Archive for the ‘On Transportation’ Category

Round and Round and Round the Toll Hike Wheel Goes. When It Will Finally Stop Nobody Knows

January 6, 2018

You might think that every penny that you pay to use a toll road would go toward the maintenance and operation of that road, including administrative expenses.

Maybe at one time it worked that way, but no longer. A toll road is an attractive cash cow to be milked by political officials for their pet projects or to pay expenses for which public funding is in short supply.

I’m not saying this is right, just that it is one of the many games that policy makers play in the budget making process.

For the 10th consecutive year tolls on the Pennsylvania Turnpike are increasing and a case could be made that the size of the hike is not entirely the doing of the Pennsylvania Turnpike Commission.

By law the Commission pays $450 million every year to the Pennsylvania Department of Transportation, which uses that money to help fund public transportation as well as highway and bridge projects not involving the turnpike.

The Ohio Turnpike and Infrastructure Commission also diverts toll revenue to uses that do not directly involve the turnpike.

The game involves raiding pots of reliable and considerable revenue to fund programs tangentially related to the source of that revenue that are hard-pressed to pay for themselves.

It is all the better if much of the revenue from those pots comes from those who can’t vote against those doing the raiding.

Here is one example of how it works. Back in 2013, the Ohio Turnpike Commission sold $1 billion in bonds for capital improvements, agreeing to set aside $930 million of the proceeds to fund 10 transportation projects in Northern Ohio that do not directly involve the turnpike.

One of those is the Opportunity Corridor, a boulevard linking East 55th Street and University Circle in Cleveland.

Portions of that project have included upgrading facilities of the Greater Cleveland Regional
Transit Authority. The transportation elements of the Opportunity Corridor notwithstanding, it is an economic development project seeking to revive financially distressed Cleveland neighborhoods.

A Cleveland area resident sued the Turnpike Commission in federal court, arguing that diverting toll money for non-toll road projects violated state and federal law.

A judge disagreed, saying there is a “nexus” between the turnpike and other transportation projects because turnpike users will benefit from those projects.

Maybe so, yet I doubt that many New Jersey residents, for example, traveling to Chicago via the Ohio Turnpike will ever use the Opportunity Corridor’s spiffy boulevard.

For that matter, many users of the Pennsylvania Turnpike will never use public transportation in the Keystone State. But they are paying for it anyway, often without knowing it.

This is not to say that endeavors such as the Opportunity Corridor or public transportation are without merit and don’t deserve public funding.

Nor is it to say that the policy makers who created the Opportunity Corridor or decided that public transportation users should be subsidized by taxpayers who don’t use that service made poor decisions.

It is to wonder how long the annual toll increase merry-go-round can continue spinning before it breaks.

Pennsylvania Auditor General Eugene DePasquale is wondering the same thing and has launched a review of the turnpike commission.

I’m not optimistic that any report that DePasquale issues is going to result in tolls being lowered on the turnpike let alone stopping the onward march of annual toll hikes.

The mandate that the Pennsylvania Turnpike underwrite some responsibilities of PennDOT is not the sole cause of that 6 percent hike that takes effect on Sunday.

At best that mandate simply adds to the size of the toll hike the turnpike probably would have imposed anyway even if every dime of it were to go directly to the turnpike.

The policy makers may pay lip service to DePasquale’s report and shave a few nickels and dimes here and there, but the allure of the cash cow and its daily torrent of toll-paying motorists is too irresistible to ignore as an answer to funding needs and the desires of policy makers without raising income taxes and sales taxes.

They’re simply raiding your wallet in other ways, including building automatic fee increases into toll roads every year in the belief that as much as you might gripe about the tolls you’ll continue to pay them because taking the toll road is more convenient than driving miles out of your way on two-lane highways without toll booths but which come with a multitude of traffic signals, lower speed limits and small town speed traps.

It is hard to love a highway that charges $7 upfront when you drive directly from the Ohio Turnpike onto the Pennsylvania Turnpike. Tomorrow it will cost you 45 cents more to enter Pennsylvania.

The Ohio Turnpike is also becoming more expensive. Back in 2013, the Turnpike Commission approved 2.7 percent toll hikes every year through 2023. It has learned well from its neighbor to the east.

