From Roads to Rail a Great Idea… In Theory

Richard L. Beadles, founder of the Virginia Rail Policy Institute, is dissatisfied with the structure of the U.S. railroad industry. While the rail freight industry has done a good job of moving large volumes of freight long distances, he says, it has yielded the short-haul business to trucks, abandoned thousands of miles of track, and built a system that is to some degree incompatible with passenger rail.

Beadles would like to see more cargo traffic shifting from trucks to rail, thus taking thousands of tractor-trailers off congested highways and reducing energy consumption. And he would like to see more inter-city passenger rail service. The solution, he suggests, is to get government more involved at the federal and state level.

“If rail is going to play a larger role in U.S. transportation, only the public sector can make it happen,” he writes in the May 2017 edition of the Virginia News Letter. “The history of great public-works projects, including the interstate highway system, argues in a most compelling way for a strong public role in rail infrastructure and service planning, augmented with commensurate public funding.”

Beadles calls for setting up a statewide Rail Development Authority. If airports, ports, toll roads, bridges and tunnels all have authorities, he says, publicly sponsored inter-city railroad projects should have one, too. “In the long run, a rail authority will be required for the very same reasons that the highly successful Virginia Port Authority was created year ago. The sooner it is created, the better for the public.”

Setting up a rail authority is not an inherently unreasonable idea, although there could be turf issues with the Virginia Department of Rail and Public Transit, the state agency that currently handles inter-city rail matters. Transferring DRPT’s inter-city rail functions and revenue sources to a quasi-independent authority would avoid bureaucratic redundancy. But it’s not clear from Beadles’ account what an authority could accomplish that DRPT does not.

A more interesting philosophical issue is where the money would come from to fund an expanded role for rail. Beadles makes essentially the same argument that backers of mass transit do — that roads and highways are subsidized, so why shouldn’t rail and transit be, too? Writes Beadles:

Virginia appears at first glance to have a public-policy commitment to raise the necessary revenues from users of highways via fuel taxes, supplemented by other fees and charges. In 1986, a landmark transportation funding package brought the “half-cent for transportation” supplement to the state sales taxes. With the effect of inflation over two decades, the “half-cent” has become a major component of highway funding revenue. Thus even a senior citizen in a retirement community, without an automobile, is now paying into the state transportation revenue pot. And now, with the 2007 General Assembly “solution” to future transportation requirements, part of the funding package includes General Fund money.

Beadles is absolutely right about this. Virginia has abandoned the pretense that roads and highways should be self-funding through a gasoline tax and other auto-related taxes. Not only is asphalt-based transportation subsidized in innumerable ways, freight trucking is subsidized by other drivers; tractor-trailers do not pay taxes sufficient to cover the cost of the wear and tear they inflict upon highways. Thus, they enjoy a doubly unfair advantage over rail.

Of course, passenger rail and mass transit are subsidized, too. Virginia budgeted $52 million for inter-city rail in fiscal 2016. So the debate becomes one of arguing that inter-city rail deserves even bigger subsidies because its goals are so worthy. The trouble with such a debate is that there is no practical way to determine what level of support is economically appropriate.

When it comes to paying for roads, bridges and highways, one could devise a Vehicle Miles Driven tax to generate revenues sufficient to maintain the road network. The tax would be adjusted up and down as needed to cover fluctuating maintenance costs. New construction could be paid for through tolls, proffers, impact fees and Community Development Authority bonds. Virginia could construct a pay-as-you-go financing system for roads if the political will existed.

No one has proposed even a theoretical model of how inter-city rail, outside the densely populated Northeastern Corridor and a few connecting lines, could be fiscally self-supporting. At the very least, Beadles needs to demonstrate a positive net social benefit for public rail investments. He comes close with one example — a $40 million contract with Norfolk Southern — but never completes the logic loop.

