Matt Rose of BNSF fame made Trains newswire 10-31-08. Money is needed for transportation infrastructure.
Government enters the equation. Tax breaks for private rail, does it have the political capital to fly? Will it be “grants?” Nothing comes without strings.
What of the “passenger element?” Rose mentions it. This hits the biggest political nerve. What trade offs to passenger for freight lines?
This is nothing new. Land grants, Credit Mobilier, the ICC, the US Railroad Administration, etc. the political always been a factor.
Depends on the poplular philosophy (politics?) over the next several decades. If we get over the fighting between so called Socialists and so called Conservatives…niether are totally what they seem or what the opposite side thinks they are…then we can get down to the business of working on the future infrastructure of this country to benifet both the public and business/commercial needs. Such projects don’t necessarily help one side or the other, but usually, in the long run, both sides. The more we need in this country, the we need a closer working partnership between government and private enterprise.
Well, if one thinks about the recent discussions about advertising done by CSX and NS in the public media, and you further contemplate the reality that the railroads are obviously not interested in getting John Q Public’s shipping business (recall the old threads about “team tracks”)…the answer becomes clear.
Taxpayer mindset is being recruited by these ads, so that when the RR’s eventually try to take a grab at public funding, the con game will already be half complete.
We’re playing the financial chess game again…IF the something-for-nothing whiners in the other forum thread get their way and restrict the rate structure, the maintenance and expansion money has got to come from somewhere.
I would hate to see the federal gov’t step in even if there seems to be a need. Funding of routes would almost inevitably become politicized, unlike a private corp. which has to make reasonably sharp guesses about where the money would most benefit the line’s infrastructure. And of course we taxpayers pay for the dubious results. - a.s.
But Al, what if Big Bussiness Railroad comes to the government and proposes or asks that the governernment help it build additional capacity between City One and City Two proving to the government that it would be cheaper than building new highway infrastructure, cause less pollution, and create jobs beyond the construction period. In other words, what if the free enterprise system asks for the government help in order for it (free enterprise railroad) to survive with the side benefits of less government expenditure, cleaner air, less land use, and future employment? Is it all right for free enterprise to ask, and recieve, rather than to have government first offer and give? And the follow up question is, of course, if Big Business Railroad can’t do the job, and government can’t build the concrete infrastructure either, then what happens? Nothing is not the answer.
There are some clues in some recent happenings. One is the NS Heartland Corridor. It is getting done with Fed, state and NS money. The Fed money was an “earmark”. The state justified the spending because it supported commerce at the port in Norfolk.
The second was the joint California/UP project to double track Donner. The UP backed out because the passenger provision was too onerous.
So, the answer is “it depends”. The devil is always in the details.
If the extra capacity is needed, then the consumers of it will pay for it and private investors will provide the capital. They will do so for a return on their investment and a reward for their risk. To the extent the government gets involved, they merely dictate that we the taxpayers invest regardless of the return worthiness / risk of the investment. With government, these business factors are secondary, while their primary objective is the expansion of government. And the government also adds to the investment equation, their incredibly bloated overhead cost and their notorious inefficiency that naturally accompanies what amounts to a bureaucracy with unlimited power to spend other peoples’ money.
Most people in the transportation field believe there is already a capacity problem with surface transportation infrastructure and unless there is a significant increase in the rate of investment, the future does not look good. Capacity problems cause congestion which reduces the efficiency of the utilization of the vehicles used to haul freight, adds unproductive fuel consumption and labor costs. Additionally, just like anyother company operating at capacity, transportation companies will go for the freight producing the highest earnings and tell shippers that if they want to use the service, they are going to have pay.
All these added costs get past on to everybody not living in caves. Further, because of the fuel wasted while trucks and trains sit stuck in traffic, automobile drivers pay more for more for gasoline because of the increase in the demand for fuel.
Matt Rose was a member of the congressionally established National Surface Transportation Revenue Policy Commission. He and other leaders from government and the transportation industry made an in depth study on the needs for investment in transportation infrastructure over the next couple of decades. The numbers Rose is citing are from the report.
The railroad industry has estimated that they will only be able to come up with their own cash for about 75% of the infrastructure investment they will need for the next 20 years or so. Some in the industry are suggesting federal tax credits to cover the gap. Actually, I think the proposal is a pretty good deal for the Federal Government, as it is only being asked to kick in about 25% of the investment. In comparison, the Federal Government pays 80% of the investment in interstate highways.
I will be the first to admit that tax credits are little different than direct government grants, as both increase the cost to the taxpayer. With
If the extra capacity is needed, then the consumers of it will pay for it and private investors will provide the capital. They will do so for a return on their investment and a reward for their risk. To the extent the government gets involved, they merely dictate that we the taxpayers invest regardless of the return worthiness / risk of the investment. With government, these business factors are secondary, while their primary objective is the expansion of government. And the government also adds to the investment equation, their incredibly bloated overhead cost and their notorious inefficiency that naturally accompanies what amounts to a bureaucracy with unlimited power to spend other peoples’ money.