Advertisements

Crystal Ball Look at 2018 and Railroads

January 3, 2018

With a new year upon us, it’s time to look ahead to what 2018 might bring in the railroad industry. Such predictions are fraught with peril given that unexpected developments can occur at any time that dramatically changes the trajectory of the industry or its individual components.

A year ago at this time we thought E. Hunter Harrison was living out his days as CEO of Canadian Pacific. Few knew that he was plotting with a hedge fund to take over CSX.

Even fewer knew that Harrison was in his final days of overseeing any railroad and would die before the year ended.

With that in mind I press ahead in reviewing four stories to watch in 2018.

What now for CSX? The patriarch of precision scheduled railroading left before his model could be fully implemented.

Look for CSX to continue the PSR model under new CEO James M. Foote, although with some modifications.

Much of the early months of 2018 will see Foote finding his way at CSX while assuring investors that he was a wise choice to replace Harrison.

Industry analysts have pointed out that Foote is thin in operating experience. Much of his industry time has been spent in marketing and sales.

That could turn out to be a good thing for CSX because customer relations was not Harrison’s strong suit. He was an old school operating man who wanted to dictate terms to shippers not the other way around.

Look for CSX to appoint an operations vice president so that Foote can focus on what he knows best.

Both Canadian National and CP have done quite well post-Harrison. Will the same be true for CSX? Perhaps, but if that is the case it will be due to Harrison having laid the foundation not from having built the house as was the case at CN and CP.

What now for Amtrak? Richard Anderson is firmly in control of the nation’s rail passenger carrier with Charles “Wick” Moorman having retired.

Anderson, the former CEO at Delta Air Lines, has hired a supporting team that includes former airline executives. It remains to be seen what that means.

These airline executives cut their teeth during the airline deregulation era when airlines learned ways to squeeze every last dollar out of passengers through such things as baggage fees and seat assignment fees, among others.

Remember the last time that an airline served you a not meal in coach as part of your fare? Yeah, it’s been a while.

Anderson won’t necessarily remake Amtrak in that model but look for him to move in that direction.

The name of the game will be maximizing revenue yield – something Amtrak has already been doing – as the carrier seeks to recover even more of its expenses from the fare box.

Anderson will have his hands full this year attending to matters that grabbed a disproportionate number of headlines in 2017. This includes the rebuilding of New York’s Penn Station and dealing with the aftermath of the derailment of a Cascades Service train in Washington State.

Much of the latter has focused on the fact that positive train control was not yet in operation on the route. Questions are being raised about the adequacy of training of Amtrak operating employees and the railroad’s safety culture.

These matters will continue to attract attention in 2018 and take up much of Anderson’s time.

Rail passenger advocates in places such as Ohio will continue to be disappointed in Amtrak in 2018. But that is nothing new.

Little, if any, progress will be made in terms of route expansion, new equipment for long-distance trains or expanding the frequency of such tri-weekly services as the Chicago-Washington Cardinal.

Perhaps the best that can be hoped for is that the aging Superliners will get a new interior look starting later in the year.

Will Railroads Make the PTC Deadline? The last day of 2018 is the deadline for the railroad industry to implement positive train control systems on routes that handle passengers and/or carry hazardous cargo. The deadline has been moved once already.

The Federal Railroad Administration has warned that waivers won’t be issued again, but that was during a different administration.

The Trump administration might be far more sympathetic to railroad industry pleas for a little more time due to the expense and complexity of PTC systems.

Some railroads will make the deadline, but others are going to be cutting it close.

Will the Trump Infrastructure Plan See the Light of Day? Candidate Donald Trump liked to talk about his big plans to revamp the nation’s infrastructure. President Donald Trump has barely mentioned it other than to pay it lip service on occasion.

The administration has been tight lipped about the scope of the plan other than a few broad details, such as $200 billion in federal funds will be used to leverage $1 trillion worth of infrastructure improvements.

Supposedly, the infrastructure plan was being held in abeyance until Congress passed a tax bill, which it did in late December.

In theory, an infrastructure improvement plan should have bi-partisan support. But in a hyper partisan environment during a midterm election year bi-partisan support might be hard to come by. Political hardball will be the rule.

There remains the question of how much the railroad industry would benefit from an infrastructure plan once or even if it is implemented. Few rail infrastructure plans come with a private developer other than than the railroad itself to provide matching funds.

