HD55 - Alternative Forms of Operation and/or Ownership of Short-Line Railroads and the Long-Term Economic Self-Sufficiency of Short-Line Railroads


Executive Summary:
Railroads are an important partner in Virginia's transportation network. Over time, railroads have emerged from being the major provider of transportation services to now being a transportation partner with highways. Following a decline of rail service that ended in the mid 1980's, Virginia's rail transportation network has evolved to better meet the needs of the shipper. Transportation planners now speak of adjacent rail and highway systems as "transportation corridors". Each system performs a specific service of the total transportation network. Planners realize that adequate rail service can relieve burdened highway systems by providing additional capacity to adjacent transport at ion facilities. As railroads analyze their marginally profitable rail lines as compared to their entire rail system, these lines are sold to a short-line operator or the track is abandoned. A short-line railroad is a non-mainline track segment that usually serves several industries and maintains a low traffic volume as compared to a mainline railroad operation. These short-line segments can usually be operated efficiently by small rail operator not burdened by the cost of labor and corporate administrative costs. In some cases, a non-viable rail line proposed for abandonment may be taken over by a public body to preserve the rail service for a local industry that could not operate without rail transportation. In response to abandonments and the need to preserve right-of-ways for future use, federal and state agencies developed guidelines to analyze potential abandoned short-lines for viability.

Recognizing the need for continued service in some areas, federal and state programs were put into place to provide public assistance for the continued improvements to rail facilities on short-line railroads. Virginia utilizes its Rail Preservation Program to assist eight short-lines in the Commonwealth. Under this program, the rail service must have a benefit cost ratio of 1.0 or greater in order for the short-line to qualify for public assistance. The eight short-lines in Virginia have an average benefit cost ratio of 2.5. The Rail Industrial Access Program (RIA) assists economic development by offering rail access to industrial sites. Both Rail Preservation and RIA enhance and assure a transportation alternative and spur economic development to areas of the state which may not have existed without public support.

As short-line railroads were created, the ever-changing need resulted in many forms of ownership. There are five types of short-line ownership identified in this report. These types range from private ownership and private operation without public assistance to public ownership and public operation with state assistance. The eight short-line railroads in Virginia fall into two categories 1) private ownership-private operation with public assistance, and 2) public ownership-private operation with public assistance.

This study analyzed short-line ownership and issues and identified the need for continued support and technical assistance to aid short-line railroads to achieve an optimum level of operation. It is the goal of the Department of Rail and Public Transportation (DRPT) to bring these eight short-lines under the Rail Preservation Program to the optimum level of ownership; private ownership-private operation without public assistance. Based on this review, the following recommendations are offered:

Rail Preservation: DRPT's Rail Preservation program has established priorities to retain service where justifiable, provide financial assistance where feasible, and to assist short-lines in achieving the optimum level goal of becoming private ownership-private operation without public assistance. The Rail Preservation Program should be continued at its current level of funding to assist the short-line railroads in achieving optimum efficiency. Each short-line should be evaluated individually. After analysis, if long-term viability or a benefit-cost greater than 1.0 is determined not to be achievable, then the short-line should not receive public funds.

Rail Industrial Access: The DRPT Rail Industrial Access Program should be continued to foster growth and industrial opportunity for otherwise non-accessible rail areas. This program provides another tool for local jurisdictions and the state to compete for industrial development.

Rail Marketing: DRPT should continue to work with its sister agencies to promote economic development in Virginia. Efforts to continue to assist all railroads in Virginia in their quest to market their facilities in the economic development arena should continue. Short-lines should work with the Class I railroads to improve their marketing efforts and services.