What I’ve read, is that before Staggers, the abandonments were mostly branchlines. Railroads were not being allowed to abandon any mainlines. See oltmannd’s thread above, about Conrail lines. If that had been the caseeither CNW or Milwaukee Road would have pulled up a line going to western S.D. It seems the CNW Cowboy line through Nebraska would have gone much sooner as well.
Railroads could not abandon mainlines because mainlines were subject to General Mortgages with “Mainstem Covenant” clauses. This is a whole different conversation.
But yet, they were able to do it after Staggers?
It seems odd, that if abandonments weren’t a big relief to the bottom line, that every railroad was pushing hard to get them, both before and after Staggers. The railroads weren’t spending money on branchline maintenence, because they had no extra to spend. You yourself, state they were trying to wring the last ounce pf profit out of them. Had they not been able to defer the maintenence on these hopeless branchlines, they would have been losing a lot of money. That’s why they were trying to abandon them-no? It appears they also had a feeling that the rules would someday be softened,as there could not have been any way to finance the branchlines that were losing money. It seems that every abandonment of an ailing branchline would elicit a sigh of relief from a cash strapped railroad. Abandonment had to be a huge financial relief for the rail industry. Why would all the railroads be so in favor for it otherwise?
They could do it before Staggers. The PCE was the biggest abandonment of mainline in American history – had nothing to do with Staggers. This isn’t really a question about the Staggers Act, it has to do with specific powers granted by Congress to the USRA to manage the rationalization of Conrail, specific powers of Federal Courts to impose “cram-down” provisions on mortgage holders, and the rights of mortgage holders to accept substitute collateral. A lot of things that just don’t have anything to do with the Staggers Act.
Well, who said they weren’t in favor it?
Bob-could you expand on this part a little bit? Was this the FED’s way of trying to get rid of it? Thanks
Am I understanding this correctly, that before Stagger
You paint a picture of it being of very little relevence to the railroads’ finances, but yet they all vigorously pursued it. The two trains of thought don’t seem to dovetail.
Your comment contained a lot of built-in assumptions, including “feelings”. I gather from the assumptions you have a theory. If you have some numbers that show that railroads derived a huge financial benefit, and suddenly surged to profitability because of abandonments, I would enjoy the opportunity to see those numbers and how they line up.
But, I did say this:
That’s my take on it from reviewing a pretty thorough study of a major Midwestern railroad probably about as typical of railroading outside the northeast as there
The bankruptcy court is a federal court, as referred to in my post, now highlighted for reference. That was, in fact, and remains today, one way of avoiding the Mainstem Covenant clauses in general mortgages. I don’t know how else to say that except to repeat it.
However, the Milwaukee abandonment petition, was, in fact, prepared and submitted to the ICC using 4R guidelines. It was specifically a 4R petition. It had everything to do with 4R. The Federal Court exercising bankruptcy jurisdiction under Chapter 77 at that point in time had no authority to order railroad line abandonments. Judge McMillen needed the permission of the ICC – under 4R! Congress then intervened and interrupted the 4R process through the MRRRA, which directed the ICC to consider an ESOP alternative to affirming or denying the abandonment petition. And technically, the ICC then gave “permission” to the bankruptcy court to issue the order.
I’m not sure why something doesn’t seem clear here, but, once again, this was before Staggers and yes, it did involve a Mainstem Covenant Clause and, yes, a federal court was a way around that. And the ICC authorized the l
[quote user=“Murphy Siding”]
Bob-could you expand on this part a little bit? Was this the FED’s way of trying to get rid of it? Thanks
Am I understanding this co
The Milwaukee proceeding moved from application to final decision in 143 days. The current STB rules set 110 days. You said Staggers required 9 months – 270 days. Considering this was a major mainline abandonment, how could waiting until after Staggers have made any difference? The proceeding occured faster than under the Staggers deadlines.
You will have to describe how Staggers substantively changed the abandonment procedures from 4R. I guess I don’t get it. That would be a useful exposition for this thread to know the differences.
I went back and re-read your post, a little slower this time perhaps. It still appears to me, that you are contridicting yourself. Had the railroads not been anticipating an ease up of the abandonment procedure, and/or the ICC had made them keep their lines in serviceable condition, it seems apparant that the branchlines in question would have been in the negative. To say that abandonments didn’t affect the railroad management’s thinking, as to how
I am reading from the record. That’s what the record says. I have no idea how I can contradict myself since I am stating what the record says. Railroads didn’t have the money to maintain those lines. Many were obvious relics of another era. Since abandonment was more difficult before 4R, and was costly and frustrating, why bother? I mean, literally, what’s the point? They extracted every last nickel as speeds slowly declined. Well, what’s wrong with that? And when the opportunity arose to begin abandonments in earnest, well they did that too. And since many lines were still in the “profit-taking” phase, often the result was a loss of net cash flow when abandonment occured. But, they avoided the cost of rebuilding the lines by abandonment, there wasn’t much reason to rebuild the lines in most cases – hence the abandonment – and there wasn’t much to go to the bottom line by abandonment because it was the avoided cost the railroads were seeking, not actual costs they were saving.