Passenger rail should be a prime beneficiary of an infrastructure plan, but given the current political climate it might find little to feed on except for a few token crumbs that will be eaten by Northeast Corridor infrastructure needs, of which there are many.

Freight railroads might fare a little better in getting funds for some projects, e.g., enlarging tunnels or replacing bridges that they agree to help fund.

But don’t be surprised if the infrastructure plan winds up benefiting highways and even some areas that only a strained definition of infrastructure would incorporate, e.g., a veteran’s hospital. It will hinge on how the terms of the plan are written.

A lot of hungry government agencies and private companies are going to be looking for a slice of the infrastructure pie and might provide tortuous explanations as to how their project constitutes infrastructure.

I’m reminded of that famous response from bank robber Willie Sutton in the Saturday Evening Post as to why he robbed banks: “I rob banks because that’s where the money is.”

The infrastructure plan might make available money not available otherwise so there are going to be a lot of hand out seeking a part of it.

Conservatives in Congress will not necessarily offer automatic support for an infrastructure plan, which they might fame as a stimulus plan. That would remind them too much of something they despised during the early years of the Obama administration.

And conservatives absolutely, positively dislike spending federal money on passenger rail. They are not all that more supportive of public transportation even when it uses rubber tires on asphalt and concrete surfaces.

Harrison’s CSX Legacy Gets an Incomplete

December 17, 2017

Shortly after I learned on Saturday afternoon about the death of CSX CEO E. Hunter Harrison, I logged into Trainorders.com to get a sense of how railfans were reacting to the news.

As I expected, many, although not all, posters wrote harsh, bitter and even over the top comments along the lines of “good riddance.”

A poster who goes by the screen name Darkcloud wrote, in part, “While it might be sad for his family, he ruined a lot of lives of rail workers who didn’t have the safety net of wealth to fall back on that he and his family do. Good men with good records fired under false pretenses or minor errors. Fired to ‘send a message’ or to save a few more dollars to pay for [the] obscene salary he demanded when already a set for life multi-millionaire.”

The business press by contrast offered a more gentile and longer view of Harrison’s passing.

Typical of those accounts was one published at Bloomberg.com that described Harrison as a turnaround chief executive officer.

“By relying on a strategy of cutting costs and implementing procedures to make all parts of the operation more efficient, Harrison transformed Canadian Pacific Railway Ltd., Canadian National Railways Co. and Illinois Central Corp. into rail industry leaders. His reputation among analysts and investors was so strong that CSX shares jumped 23 percent on a single day in January 2017 when reports emerged that Harrison was in talks to take the helm,” Bloomberg reporter Frederic Tomesco wrote.

Can these disparate points of view be reconciled? Yes, if you keep in mind that how you view Ewing Hunter Harrison is shaped by the angle from which you view him.

History books are more likely to portray Harrison in the manner that Bloomberg did than with the emotionally wrought language often employed on chat lists.

And yet both speak to the same point. Harrison was a controversial but hard to ignore figure revered on Wall Street and respected by business writers and railroad trade journals, but often loathed by many who worked on his railroads.

There is no denying that Harrison will be remembered for his concept of precision scheduled railroading that he honed on the IC and then took to CN, CP and CSX.

There also is no denying that the tools that Harrison used to make his railroads more efficient included reducing payroll and demanding in no uncertain terms that workers and manager do things his way.

He lived by the credo of doing more with less; that meant fewer employees and assets, and pushing to get a little more out of both than his predecessors had done.

“Run a tight ship, and you can expect a reasonable return; manage it badly, and the sheer weight of assets will sink you,” Harrison wrote in his 2005 book How We Work and Why: Running a Precision Railroad

Harrison sought to frame himself as concerned with the welfare of his railroad’s employees and even hinted that he was pro labor. Yet at CP he ordered mid-level managers to learn how to operate trains in the event that the unions went on strike.

Likewise, Harrison sought to frame what he was doing at CSX as in the best interests of the railroad’s shippers even as many of those shippers flooded the U.S. Surface Transportation Board with complaints about shoddy service.

CSX acknowledged having service issues during the transition to the precision scheduled railroading model.

But Harrison was an old school manager who saw himself as being in the railroading business and not necessarily the transportation business, a viewpoint that was not unique to him.

He would never accept the premise of that statement, but even by his own words, Harrison acknowledged that CSX was trying to get shippers to change their behavior rather than the other way around.