In 2007 DRPT provided the funds to upgrade Norfolk Southern’s rail line between Manassas and Front Royal with the goal of shifting freight traffic from Interstate 81 to Norfolk’s Southern’s rail network. Under the contract, the rail company is required to divert 76,000 trucks per year above current levels by 2023. That sounds like a lot of trucks. But the reduction averages 208 trucks per day, slightly less than 9 per hour. How much do nine trucks per hour create in congestion costs, and how much economic value (less drivers’ time lost to congestion) would be saved by getting them off the road? Alternatively, one might ask what other improvements the state could make with $40 million, and what public benefits would be attained. Was the Norfolk Southern subsidy a good public investment or not? We don’t know — not with the information that Beadles provides.

Investing more public money in rail might make economic sense. But I want to see a stronger case for it. An even better idea would be to let roads and rail, trucks and railroads, compete on a level playing field by making all transportation modes operate on a pay-as-you-go basis. I have more faith in truckers and railroaders than politicians to make decisions that make economic sense.

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17 responses to “From Roads to Rail a Great Idea… In Theory

  1. re: ” The trouble with such a debate is that there is no practical way to determine what level of support is economically appropriate.”

    well , start here:

    FY – 2017 estimate

    Motor Fuel Taxes $868,900
    Motor Vehicle Sales and Use Tax 976,500
    State Sales and Use Tax 1,023,100 2

    https://www.dmv.virginia.gov/webdoc/pdf/tracking_apr17.pdf

    so the fuel tax and motor vehicle sales tax can be fairly allocated to roads

    but what logic is required to allocate any part of the sales tax to roads rather than transit?

  2. Oh great, more gub’mint. On the passenger rail front – let’s talk Amtrak. Other than the northeast US, northern Illinois and California Amtrak is a financial basket case. One third of its total boardings are DC, Philly and New York. So, why does Amtrak continue to run ridiculous and unprofitable routes to Walnut Ridge, AK and Elko, NV? Because the US Constitution gives a lot of power to low population states (since every state gets 2 senators). All those senators push Amtrak to operate in 46 states as opposed to the 23 states that can be served profitably.

    Tell me why this plan will be any better.

  3. Amtrak is a chicken/egg deal and if you build it – and run it on a regular schedule – enough to be convenient – it can compete against regional air trips of several hundred miles – especially those places that are more than an hour from an airport with regular commercial carriers.

    Amtrak is a successful attempt to “starve the beast”. Once you degrade service below a convenient point.. it’s no longer a viable service for most people.

    and that’s not just for rail.. there is also a threshold for regional airports.. in terms of how regular the service is and how many commercial carriers…

    the Feds actually do subsidize regional airports.. in fact, they pay 95% of the start-up!

    Feds keep little-used airports in business (USA Today)

    http://usatoday30.usatoday.com/travel/flights/2009-09-17-little-used-airports_N.htm?csp

    • I think the issue is more national vs regional. Amtrak’s NorthEast corridor is reputed to be profitable. Same for the midwest around Chicago and California. Everything else loses money and requires a taxpayer subsidy. If Amtrak spun off its NorthEast operations that part of the business would need no subsidies. Of course, the podunk stops in the south and Rocky Mountain areas would need even more subsidies.

      When it comes to passenger rail … the country is too big and individual states are too small.

      What should Virginia want from Amtrak? More access (via train) to New Orleans or extending the Acela high-speed line to Richmond with an intermediary stop in Fredericksburg? The answer is obvious. Unfortunately, Virginia only has 2 US Senators so the subsidy hunters in Amtrak are pre-disposed to keeping as many DC politicians in their corner as possible.

      By my calculation an early-bird Richmonder who took the 4:00 am Acela to Manhattan could be at a breakfast meeting in the Trump Tower by 8:30 am.

      • I think you’re correct about the problem with Amtrak (and many gov’t programs). The fact is that a number of these programs could be effective. But….then there are the rural areas of the country (and or state).

        Of course, LarrytheG will respond with: if you don’t do anything for the rural areas, they’ll just become worse off….

