NCPA - National Center for Policy Analysis

Railroads In Search Of Public Funding

May 1, 2000

Railroad executives have until recently been reluctant to accept money from the government. But that may be changing.

For example, Norfolk Southern Corp. is asking Virginia to help pay a projected $900 million to add a second track to its mostly single-track route that parallels Interstate 81. The railroad argues that it would then be able to handle much of the freight that now travels by truck on I-81, easing traffic and putting off an expensive highway widening project.

Experts say this new attitude stems from railroads' massive capital needs -- and the fact they have spent so much of their money buying each other.

Railroads are cheaper and quicker to build than highways. But they are less reliable at delivering the goods than trucks, studies show.

  • Applying the Norfolk Southern example above, it would cost $1 million to $2 million per mile to add track along I-81 -- compared to $10 million per mile to add a highway lane in each direction.
  • The track could be laid in four years -- versus 20 years for highway construction.
  • Freight rates from Dallas to northern New Jersey, for example, are roughly 50 percent higher for the same size shipment by truck than by rail.
  • But the reliability of shipment by rail runs between 80 and 90 percent versus 95-plus percent by truck.

Typically, railroads are competitive with highways when freight is moving at distances of more than 700 miles.

Although officials at the Virginia Department of Transportation are looking at the Norfolk Southern proposal, officials of some other railroads think the company is asking for trouble. Mark Hallman at Canadian National Railway Co. warns that accepting public funds "allows other parties to have a say in your core business," and adds, "we're opposed to that." Canadian National was, until recent years, owned by the Canadian government.

Source: Daniel Machalaba, "Railroads Learn to Like Public Funding," Wall Street Journal, May 1, 2000.


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