A few weeks ago he dismissed shipper complaints as long-standing efforts by shipper trade groups to get the federal government to impose regulations on railroads.

This spoke to a paternalistic bent of “I know what is best for you” that no doubt irritated some CSX customers. What is best for shippers is not always what is best for CSX and vice versa.

Of late, Harrison and CSX executives had been touting the improvements that the railroad has made in such metrics as average train speed and dwell time of cars in classification yards.

Some of Harrison’s critics and even his admirers have wondered if precision scheduled railroading could work at CSX with its labyrinth route network and more complex mix of traffic than IC, CN or CP.

We’ll never fully know the answer to that question because Harrison won’t be around to see the process through. His CSX legacy is and always will be incomplete.

He led CSX for less than a year and although the surviving managers are likely to continue the precision scheduled railroading model, they won’t have Harrison around to lean on for guidance, leadership and inspiration.

Whatever successes or failures that CSX has in the coming months and years will be on those managers and not Harrison even if he established the direction that the railroad is going.

I’ve always believed that our society places too much emphasis on the efforts of individual presidents and chief executive officers.

We see them as larger than life figures and tend to attribute to them an organization’s good and bad behavior at all levels.

To be sure, the man or woman at the top sets a tone that percolates downward through the top managers that he or she hired and oversees. Some CEO’s do better at that than others.

Yet the focus on personality can overlook the context in which the top executive operates and might attribute to personality what is actually the work of culture and external forces and how an organization responds to those.

Yes, the personality, talent and skill of the CEO play a role in organizational behavior, but Class 1 railroads are complex organizations that engage in multiple juggling acts to seek to satisfy multiple masters.

Whether you thought Harrison did that well or not depends on your perspective as the commentary about his passing well illustrates. But critics and admirers both can agree that he was a towering figure in the railroad industry who stood over many of his peers and will be remembered for much longer than many of them because of his efforts to be a transformative leader.

Is CSX Trying to Eat its Seed Corn?

November 6, 2017

Under normal circumstances, I don’t cover news beyond the states that surround Ohio, but there is a story out of Baltimore that is worth following because it may say much about what is going on with CSX these days.

Last week CSX said it would not contribute $145 million to a public-private partnership to enlarge the Howard Street Tunnel in Baltimore to accommodate double-stacked container trains.

When the Baltimore & Ohio Railroad built the tunnel 122 years ago, no one could have envisioned stack trains, let alone intermodal trains carrying containers and truck trailers.

Howard Street is just one example of the aging infrastructure in the Northeast transportation corridor between New York and Washington that needs to upgraded, rebuilt or replaced. It won’t be inexpensive.

You might think that CSX would be keen on modernizing the Howard Street Tunnel because it is an impediment to developing the I-95 corridor between New Jersey and Florida. And for a time it was.

Enlarging the Howard Street Tunnel would have benefited the Helen Delich Bentley Port of Baltimore, which has seen an increase in container traffic since the expansion of the Panama Canal.

Figures provided by the Maryland Port Administration show that the port handled a record 10.3 million tons of general freight and nearly 908,000 TEUs (20-foot-equivalent units) of containers in fiscal year 2017, which ended on June 30.

Then along came E. Hunter Harrison of precision scheduled railroading fame.

In announcing the decision to cancel its share of funding for enlarging Howard Street Tunnel, CSX put out a statement that referenced precision scheduled railroading – it has become a buzz phrase used as boilerplate in virtually every CSX statement and news release these days – and made a vague statement that the tunnel project “no longer justifies the level of investment required from CSX and our public partners at this time.”

But as Railway Age magazine pointed out, the statement did not fully explain why CSX decided to bail out on funding the Howard Street project.

When the magazine asked CSX to elaborate, its PR department replied with the same statement it had issued earlier. CSX is not going to explain itself any further.

Railway Age suggested two possible reasons for why CSX backed away from the Howard Street tunnel project.

One is that a fresh set of eyes in CSX management decided that the return on investment wasn’t worth $145 million because the volume of double-stack container traffic likely to use the tunnel would not be as high as the previous CSX management projected.

The other theory is that CSX management is dancing to the tune being played by hedge fund Mantle Ridge, which played a major role in getting Harrison installed as CEO last spring.