We can’t do anything about a private business asking the government for help. But we do have a say in whether the government says yes or no to the request-- for at least a couple more days anyway. <
If the extra capacity is needed, then the consumers of it will pay for it and private investors will provide the capital. They will do so for a return on their investment and a reward for their risk. To the extent the government gets involved, they merely dictate that we the taxpayers invest regardless of the return worthiness / risk of the investment. With government, these business factors are secondary, while their primary objective is the expansion of government. And the government also adds to the investment equation, their incredibly bloated overhead cost and their notorious inefficiency that naturally accompanies what amounts to a bureaucracy with unlimited power to spend other peoples’ money.
We can’t do anything about a private business asking the government for help. But we do have a say in whether the government says yes or no to the request-- for at least a couple
If Big Business RR can’t attract the capital to improve its plant then it should not, need not, be improved. So the answer to your question in that case is: Nothing will happen.
But “nothing” won’t happen. There will be a consequence be it unsafe operations, total loss of operation, loss of jobs, undermining local economy, or any of a dozen other things.
But you seem to be clouding the issue by attaching a rider to your premise. That is your stipulation that the improvement in your example not only is needed to serve the business of transportation, but it is also partly needed to serve a suggested societal need for reducing pollution and not having more and bigger roads. By the way, what is wrong with more and bigger roads?
“Societal need”. If business is an entity, does it not have a “societal” obligation for its own well being of safe, effecient,and economic operation as well as being, for lack of a better term, a “good neighbor”? Much of today’s economic situation is because of big business’ lack of social conscience. As for more and bigger roads: it may not be an option in crow
The one thing I didn’t mention in my post above was the impact of inefficient transportation on the number jobs in our economy. If we have to pay more for items we need then it follows that we will have to do with less. Doing with less, means less things will be made and less people will be required to make goods and provide services.
Yes, it is very true that much of the consumer goods we buy are made somewhere else, but one of the recent bright spot in US business has been or ability to do well in the world markets for industrial, agriculture and mining products. A relavant questions is where will we be in those markets if the transportation cost of getting the products to the port of export increases because of an inefficient transport system.
That seem a little simplistic to me. I might be wrong, but doesn’t the length of return play a major role on whether investors finance or not? It seems to me, we are in a day of "instant returns." If it takes more than a year or two to show desired returns, investors are not interested. There for, it puts the second sentence into question.
Well I am putting it in a rather simplistic way to make a clean point. We live in a tangle of real needs, agenda driven needs, public and private financing. And it is true that if the return is too long-term, it will discourage private investment. But if the return is too low, that will likewise discourage investment. Add to that the fact that somebody can easily make a case for need, and you have needs going unfunded. So there is a threshold at which a need is great enough to attract private investment. But if a need is not great enough to meet that threshold, I think that is excellent criteria for ruling out pubic financing of it.
In the 20th Century I can only think of one huge federally funded RR project: electrification of the PRR between Washington Union and NYC Penna. We aren’t in such a grave depression yet that we can afford the likes of that!
I agree that generally it is the stockholders and management who take the risk and hope they will receive improved dividends if some of the profit is plowed back into infrastructure, and we all know how quickly a neglected pike can deterioriate: Look at Penn Central.
What I can’t approve of is the federal gov’t “investing” lots of money in railroads that are owned by private owners. This would be taking everyone’s money to help enrich the owners of just one railroad, say; and if you specially priviilege BNSF, then UP and CN are going to holler. That’s why I’m afraid of direct government investment, along with the practical decisions as to whether we want lawmakes deciding which RR cos to fund – it’s the old “creeping socialism” argument but fed funds might make it escalate at a gallop!
Some RR shareholders want insant high returns. Many corporate annual reports are “sales documents for stock” and show the company in the best light for shareholders and potential shareholders. If you look at CSX’s annual reports for 2005 and 2006 (2007’s is more service-oriented), CSX seems to be getting across the idea that investing in CSX is splendid and not so much discussing how they serve customera or find new revenue streams. Mutual funds – the largest category of RR ownership usually – sometimes are in a hurry and sometimes not to get enhanced revenues. And Warren Buffet owns about 17% of the BNSF, yet we don’t see him selling out in a slump. We also dont’t see him lobbying for federal funds for a new Mississippi Bridge, not that I know of.
I don’t want that, either. OK I am learning here, please, be forgiving. Investors didn’t see the need for rail in Southern Wisconsin. The state did and bought the right of ways. Because of this, there is rail service in S. Wis. today. Is this the exception to the rule?
Also, as AL mentioned, what about bonds or loans from government?
OK. You are asking the questions that undercut all contemporary rhetoric as these are things that have been going on since the inecption of the country from turnpikes and roads to canals and waterways and on to railroads. Federal and state or other governments will insure or issue bonds, make loans or grants, or simply buy up to assure. It is not a question so much as do we want to go back to 1700 something, but how could we? We are here because all these things have happened up to now and can’t be undone. And I am not sure that everytime government gets into something it gets bigger isn’t more rhetoric in itself rather than total fact. I am afraid that if we pulled government out of the trucking business, the airline business, the banking business, the mortgage business, etc., the country would collapse in its entirety. And neither the extreme left nor the extreme right left to thier own devices have the morals or the means to bring it back correctly; niether extreme can be trusted.