Rail Upgrades Key For Rural Economic Growth
This week’s Courier Herald column:
The effort to fix metro Atlanta’s transit governance issue received a lot of public and press attention during this legislative session. When a problem almost a half century in the making is solved across party lines and with support of urban and rural state leaders, it’s a success that is worth noting.
The transportation issues of rural Georgia were not ignored during this session of the Georgia General Assembly, even if they received a bit less fanfare. The challenges are different, and the problems that leaders must solve are unique in rural Georgia and metro Atlanta. Because of how we move our people and goods through the state, however, the two remain inextricably linked.
In metro Atlanta, the transportation problem is congestion. In rural Georgia, the issue is one of access and economic development.
The transit governance bill for metro Atlanta wasn’t the only major bill to improve Georgia’s transportation infrastructure this year. House Bill 735, sponsored by Representative Patty Bentley (D-Butler) provides a 50% tax credit for maintenance and upgrades of Georgia’s short line railroads.
Let’s be honest. That description doesn’t lend itself to sensational headlines. Some perspective is in order.
The success and growth of Georgia’s ports has long been documented. The Port of Savannah is the largest container facility on the East Coast and is expected to double in size again over the next decade. The containers that move through the port arrive one of two ways: by truck or by train.
The Ports Authority has been investing heavily in upgrading their rail capacity to move more of their goods via rail. It helps them to extend their reach well beyond Georgia, but also helps to keep the additional truck traffic on Georgia’s roads to a minimum.
Port officials broke ground on a new rail terminal at the end of March that will increase the efficiency of rail operations. They’ll have the capability to simultaneously load trains of 10,000 feet in length – almost two miles. They estimate this will take over 200,000 trucks off of Georgia’s roads every year.
They are also adding to the number of “inland ports” that are multi-modal transfer stations from rail to truck, to allow more of Georgia to be connected to the ports via direct freight rail. The first of these stations is in Cordele Georgia, with the second opening in Murray County late summer or early fall.
What does this have to do with incentivizing the investment of short line rail operations? Short line railroads are the small rail operators that serve local communities. We’re not talking about CSX or Norfolk Southern here – the national carriers that operate long haul freight corridors.
Short line rail roads are the last mile of service. They’re the ones that often determine if a rural community has access to rail – and if that rail service is effective and competitive.
Georgia’s short line rail system has not kept pace with upgrades at the ports nor of the larger rail network. Some operate at speeds as little as 10 to 15 miles per hour, based on track layout and conditions. For shipping some raw materials this speed of operation makes sense, but to make communities served by these rail systems more competitive for a wider range of industries, upgrades are demanded.
The need for improvements was one of the main recommendations from the House Rural Development Council, a two-year study committee project chaired by Appropriations Committee Chairman Terry England and Ways and Means Chairman Jay Powell. It should be noted that the committee is bi-partisan in practice. Representative Bentley, the short line bill sponsor, is a Democrat.
The tax credit allows the smaller rail operators to receive half of their investment for upgrades back, but is capped at $3,500 per mile. Thus, the state is providing an incentive while ensuring that the operators put their own skin in the game.
The desired result is that more of Georgia will be able to tie directly in to the success of Georgia’s ports in Savannah and Brunswick, as well as the network of inland ports planned around the state. The faster these “last mile” rail networks reach the standards of the main line carriers, the sooner all of Georgia has the same access and opportunity to leverage the investments made at the ports.
About Author
Charlie
Founder of GeorgiaPol.com; Now weekly columnist Very interested in Georgia and Georginas. Interest in politics is waning daily.
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Looks like progress.
Could this apply to the ‘last mile’ to private warehouses, agro usage, factories, ect?
The Bill First Reader Summary includes this phrase: “so as to create an income tax credit for expenditures on the maintenance of railroad track owned or leased by a Class III railroad.” The Surf Board rates various railroads in terms of revenue, with Class III being the lowest revenue at lower than $20 million per year. Typically, these are lines that were originally branches of larger railroads. I suppose that you could make a “last mile” line into a Class III, perhaps by having rolling stock that is in interchange service with other railroads, thus giving you the necessary revenue.