This theory is that CSX is diverting cash from infrastructure projects to a $1.5 billion stock buy-back program that will benefit Mantle Ridge, which acquired a sizable block of CSX stock in order to have enough clout to force the company to hire Harrison.

Media outlets have also been reporting that CSX has decided against building a new $270 million intermodal terminal near Rocky Mount, North Carolina.

Designed to develop intermodal business in the middle Atlantic region, the Carolina Connector was to be modeled after the Northwest Ohio Intermodal Terminal in North Baltimore, Ohio, which opened in 2010.

CSX has begun scaling back operations in North Baltimore and there are reports that it plans to end intermodal operations there on Nov. 11. Last year, North Baltimore handled nearly 30 percent of CSX’s intermodal traffic.

It is not clear yet what strategy CSX has in mind for its intermodal business other than it is abandoning the hub and spoke system of building traffic density at terminals such as North Baltimore and the proposed North Carolina facility.

Railway Age quoted railroad economist Jim Blaze as saying that without enlarging the Howard Street Tunnel, most of the talk about developing the I-95 corridor and diverting traffic from trucks is just talk.

“Stack trains are about 35 percent more efficient than single-level intermodal trains,” Blaze told Railway Age. “Without Baltimore as a double-stack route, other intermodal I-95 projects on CSX’s two-decade-long wish list are likely also now at risk. My questions: Where’s the traffic growth to come from for intermodal east of the Appalachian Mountains? What’s the back-up plan to grow the top line of the CSX income statement? This is a strategic economic issue.”

Blaze predicted that the “winners” of the CSX decision will be truckers as well as Norfolk Southern, which has been working for two decades to develop a double-stack route between the New York City/Northern New Jersey region and Florida.

The NS route is longer and more circuitous than the CSX route, but has clearance to handle stack trains all the way.

If the Mantle Ridge influence theory is true, it suggests that CSX is playing a game that has been played out many times before in corporate America.

In the 19th century, it was common for financiers to “milk” railroads for all the money they could before walking away and leaving the railroad a shadow of its former self.

That might not happen to CSX, but I also wonder if this is replay of another era not that long ago that was described in Rush Loving’s book, The Men Who Loved Trains.

That book described another CSX administration that was focused on expense control of its income statement and balance sheet assets to the detriment of infrastructure development.

It decided that short-term financial gain could be had by squeezing a little more life out of ancient signals and other infrastructure.

In this case, CSX has decided it can get by a little longer with a narrow tunnel in a key intermodal lane.

Rather than spending money to make money, CSX has decided to hoard and eat its seed corn.

One ‘Law’ Won’t Change Following the Infamous United Airlines ‘Re-Accomodation’ Incident

May 11, 2017

Whenever I read about an incident in which police are alleged to have used excessive force, I think about a comment made by a political science professor who taught a course I took titled Introduction to the Legal System.

On the first day of class the late Charles A. Hollister told us that law is a very jealous mistress that won’t tolerate competition.

The incident last month aboard a United Express flight at Chicago O’Hare Airport during which a Kentucky doctor was dragged off the plane by airport police officers reminded me yet again of professor’s Hollister’s missive.

He was talking about the legal system, but law is a concept that transcends the courts and its officers.

Every transportation company has a central “law” that is sacrosanct. Though shall not interfere with operations. Planes must fly, ships must sail, and the wheels of trains, buses and trucks must turn. Moving objects are, after all, the essence of transportation.

News reports indicate that the United Airlines incident began when four crew members showed up at the gate and said they had to get to Louisville, Kentucky, on this flight because they were scheduled to operate a flight for the company the next day.

United officials chose four passengers already aboard the plane to bump, three of which agreed to accept the airline’s financial incentive.

By law airlines must compensate passengers denied boarding, a rule that apparently also applies to those already aboard a plane.

But the Kentucky doctor balked. He had his own “law,” which he is reported to have described as “I need to get back home to attend to the needs of my patients.”

What happened after that was the logical result of everyone acting like a jealous mistress and holding fast to their “laws.”

Airline officials called police and millions have seen how they drug the recalcitrant doctor down the aisle of the plane after grabbing and pulling him out of his seat.

Those images resonated with many because it represented one of our worst nightmares about flying.

It was also an aberration. Most people get to their destination aboard the flight that they booked without getting bumped or physically assaulted.

