.

Gabe

P.S. I never feel bad about socking it to truckers. Why? Not because I hate truckers, my Dad actually was a trucker to cut costs during the first few years when he was trying to get his steel company off the ground. The reason is because I know that no matter what anyone does, truckers are not going to lose their jobs. Trucking will NEVER go backwards; it is just a matter of making railroads competitive enough to keep truckers from drowning (in highway congestion) in their own success.

12

First of all, Dave always has interesting things to say. So, if I am hard on him, it is in a intellectual or discussional manner. Debate is always good, at least as long as it is within rules or good reason and respect.

Gabe, I may be wrong, but I believe that railroads do not pay fuel taxes. I think I read somewhere here that it is also a “pink” color so that it can be differentiated from motor fuel.

It would be very interesting to take a look at the “cost” of taxation for both modes. My guess is that the “cost” is fairly similar. If I have a chance, I will try to take a look at some annual reports.

One thing to consider…railroads own their property. Those are assets. They have value. How you value that land is yet another discussion.

Regarding Blago’s 453x comment, I would be interested to know where he got that number.

Regarding trucking’s economics, the industry endured a long spell (1980 thru about 2003) of almost flat rates. De-regulation was very kind to the railroads, but hit the trucking industry pretty hard. The ones that are still around are extremely good companies.

Given today’s business climate, I am not sure the railroads will reclaim much of the business the truckers have, unless it is by intermodal. Boxcar freight has left the building. Look at all of the containers moving from the west and east coasts.

ed

13

Obvioulsy, I don’t know the accuracy of 453x for truck damage to a road way. But, I do know the context of the quote. Initially he gave a much wilder number, something like 2500x the damage that automobiles cause. A trucker lobby called him on it, and he gave the 453x as a retraction. Given that he knew he would be called on the number, I presume he made an effort to get it right.

But, it is all hearsay to me.

(though I don’t doubt you) I am surprised about your contention that trucking rates are staying flat. My Dad is constantly complaining that not only are rates increasing to get his steel over the road but trucks themselves are becoming scarce because there is so much competing business.

Gabe

14

Gabe:

The rates were flat thru 2003 or so. Now, they are climbing.

There has always been wind in the face of truckers. Either a shortage of drivers, or insurance problems, or fuel (now taken care of with fuel surcharges) or oversupply of trucking companies.

Several things leveled the playing field. First, the shippers have been pretty tough on truckers for years. The truckers really didnt have much recourse…either accept these rates or I will find another one.

However, the CDL license really took a lot of drivers off of the road. Those driving today cannot easily hide behind multiple identities. Also, there are a number of carriers that are gone.

Look at the LTL business. 25 years ago there were a number of carriers such as CF, Yellow, Roadway, ABF, Ryder, McLean, et al. Today CF is gone, Roadway is owned by Yellow who just announced a merger with USF. USF owns a number of regional LTL carriers including Holland, Dugan, Reddaway and others.

Ryder and McLean are gone. HUNDREDS of LTL carriers are gone. The one I worked for hung around til 2000. I left in 1990 seeing the writing on the wall.

Today the trucking companies have pricing power. The truckload segment is dominated by the big fellers…Schneider, Swift, and others. They moved into the logistics business. In other words, during downsizings of the 90’s, the “traffic managers” were shown to the door. Outside companies entered offering to manage the transporation. Now, all of the large truckers have Logistics operations. The word is that Yellow purchased USF for their Logisics department…

Your father will have to ride this current wave until it balances … or SHIP BY RAIL!

ed

15

I have been telling him to try to find a way to ship his inbound bulk material by rail for years–as I think trucking rates will continue to rise.

He does so occassionally, but says it is too much of a hastle because of inconsistencies of both service and price. I am sympathetic to his reasoning. But my thought is, if he gets used to it now, he might have a jump on the competition when the day comes when he wont have much of a choice.

Gabe

16

Assuming the railroads did the math and liked it, there would be one HUGE problem.

Unlike most taxes, property taxes go directly toward local uses in most jurisdictions throughout the United States–usually directly into the county school system.

Problem #1: Try to get a politician to stand up and propose a specific tax cut that would take money away from schools.

Problem #2: Counties without railroads would be subsidizing counties with railroads. A passenger service benefits counties throughout the State, not just the county where the line is–thus, the county where the rail line is would be foreifiting the revenue while other counties would be getting the service.

Gabe

17

One of the reasons I stuck up for Dave on this one, is I have first-hand knowledge that property taxes can be quite onerous for railroads. They are not consistent from State-to-State and in some instances even County-to-County. Local officials often see property tax as their chance to stick it to the man and railroads are preceived as the man.

Gabe

18

I’d be interested in knowing just exactly how much the typical RR pays in property taxes per mile of right-of-way each year. I worked on a major RR restructuring in the '80s and remember that most RR land is pretty useless – wrong locations, funny shapes – for other uses. If their lawyers are doing their jobs, the tax assessors tax them at a low rate.

19

Tax assesors at the county level have zilch to do with railroad operating land. The average figure runs $2000-6000 per mile per annum. Depends what state you are in and what the improvements (track, bridges, signal system buildings, etc.)

The railroad pays the state. In turn the state distributes by county by terms of relative valuation per county.

20

This topic came up in the new Plan for Nashville. A lot depends on ow much space a cloverleaf takes up. A bad one can take up as much as six acres. Now if you take up six acres in downtown Nashville or New York, you have to wonder if something else could go in it’s place? Like a Cracker Barrell or Holiday Inn?

You could look at the development that takes place along the Interstates now. All the facilities devoted to selling something to the traveler, from gas, food, lodging etc. A smart chamber of commerce will have some advertising about the nice town & please spend more time & money visiting. How many hotels have a little van to pick you up for free at the airport? I bet many of the downtown hotels used to provide a similar service to the train station.

They also did a survey to see if 75% of the traffic was bound for another city. A bypass would have to be built for all that traffic. The idea is to turn the interstate into a boulevard, with lights & cross streets. Then the six acres could be sold for development. Seattle is the prototype for this. They have built parks & other things over the interstate right of way. Most of the land near Union Station in Chicago has already been developed as air rights over the track.

Another issue is the way so many interstate highways were used for urban removal, destroying thriving neighborhoods or turning them into slums. Railroad rights-of-way are so thin by comparison, they don’t always divide people that live/work/shop on the other side of the tracks!