I ask, because companies in Wisconsin have off shoot lines to places like paper mills, plywood yards, large grainers, dairies, Kolher, Quad/Graphics – that were originally owned by Soo Line, Wisconsin Central or CN that were sold back to the companies in the 1980’s. A lot of these lines connect or go directly through interior warehouse space, so they can load in the winter. Some still own private cars the can be hooked up to CN engines out of the 5 yards still connect to the lines. SO as this reads, the company would have to have at least a Class III railroad. I can see Kohler and Quad if this bill was in Wisconsin pulling that off, since they owned private cars. The Quadracci founder liked to travel to all his factories by vintage Pullman cars with a 1950’s GE engine. But the private lines into International Paper and Purina that still use CN engines would not.
This kind of a cross-reference thing. To qualify for funding under HB735, you have to be a Class III railroad, but to be a Class III means that you have also passed other regulatory hurdles. A lot of plants have local switchers to move cars around the company facility but they don’t go out of the plant area. It doesn’t even have to be a locomotive doing the switching; it could be a tractor or front loader, even elephants. I’m sure that there are other criteria to become an operational railroad working in interchange service.
Granted, there are people out there who dedicate their lives to finding a work-around to get some sort of tax advantage, or other advantage. Putting freight cars into open revenue service would get you there, but I don’t think that Quad would want the hassle of the regulatory filings in exchange for a small tax break on right of way maintenance.
On the other hand, HB 735 is a pretty smart part of a larger view of the Georgia economy, which relies upon the ports of Savannah and Brunswick. Back in the day, the Class I’s built branch lines to serve specific markets. One would be the Savannah, Americus and Montgomery, which brought in products to rural communities from Savannah and brought out local assets such as timber and textiles. Many of the tracks are still there. Railroads need constant maintenance; the faster and heavier the trains, the more maintenance needed. You can defer maintenance to save money, but it has a way of coming back to bite you later.
The great sense of HB735 is that it is yet another aid for attracting businesses to locate in Georgia. You don’t have to build in Savannah if there’s a line that brings your goods to you in a smaller town that costs less to build and operate a manufacturing facility. And, it brings jobs and tax revenues to parts of the State that can use it.
My take on the above questions/discussion: About half of these systems are now owned by the state, the other half are “mom & pop” rail lines. There’s the desire to do something similar eventually to get true high speed freight rail with the class I guys (CSX & Norfolk Southern), but this one is about getting the small lines connectivity to the system with the same standards the big lines operate with. The point is very much that in Mr. Bear’s last comment. This is about opening up many more places in Georgia for companies looking to relocate, and to help retain many of those we already have.
There are about 1,300 shortline railroad route miles in Georgia. GDOT owns about 500 route miles that it leases to shortlines (though I think some of the track is out of service). Shortlines own and operate about 500 miles, and shortlines lease and operate about 300 miles from Class I RRs CSXT or NS.
GDOT map of Georgia Railroads here: http://www.dot.ga.gov/InvestSmart/rail/Documents/Freight/GeorgiaRailroadMap-2013-14.pdf
(The map is a few years old. There have been a few changes mainly involving shortlines—for instance “mom and pop” RRs, HOG RR and Georgia Northeastern RR, have become subsidiaries of shortline RR holding companies. I think GDOT is in the process of updating the map)
There are not that many true “mom and pop” RRs in Georgia. The Sandersville, Ogeechee and St. Marys West RRs, and the Hartwell, Athens Branch and Great Walton that have the same owner (owner meaning the RR company, not necessarily the track), and the few lines operated by CaterParrott, readily come to mine. The other shortlines RRs are mostly Genesee & Wyoming railroad subsidiaries (link to G&W RRs map: https://gwrr.com/customers/freight-rail-service). There are also about three Omnitrax subsidiary railroads.