Most people would not defy four police officers telling them to get off the plane. We are conditioned to obey police officers because if we don’t, well look what happened to that Kentucky doctor.

Police generally do not respond well to those who resist or refuse to recognize their authority and they have the legal right to inflict physical punishment upon those who defy them.

Much has been written about how the airline should have handled the situation. Commentators have written that everyone has their price and if the Kentucky doctor was unwilling to take the airline’s initial offer, then the gate agent authorized to make the offers should have gone to another passenger or upped the ante until the Kentucky doctor agreed to take the money and walk.

But whoever decided to choose the doctor for involuntary removal from that flight, or as United CEO Oscar Munoz infamously described it as “re-accomodate” him, also decided to become a jealous mistress and dig in his/her heels and insist on bumping this particular passenger.

How dare a passenger defy an airline employee telling him to get off the plane?

In the wake of the video made by passengers of the Kentucky doctor being drug down the aisle going viral, United has been falling all over itself apologizing, announcing rule changes and seeking to put the incident behind it as quickly as possible.

After attorneys for the doctor said he would sue the airline, the two sides quickly settled out of court for an undisclosed sum – possibly in the millions – and issued statements praising each other.

The rule changes that United and other carrier have announced may lessen the probability of another violent bumping incident from occurring again, but won’t change the basic “law” that came into play in the United Airlines incident.

Planes must fly, wheels must turn and ships must sail and the owners of those vessels will continue to insist that it is they and not those being transported who will dictate the terms of operations.

Preserving Heritage Rail Lines May Involve Overcoming ‘More Beneficial Use’ Arguments

April 11, 2017

Scott Fadness is not a popular person these days among railroad advocates in Indiana.

The mayor of Fishers, Indiana, favors ripping out a former Nickel Plate Road branch line that runs through his city to Indianapolis that until 2015 hosted excursions operated by the Indiana Transportation Museum, including its popular Fairtrain to the Indiana State Fair.

In place of the now dormant rail line, which is owned by a public entity, would be a hiking and biking trail.

ITM and other rail supporters have proposed building the trail alongside the rail line.

But Fadness has rejected that due to safety concerns, saying he didn’t think it would be wise for trail users to be within several feet of a locomotive.

It is easy for railroad advocates to dismiss Fadness as ignorant or to proclaim his position as ludicrous as an ITM spokesman did.

Indeed, those accusations probably are true. But overcoming the beliefs of officials such as Mayor Fadness will not be easy.

He may not be a friend of rail preservation, but it could be a mistake to consider him an adversary. He is someone who needs to be won over.

If anything, railroad advocates need to listen carefully to public officials such as Mayor Fadness. You can’t overcome opposition if you don’t understand it.

Rails and trails can and do co-exist. The Rails to Trails Conservancy says there are 1,600 trails in 41 states that are located next to a railroad line.

Yet the Conservancy said there are 10 times more trails that have been built on a former railroad right of way.

As a result more people think trail without rails than they do trail with rails because the former is most likely to be what they have seen and experienced.

One of those trails without rails is a couple miles west of the ex-NKP line on the right of way of the former Monon Railroad line to Indianapolis.

Fadness wants to emulate that trail and has adopted the type of “more beneficial uses of the property” worldview that worries Jim Porterfield, the director of the Center for Railway Tourism at Davis & Elkins College in West Virginia.

Porterfield was quoted in the May 2017 issue of Trains magazine as warning that heritage railroads are at risk when a community views them as entertainment rather than historical venues.

Porterfield told Trains that the typical arguments for displacing heritage rail lines include, “year round versus seasonal use, a greater distribution of income to local businesses, more people present, and higher property values along a trail versus a rail line.”

By one estimate, the ex-NKP line in Indianapolis needs $9 million in repairs to bring rail service back. A trail can be built for much less than that.

Mayor Fadness sees the situation as a simple cost-benefit analysis that weights heavily in favor of a trail.

Every rails to trail dispute has its own circumstances. In the case of the ex-NKP rail line, there has been internal turmoil within the past year at ITM that has harmed its credibility.

The location of the line in an affluent area of suburban Indianapolis also works against it. Such areas are a fertile ground for NIMBY opponents who know how to work the political system.

Some at ITM have also spoken about extending the ex-NKP to downtown Indianapolis and offering passenger trains there.