        Tough, tough calls for public policy. Logic may say: Well, why don’t you help the areas/people most in need? But the problem with that “logic” is that the way the country is currently constituted, you’d simply have the wealthy areas paying taxes and receiving very little or nothing in return. That won’t last long.

        I think the last election really amplified the unbelievable divide in the country. I think this gubernatorial election will rip the bandage off of Virginia. No more Warner-Kaine-McAuliffe playing kissy face with the Chamber of Commerce/Dominion/etc. and trying to work with the rural part of the state. Perriello is probably going to win without appealing to a single Republican except for a few Augusta/Nelson landowners who may vote for him due to his pipeline opposition. It would be interesting to see what he does if he wins.

  4. For what it’s worth…. Not all routes outside the Northeastern corridor are fiscal failures. The Lynchburg-to-Washington passenger rail service is profitable (at least it was a couple of years ago). Also, Richmond’s Staples Mill station is reputedly the busiest Amtrak station in the Southeast.

    Passenger rail is a nice travel option to have. Perhaps something can be learned from the rare success stories.

    • A good example is Charlottesville to get to airports with more national route air carriers…

      There are more examples … across the country ….

      and one more… on regional connectivity –

      the the .7% sales tax for Transportation in NoVa that generates more than 350 million a year. How much of that should go for transit and METRO that connects the airports?

      In terms of finding out how to allocate … one might say that the tax on gasoline and new vehicles is what should pay for the roads for them and the sales tax should pay for non-road transportation.

    • This article is pretty convincing …

      http://www.economist.com/blogs/gulliver/2014/07/amtrak

      Any given route may be profitable – depending on how you allocate overhead. However, the Economist’s claim that Amtrak would need no subsidies if it went from operating in 46 states to operating in 23 seems logical. I assume Virginia would be among the 23 that are profitable but I don’t know that for sure. Lynchburg seems like a pretty successful small city. After population stagnation in the 1980s and 1990s the city has taken off during the last 17 years. Funny how a growing population can support things like passenger rail while a shrinking population cannot.

      There are many positive aspects to rural living. However, easy access to long haul passenger transportation is not one of them. That only exists through government subsidy. Whether it’s heavily subsidized, small, regional airports or money losing Amtrak regions – it’s all about the subsidies. This subsidization has been going on for almost a century. The Rural Electrification Act, the Universal Service Fund in telecommunications, Amtrak subsidies, etc. The problem is that all this wealth transferring has not stemmed the out-migration from rural to urban and suburban areas. It has not brought the expected jobs to rural areas. In layman’s terms – it’s not working.

  5. I’m pointing out a couple of things…

    1. the Feds subsidize air travel for the non-urban areas… so they will have “access” to transportation.

    2. – when the interstate system was originally built the same argument now being used against Amtrak was used with regard to building rural interstates.

    Now – most people would think it terrible if we said the rural interstates cost too much for the value provided to rural areas.

    it’s not about rural areas in isolation.

    you need regional networks for the rural areas that don’t have other options.

    This is what Europe and Asia both have as DJ can attest to …from his travels.

  6. Fully one third of the Virginia funding for transportation comes from the general sales tax – more than the fuel tax.. and the sales tax on vehicles!

    If we used the billion a year from sales tax to pay for Amtrak in Virginia – how would that be any more or less of a subsidy than the money that comes from the fuel tax to pay for roads?

    it’s even worse in NoVa – where – 300+ million a year comes from the .7% supplemental sales tax for transportation.

    so here’s the question – if the fuels tax “belongs” to roads.. should the sales tax monies “belong” to rail and transit?

    • Even if the sales tax “belonged” to rail and transit … why would you build rail and transit routes that can’t support themselves? The answer is to make road transportation taxing intelligent. Put a GPS device in every car, truck, motorcycle, etc. Tax by vehicle mile traveled with the rate varied by the road being used. VDOT would approve road expansion projects and the miles traveled on those roads would get more expensive as a fund accumulated to pay for the expansion. Once the fund reached a certain percentage of the total additional monies could be borrowed and the construction started. Roads that need no expansion only have to cover the costs of their maintenance.

