Shortline Freight Rail Captial Programs

Shortline railroads are small regional or branch railroads that serve local communities. Officially classified as Class II or Class III railroads, they operate less than 350 miles of track or have less than $398.7 million in annual revenue. There are seven large Class I railroads in the US, including the Burlington Northern Santa Fe and the Union Pacific, and there are 561 non-Class I railroads in the US, operating over 43,000 miles of track with an aggregate annual freight revenue of $4 billion. As of 2005, shortlines operated 29% of all U.S. rail mileage and were responsible for 25% of the total freight shipped on larger, Class I railroads.

So, why does this matter?

Most shortlines are former main lines or branches of larger Class I railroads that were sold or abandoned when those railroads no longer wanted to operate or maintain them. Part of this is due to the economies of scale Class I railroads achieve with larger "unit trains" of all coal or all intermodal containers.Many shortlines are still highly economically viable and serve industrial, manufacturing, and agricultural properties. As smaller localized companies, they often pursue bottom-up economic development in the communities they serve. However, when larger railroads plan on abandoning lines they cease maintaining them. This means that many shortlines face capital problems around targeted, key pieces of infrastructure like bridges. 

Freight rail is itself a key mode that is often overlooked. Rail is about four times more fuel efficient than trucking and can haul one ton of goods an average 476 miles per gallon of fuel. Shipping by r

The Buckingham Branch Railroad. Source; http://www.trainweb.org/varail/railimages/bremo1.jpg

ail can decrease greenhouse gas emissions by 75% and one rail car has the capacity of three or four trucks. About one-third of all US exports are shipped by rail. In light of funding shortages for highways, private rail networks will likely become more important for certain commodities in the coming years.

Capital Programs

Some states provide grants or loans to shortline railroads to bridge this gap. My paper examined two of these program in Minnesota and Virginia. Virginia's program  provides 70/30 matching loans to railroads to improve necessary infrastructure. It was created in 1991 and is allocated just over $3 million annually. The state cataloged all projects on the nine shortlines in the state and developed a long-term plan to address them. The program is fully funded for the current six-year cycle that targets key projects, but the longer term project list is significantly larger than the funding stream. 

Minnesota Prairie Line. Source: http://www.railpictures.net/photo/276609/.

Minnesota has a similar program called the Minnesota Rail Service Improvement Program (MRSI). It was created in 1976. Since that time, changes in the State Legislature have reduced the amount of money in the program, but the state maintains that the fund now covers itself. Minnesota's program has two halves: one that helps rehabilitate economically viable but deteriorated lines, such as the Minnesota Prairie Line that is owned by the Minnesota Valley Regional Railroad Authority. MRSI funds are helping increase operational speeds form 10mph to 25mph. The other half of the program provides loans up to $200,000 for improvement of specific infrastructure and must be repaid within 10 years.  

Evaluation

On the whole, these programs serve their purposes well. In terms of adequacy, shortline infrastructure programs often have higher needs than funding. Minnesota's program is less efficient than Virginia's because it is less nuanced. Virginia has other parallel funds to help develop industrial spurs and to improve passenger rail corridors. Minnesota's program provides smaller amounts of money that are not that much more competitive than private capital for targeted improvements. By require various levels of matching grants, these programs require the private railroads to have some "skin in the game," and by that measure they are somewhat equitable. However, these programs still see fractional amounts of a state's funding. Sustainability is contingent on the political process in states like Virginia that provide annual appropriations. In Minnesota, the fact that these loans are revolving help with sustainability.  

Conclusion

More research is needed on the economic impact of these programs, but some shortlines like the Buckingham Branch Railroad in Virginia seems to have benefited tremendously from relatively minimal state support, keeping hundreds of miles of former main line track in service and hauling hundreds of thousands of rail cars a year.