There may be some merit to that vision, but it would cost millions if not billions, to replace track that was removed years ago.

People who do not “love” railroads will laugh off such proposals as unrealistic given the existing available resources.

Mayor Fadness may have his mind made up and time is not working in favor of those who want to keep the ex-NKP branch intact.

If you are going to persuade public officials such as Mayor Fadness, you need to show him that rails and trails can co-exist. And you need to convince him on his terms, not those of a railfan who tends to believe that every foot of rail should be preserved.

The question is whether the railroad advocates have the skills and willingness needed to make the case for rail and trail.

Budget Proposal Just a Starting Point

March 21, 2017

More than likely it is a waste of time to discuss the Trump administration proposal to eliminate funding for Amtrak’s long-distance trains.

A president’s budget proposal is just that, a proposal, and no president of either party sees the budget he sent to Congress come out without any substantive changes.

For that matter the House and Senate will have their own ideas about how to spend public money, including how much to allot to the national rail passenger carrier.

Amtrak has been down this road before, many times in fact. Past administrations have proposed zeroing out Amtrak funding only to see Congress time and again appropriate just enough to keep Amtrak’s skeletal national network operating.

If anything is a surprise that the Trump budget would seek to keep any funding for Amtrak.

Amtrak may have survived past budget fights but there have been route casualties along the way. A major restructuring in 1979 killed the only Amtrak service in Columbus and Dayton with the discontinuance of the New York-Kansas City National Limited.

A 1995 restructuring killed the Broadway Limited, which wiped Akron, Youngstown and Fostoria off the Amtrak map.

They later regained service for a short time when a revived Broadway operating as the Three Rivers ran between Chicago and New York.

Another budget fight took Athens and Chillicothe out of the Amtrak network when the Cincinnati-Washington Shenandoah was discontinued in 1981.

For a short time, that 1981 budget fight kicked Cincinnati out of Amtrak, but thanks to the political clout of the late Senator Robert Byrd of West Virginia, the Cardinal returned to its Chicago-New York flight path in early 1982, albeit as a tri-weekly rather than a daily train.

Given the history of Amtrak funding, it would seem likely that some, if not all, of Amtrak’s long-distance trains will survive due to political wrangling.

What could happen is that the fight becomes one of percentages as in what percentage of the Amtrak long-distance network will survive.

If that is the case, Ohio could be in the middle of the fight when some modifications of the long-distance route network are proposed to consolidate “duplicate” service, e.g., the Lake Shore Limited and Capitol Limited between Chicago and Cleveland.

I could see someone proposing reducing the Capitol Limited to a Pittsburgh-Washington service that connects with a combined Lake Shore Limited and Pennsylvanian between Chicago and New York. That would leave Erie, Pennsylvania, off the Amtrak map.

Already, Amtrak and the Michigan Department of Transportation have proposed rerouting the Lake Shore Limited through Michigan, presumably in lieu of an existing Wolverine Service train.

Someone in Washington in an Amtrak office, a Department of Transportation office and/or a congressional office has probably been studying the Amtrak map with an eye toward finding a way to end federal funding of the Lake Shore Limited by making it into a state train.

Michigan and Pennsylvania already fund the legs into Chicago and New York City respectively. Why not tell Ohio that if it wants service it needs to fund the leg between Detroit and Pittsburgh?

And if Pittsburgh-Washington service is to survive then Pennsylvania, Maryland and West Virginia or a combination of those three states will have to fund what would be left of the Capitol Limited.

Some lawmakers like to talk about offering “options.”  They may or may not know or may or may not care that Ohio is unlikely to agree to fund the middle section of the Lake Shore Limited route.

But if Ohio says “no,” well it was given an option and it voted with its wallet.

Buried in the Trump budget proposal is the rational for sharply reducing funding for programs that benefit public transportation: “Future investments in new transit projects would be funded by the localities that use and benefit from these localized projects.”

Look for some in the coming months or years to begin seeking to apply this philosophy to funding for Amtrak long-distance trains.

It would be part of a larger effort to frame the narrative over passenger train funding as a local issue, not a national one even if the trains in question work to form a national transportation network.

A World Without Coal for America’s Railroads? That Possibility is Still A Ways Down the Tracks

March 13, 2017

Trains Editor Jim Wrinn asked a perceptive question in the March 2017 issue.