      Toll gantries would still be kept on major thoroughfares for out of state drivers. The Virginia drivers would be exempt from paying the tolls since their GPS devices would charge by the mile instead.

      All fuel taxes are eliminated, all supplemental sales taxes are eliminated, all additional vehicle taxes are eliminated, all toll roads are eliminated (or, alternately, all roads become toll roads).

      You know this is the right way to go and so do I.

  7. you know… you’d not even have trucks moving goods nationally if it were not for the subsidization of the interstates in the rural areas.

    That’s where long-haul trucking began and goods were shifted from rail to trucks.

    But I understand Trump is coming to the rescue – he is proposing that the ban on tolling existing interstates be removed and that any/all interstates new or old – be tolled… so maybe that will cause a switch from trucks to trains… oh wait.. he’s cutting funding for rail also!

    • If interstate subsidization really helped rural areas then rural areas wouldn’t be struggling like they are now. In truth, Dwight D Eisenhower saw the US interstate system as crucial to national defense with the side benefit of facilitating the movement of civilian goods across the country. He was able to afford this incredible project because the 1950s were an economic boom time in America.

      Trump sees deficits as a huge problem for the US. Maybe he read Boomergeddon. If he’s right and the US enters a new era of economic prosperity then he may the same freedom that strong economic growth afforded President Eisenhower. Of course, Trump’s deficit plan relies on some possible financial alchemy. Namely, cutting taxes faster than cutting spending will spur growth sufficient to reduce the deficit. I think that could work over the short term. Deficits were shrinking after the Bush tax cuts until the recession of 2008 happened. Then all hell broke loose. The snowflakes’ worst fear should be that Trumo gets enough of his economic plan passed to spur growth while cutting the deficit before he runs into the inevitable next recession. If he pulls that off by 2020 he can run as the man who made America’s economy great again. The right wingnuts’ worst fear should be that Trump can’t get enough of his economic ideas implemented despite having a Congressional majority. The economy will remain lukewarm, the GOP will lose a full majority in the interim elections and all the other Trump baggage will bring him down in 2020.

      • re; national defense then side benefit

        bull feathers..

        that was the premise.. the reality is that the interstate system was subsidized through the rural areas so we would have a national grid – and that national grid is what gave trucking a competitive advantage over rail..

        and rural has been helped – especially the agricultural economy which now has mega farms near the interstates…

        re: boom times

        remember – the interstate highway system was on land taken by eminent domain… another govt subsidy that benefited private trucking companies..

        remember – the Feds currently ALSO subsidize airports and ports… to the benefit of private sector companies…

        re: ” Trump’s deficit plan relies on some possible financial alchemy. Namely, cutting taxes faster than cutting spending will spur growth sufficient to reduce the deficit. I think that could work over the short term.”

        no – it’ voodoo supply-side economics…. you can get prosperity from deficit spending.. the GOP preaches this all the time then when they get in power – they can’t wait to violate it.. but rather than admit it – they bill it as “dynamic” spending..

        If you want a REAL LIFE example… go look at Kansas.. that did exactly that.. and did it per the urging of the GOP idiots, Stephen Moore, and Laffer… and now where are those guys now that Kansas has blown up?

        … but I digress…

        public roads are the biggest social program ever – we take from property owners and taxpayers to create something that the private sector can use to make profits… and in truth -that’s fine – the key is to admit it…

        rails would be the predominate way to move goods in this country had we not subsidized a national grid of roads that ran through both urban and rural.

        it wasn’t about “helping” rural.. it was about “helping” commerce.

  8. re: Trump versus the “GOP”.

    Nope.. it’s not Trump versus “the” GOP – it’s Trump versus the two GOPs – that do not agree with each other even before we get to the Dems.

    The GOP itself is essentially two different parties these days.