For those with keen interest in Georgia RRs, see the State Rail Plan: http://www.dot.ga.gov/InvestSmart/Rail/Documents/StateRailPlan/2015GeorgiaStateRailPlan-1-26-16.pdf#search=state%20rail%20plan
Railroads, by their nature, are conservative institutions, regardless if they are Class I, Class III, government operations, private enterprise. Railroads don’t pick up their routes and move someplace else. Railroads pay taxes on their rights of way and equipment. The right of way is EVERYTHING; if the tracks are bad, even the most modern locomotive cannot operate properly. HB 735 recognizes that.
But another issue is at play here also. After over 100 years of Federal oversight by the Interstate Commerce Commission, the railroads are freer to explore business models and options. It has taken years for railroad executives who lived in the ICC environment to retire out and be replaced by younger executives who looked at issues differently. There are still regulations to be complied with, but the environment is so much freer now. And we are fortunate for that.
To be sure, HB 735 is mostly for rural Georgia, but this General Assembly had some refreshing moments. We now know and acknowledge that the Atlanta region has traffic problems. Certainly part of the solution will be to take some of the pressure off by moving businesses out of the Atlanta area to areas that could use the presence of those businesses. And if those businesses can rely upon the railroad infrastructure to help them thrive, then this is a good thing. The same applies for information technology.
Maybe we might even think of offering rail transit……
We might actually be talking about CSX here—sort of. CSX has downgraded its Atlanta-Augusta line (which I believe was the first rail entry into Atlanta, in 1845—the old Georgia Railroad), not a top speed line like their line through Athens or their routes in southeast Georgia. Going back and forth between the two cities occasionally on the old 278 (that parallels I-20), I have almost never seen any train on that line. CSX is in a downgrading mood for some of its lines (lighter-used stretches such as Dothan-Montgomery or Jacksonville-Mobile), which CSX late CEO Hunter Harrison was looking into before he died late last year.
Maybe 5 years or so ago, CSX leased one of its routes west of Richmond (between there and almost the West Virginia border) to Buckingham Branch RR, part of which hosts Amtrak’s Cardinal train between Chicago and New York. CSX kept its coal-heavy, flatter route along the James River west of Richmond, while the line now operated by BB RR has its share of grades.
Thus, who knows if a short line might take over that Augusta route, or at least parts of it?
Supposedly, the Atlanta – Augusta line, the former Georgia Road, was maintained to improve speeds after Hunter Harrison came in. What may be happening is that you are seeing fewer trains, but those trains are considerably longer than before.
Harrison was all about keeping trains on the move and out of terminals. One part of this philosophy has been that Tilford Yard, the major CSX yard in Atlanta, has been decommissioned, with most structures being demolished. Much of the Florida to Midwest traffic has been rerouted through Birmingham, but the Atlanta to Chattanooga line still sees trains, just fewer and longer. In an earlier era, the line saw 50 – 60 trains a day, but is now down to many fewer.
This line, known as the Western & Atlantic, is owned by the State of Georgia and leased to CSX. This lease comes up for renewal in 2019, and there is the tantalizing possibility that this line could be used for commuter rail to Ackworth or Cartersville. There’s also the possibility of longer haul passenger trains to Chattanooga. Who knows what will happen?
Even with Harrison out of the picture, the general philosophy that he espoused apparently still hangs on with CSX. It is very different from earlier times. Whether it is successful or not remains to be seen, but early days in the Harrison regime were marked by shipper irritation. Manufacturing facilities served by CSX relied upon predictable delivery, the classic just-in-time approach. Faced with CSX’s new unpredictability, some manufacturers resorted to using trucks, not a desirable outcome. Things are now supposed to have been improved.
Which brings us back to HB 735, designed to give shippers on the Class III’s equal status in the railroad infrastructure. It should be pointed out that some of the really bad track is currently rated at 5 mph. Going through such a branch line, replacing crossties and aligning track might bring the track up to 25 mph, certainly not “high-speed”, but the higher speed that means shippers can get a carload to & from Savannah within a day or two. These things have a way of building upon themselves. Improved speeds lead to more shipments, which leads to another maintenance cycle and faster shipments.