As I say, if there is some evidence that railroads gained some profit by abandonment, I would like to see it. These discussions often turn on burdens of proof, and I keep offering, but not getting much back. As Selector has pointed out, the habit of simply gainsaying evidence, while insisting something else must be true without an ounce of evidence is really not an acceptable discourse. And I don’t really know what else to look at except actual railroad studies, but those seem to meaningless in the face of determined opinions:
"Had the railroads not been anticipating an ease up of the abandonment procedure, and/or the ICC had made them keep their lines in serviceable condition, it seems apparant that the branchlines in question would have been in the negative. To say that abandonments didn’t affect the railroad management’s thinking, as to h
Your comments on this subject reminds me of your assertion that the railroads would have been better off running their newer steam locomotives into the ground before replacing them with diesels (i.e. stretched out the process of dieselization by a few years).
What I’m reading into your posts is while profits may have not changed much at the time of abandoment, profits a few years down the road were greater due to not having to make an investment in line maintenance that didn’t have a chance of paying off with expected revenues. I’m also wondering how much of the current rail network would be able to payback the costs of new construction.
How is it, that these two ideas can be different things?
The term “mainstem covenant” is new to me. It appears to be straighforward, but I want to be sure I understand what it means.
For example, railroads A & B both have a mainline (mainstem) between a specific city pair, although their mainlines elsewhere are not parallel. They merge. The resulting railroad wishes to abandon one of the duplicate routes. Railroad A’s route is superior due to grades, intermediate traffic, maintenance, length or whatever. However, Railroad B had bonds out there with a “mainstem covenant”. Effectively that says line B can not be abandoned without paying off the bonds. The merged railroad is left facing a bad choice – abandon the better route, pay off the bonds, or continue to operate both mainlines.
Do I have it correctly?
Well, profits were greater in prior years too, from not having made the investments in the lines that resulted in the deferred maintenance. Looking at BN’s deferred maintenance as of 1977, $389 million; Milwaukee’s of $510 million, and CNW’s of $990 million, these sums weren’t, by and large, mainlines. But it does represent money they did not spend over a 20 year period or more.
So, the avoided expenditures in the future after abandonment meant … what … in terms of increased profits? Compared to what? The period of time they weren’t spending anything anyway? How does that “help” the bottom line by comparison, post-Staggers, if it was already “helping” the bottom line for the 20 years prior to Staggers – i.e. not spending the money?
What ended upon the finality of abandonment was the loss of net cash flows that in many cases existed as the railroads cashed out of the investment over the period of time of deferred maintenance. That cash flow was gone. Didn’t pop back up again after abandonment. Railroads suffered a reduction in income in many cases after the abandonment cycle was over compared to the previous 20 years.
I do think the 4R was a great relief on that count. It finally allowed the logjam to begin to break free. It just happened, in many instances, to actually reduce net cash flow. In many instances, it reduced losses. But the idea that suddenly a huge tidal of wave of cash was “freed up” for use elsewhere, and that Staggers alone was responsible
Well, you said you do have a theory, and a belief system – you know it with certainty – and there’s nothing wrong with postulating a theory – that’s how the scientific method works.
But, the scientific method then requires more before a conclusion can be reached. But, I get the sense you are looking for confirming opinons, not facts that need to be weighed before an opinion can be reasonably generated.
There are probably 15 or 20 studies “out there” that examine various specific changes in the rail industry and attempt to assess their cause and impact, post-Staggers. But, I know, most people don’t want to be bothered by studies and facts – “when the legend becomes fact, print the legend”. So, there’s no point in even referencing them.
A good approach, however, is breaking down Staggers, issue by issue, and examining each effect. Focusing on abandonments is certainly part of that. I am puzzled by that part of the discussion because there seems to be a real “desire” – almost an emotional one – to attribute to Staggers what was plainly a 4R development. I don’t know why that is. What’s the point?
Staggers is not a Holy Grail. It was legislation – as the second poster attempted to point out, part of a series of revisions over a considerable period of time. It had its good points and its bad points. Its most salient feature – elimination of most rate regulation – caused a swift reduction in industry revenue.
Staggers didn’t do much for infrastructure. The Tax Reform Act of 1981 had much more to do with creating investment benefits for the rai
The last year of regulated rates, 1980, wasn’t that bad of a year, compared to the decade following Staggers. If you perform a trend line analysis, the rail industry, 1980-1991, was pretty middling; but trending down. Where was the cash resulting from abandonments?
