Op-Ed: Good Public Policy Drives Freight Rail Investment (Not Public Funding)

Op-Ed: Good Public Policy Drives Freight Rail Investment (Not Public Funding)

March 29, 2018  | Amy Hawkins

President Trump and many in Congress have placed a high priority on infrastructure investment.  The Administration’s plan has significant federal funding associated with it, primarily aimed at attracting more non-federal dollars into infrastructure, including private sector investment.  As Congress and the Administration consider this approach, it should be reassuring that substantial private investment is already being made to maintain and expand the nation’s freight rail network.  Freight railroads have invested around $26 billion a year over the last five years, and more than $635 billion since 1980, on capital expenditures and maintenance expenses related to locomotives, freight cars, tracks, bridges, tunnels and other infrastructure and equipment.  That’s more than 40 cents out of every revenue dollar plowed back into the rail network — about six times the rate of reinvestment of the average U.S. manufacturer.

To facilitate this investment, freight railroads require a growing economy and good public policy; federal policy makers (thankfully) don’t need to provide the funds that railroads spend.  But regulatory and other transportation policies have a large impact on freight rail investment, and the wrong policies can dampen what freight railroads spend. Therefore, it’s important to keep in mind how private sector rail investment is impacted by public policy, especially as infrastructure investment proposals progress through Congress.

First, pro-growth policies support freight rail investment; freight railroads invest to meet the growth in demand from customers. The recently passed tax reform bill is helping to drive growth which, in turn, should drive more railroad investment.  Good trade policy is also important to customer growth.  Almost 35% of freight rail revenues are derived from trade-related freight.

Turning to transportation policies, ongoing infusions of General Funds into federal highways subsidizes freight that goes over the highway.  Since “you get more of what you subsidize,” over time this will hurt freight railroad growth and related investment. Finding user-based revenue alternatives to the gas tax is a long-term goal whose time is coming, even if initially just for commercial users of the highways.

Finally, if federal regulatory policies reduce returns, strand capital or require inefficient operations, freight rail investment will be impacted. Safety regulations should encourage the use of new technologies and operating practices that provide for safe, and more efficient, operations.  And economic regulation must permit adequate returns to support investment.  Growth and improved freight rail earnings have allowed railroads to afford the massive spending necessary for maintaining infrastructure and equipment and provide the service customers require.

The supply chain is changing, driven by greater demands placed on transportation networks by e-commerce and changes in the industrial economy and energy markets.  But one thing is certain, the nation will need more private freight rail investment and productivity, not less. While Congress and the Administration grapple with the reality that the country’s publically-funded highways and bridges require more investment, they can take comfort in the fact that public policies supporting private investment in freight rail networks are relatively easier to achieve, and freight railroads are investing.

Want to stay in touch with Eno? Subscribe to our mailing list
Want to learn more about joining Eno?  Check out our individual and group memberships!

Share

Related Articles

Webinar: Promoting Resiliency Across the Global Supply Chains

Webinar: Promoting Resiliency Across the Global Supply Chains

Supply chain and logistics professionals are constantly adapting to technological and socioeconomic shifts in the mobility landscape. While...

Senate Passes Pipeline Safety Reauthorization Bill

Senate Passes Pipeline Safety Reauthorization Bill

Last night, the U.S. Senate quietly passed a three-year pipeline safety reauthorization bill (S. 2299) by unanimous consent, without...

House Passes Biennial Water Resources Bill

House Passes Biennial Water Resources Bill

The House of Representatives passed the biennial water resources development bill (H.R. 7575) this week by voice vote after perfunctory...

House Adds Coast Guard, Maritime Bills to Defense Authorization

House Adds Coast Guard, Maritime Bills to Defense Authorization

On July 21, the House of Representatives passed a $734 billion defense authorization bill for fiscal year 2021, after amending the bill...

Biennial (and Bipartisan) Water Resources Bill Approved by House Panel

Biennial (and Bipartisan) Water Resources Bill Approved by House Panel

Weeks after the panel muscled a partisan surface transportation bill through the markup process, the House Transportation and...

Webinar: State of the Industry: Freight Rail in 2020

Webinar: State of the Industry: Freight Rail in 2020

The impact of COVID-19 on consumer-facing industries, like aviation or retail, has received great coverage in the press and in the public...

House Spending Bills Freeze FY21 Water Infrastructure Funding at FY20 Levels

House Spending Bills Freeze FY21 Water Infrastructure Funding at FY20 Levels

The House Appropriations Committee has been releasing the text of draft appropriations bills for fiscal year 2021 every two hours this...

$1.5 Trillion Infrastructure Bill Moving to House Vote Next Week

$1.5 Trillion Infrastructure Bill Moving to House Vote Next Week

A $1.5 trillion infrastructure bill, which incorporates a $494 billion, five-year surface transportation reauthorization (backed by a $145...

Eno Recommendations Reflected in INVEST Act

Eno Recommendations Reflected in INVEST Act

On June 18, 2020, the House Transportation and Infrastructure Committee completed an epic markup session of the surface transportation...

USDOT Gives Out Final Installment of FAST Act INFRA Grants

USDOT Gives Out Final Installment of FAST Act INFRA Grants

The U.S. Department of Transportation this week announced 20 additional projects that will share $906 million in funding under the INFRA...

House Subcommittee Hearing on U.S. Maritime Supply Chain During the COVID-19 Pandemic

House Subcommittee Hearing on U.S. Maritime Supply Chain During the COVID-19 Pandemic

On Friday, May 29, the House Subcommittee on the Coast Guard and Maritime Transportation held a hearing entitled “The Status of the U.S....

Senate Commerce Committee OKs Bills, Nominations

Senate Commerce Committee OKs Bills, Nominations

The Senate Commerce, Science and Transportation Committee held a business meeting on May 20 to approve various bills and nominations (full...

Be Part of the Conversation
Sign up to receive news, events, publications, and course notifications.
No thanks