    On wing of the GOP – KNOWs that cutting taxes but not cutting spending is a recipe for longer-term disaster – bigger deficits and debts… that.. in fact..
    cutting taxes is really just another form of “stimulus”… remember the “make work pay” tax credit under Obama?

    the other wing of the GOP is bat-crap crazy …they actually “believe” that cutting taxes will generate enormously increased economic activity.. and they base it on their mythologic goofiness about what happened with prior tax cuts.. Reagan DID cut taxes.. and then had to increase them to stave off deficit disaster.. Bush’s tax cuts had a similar longer term outcome and at least Reagan’s guys KNEW and acknowledged that he had to do the subsequent tax increase – .. Reagan is the guy who actually increased the FICA tax in anticipation that retiring boomers would overwhelm it.. so he
    increased FICA to give a window to make the changes.. changes that have not been made – because.. of GOP ideology – … opposed to the CONCEPT of SS.

    this group of tea party GOP is disconnected from reality.. they spout just utter foolishness like “free market health care”.. even though there is not another place on the planet that does it “free market” – and all other places on the planet that DO HAVE .. universal health care and lower costs – ALL OF THEM are govt-run.. and among the best – Singapore which MANDATES insurance AND disclosure of prices.. AND subsidized insurance for low income.

    there is no country on earth that works in reality like the GOP goofballs “believe”… It’s all a theory – an unproven experiment they want to try… like they did in Kansas.. and it worked in Kansas pretty much like most sane economists predicted.

    No one in their right mind should buy the ideological foolishness the GOP is peddling these days.. people do.. the Rural GOOBERs do… for sure..

  9. What is needed is less government intrusion into the free market and more private sector investment that does not require taxpayer subsidies.

    To improve governance in Virginia we need to head in the opposite direction from the proposals to create more layers of all-appointing governing … governing and decision-making that is unaccountable to the voters.

    Friends, we have a General Assembly and we have a local government (BOS or City Council). That is more than enough government. If we need to extend the General Assembly for a year ’round legislature, then let us consider doing that. But growing unaccountable governing is clearly the WORSE choice.

    Let those individuals we ELECT make the decisions, do so. Do not permit them to slough their job off on yet another unaccountable governing entity.

    If the business case exists to move people with rail, then the private sector should be free to build such systems. Passenger rail ended for a reason.

    Because cars and buses were more affordable and more flexible.

    Here in Norfolk and Virginia Beach we have been PLAGUED by the cancer of government subsidized financial train wrecks … euphemistically dubbed “Light Rail” (inner-city passenger rail) … for decades!!!.

    The service provided is waaaaaay …. too ….. s -l -o – w, too expensive, and too impractical (speed over ground made good = 15 MPH).

    It is financially unsustainable.

    The “fares” are artificially low. This is accomplished by forcing people *not* riding the train to pay 90% of the cost to operate and maintain the trains.

    Many targeted groups are provided FREE fares … to bribe people into using the rail, so as to invent the appearance of “ridership”.

    Even with such lavish and unsustainable expense, ridership keeps declining and far too few ride. Of those that *do* ride, many used to ride a bus, but the bus was discontinued along the route of the train, so now they ride a far more expensive train.

    According to our local transit provider (HRT), HRT pays $88 per service hour to operate their buses. Their “light rail” costs a whopping $312 per service hour! This cost exists even when the trains run … empty. Which, is … often.

    Folks, this push for taxpayer funded passenger rail is a S-C-A-M.

    We need to spend our transportation funds far more wisely.

  10. Hey Reid!

    re: ” Because cars and buses were more affordable and more flexible.”

    think about it.. would to DRIVE to Las Vegas?

    how about Seattle?

    most folks fly – right

    now pick a distance that is too short to fly – but a long drive.. would you still drive if there was a convenient station and schedule – say like they have in Europe and Asia?

    we subsidize the interstates and airports.. why not rail – or perhaps to put this another way – how about we let the private sector take over the roads and charge tolls instead of the gas tax?

    that would be a true free market, right?

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