On TransportationSpeaking about how railroads are losing unit train loads of revenue because of the decline of coal, Wrinn cited a country western song to pose the question, “how do we live without coal?”

It was a paraphrase from a 1997 song sung by Trisha Yearwood titled How Do I Live.” Wrinn asked the wrong question, though.

A better question comes from the last verse of The Oven Bird, my favorite Robert Frost poem. Is what to make of a diminished thing.

I can understand why Wrinn writes as though coal is about to vanish from the rails.

He has edited numerous articles in recent months about the railroad industry’s loss of coal revenue.

The lead article of the March 2017 issue of Trains observes that coal has been the backbone of railroads since the first loads were hauled in Pennsylvania in the 1840s.

Two survivors in the 21st century descended from coal-heavy railroads and coal kept them prosperous when so many other lines were failing. This includes the Chesapeake & Ohio – the C in CSX – and Norfolk & Western, the first half of the Norfolk Southern name.

In 2008, there were 598 coal-fired power plants in the United States but 212 of them have closed or converted to natural gas. Ninety-four of those closures occurred last year and 41 more are set to burn their last ton of coal this year.

Since 2015, more electricity has been generated by natural gas than by coal. But read the article carefully. There are still 386 power plants burning coal.

The coal used by those plants is not going to be transported from mine to generating plant over the Internet or shifted in large quantities to trucks.

There may be fewer of them, but unit coal trains will continue to polish the rails for the foreseeable future. Coal may be down, but it is not yet out.

Everything I’ve read about railroads and energy markets concludes that although the Trump administration is likely to relax environmental rules pertaining to the use of coal that is unlikely to materially reverse the trend away from using coal to generate electricity.

It is fashionable in some quarters to blame increased environmental regulations for the slide of coal.

There is some truth to that, but there are more economic reasons for the decline of coal as there are regulatory ones and the two are very much intertwined.

I’ve yet to read a single story that has flatly predicted the date when coal will cease to be used as a fuel to generate electricity.

As I read Wrinn’s column I was reminded or an anecdote I read about a family from Corbin, Kentucky, that traveled to Washington to watch Donald J. Trump be inaugurated as the 45th president.

The woman and her husband own a movie theater and times are tough in their hometown. She expressed the hope that Trump will overturn the environmental regulations that she blames for the decline of coal.

In her mind, relaxed environmental regulations will lead to an increase in coal mining which will lead CSX to hire back laid-off workers.

Presumably, that will be good for her theater and the economy of Corbin. If only it comes to pass.

But editor Wrinn is not spinning such scenarios and neither are any of the authors or analysts who have written about coal and the railroads in the past year.

Wrinn is optimistic that railroads will find ways to reinvent themselves because they’ve done it before. They will learn to live without coal, but it will be as a lesser facet of their business not as non-existent part of their franchise.

Coal may be a diminished thing, but it is not – yet — a vanquished thing. Someday it may be gone but we still have a way to go before we get there.

Until then railroads have trying to figure out what to make of a diminished thing that has been so good to them for a long, long time.

Numbers, Numbers. How Much is Hunter Worth?

February 20, 2017

When E. Hunter Harrison retired early from Canadian Pacific, news accounts noted that he left millions of dollars on the table in exchange for a limited waiver of a non-compete clause so he could pursue the CSX CEO job.

As it turned out, Harrison did no such thing.

On TransportationThe hedge fund Mantle Ridge agreed to pay Harrison the money he gave up at CP.

Mantle Ridge in turn wants CSX to reimburse it for the cash it guaranteed Harrison for walking away early from CP.

CSX claims that Harrison is seeking a four-year contract worth $300 million. That $75 million a year would make him not just the highest paid North American Class 1 railroad executive but also place him among the highest-paid CEOs in America.

By comparison, the man Harrison wants to replace, Michael Ward, earned $2.9 million in 2015. Another retired Class 1 CEO, Charles “Wick” Moorman, who agreed to take Amtrak’s top job for $1 a year, although he is also eligible for performance-based bonuses of up to $500,000 a year.

But Mantle Ridge counters that Harrison’s compensation package would actually be worth $200 million of which $120 million are stock options.

Such is life in the rare air of the corporate suite where eye-popping salaries are justified by saying a CEO brings a “unique skill set” to the job.

Executive compensation experts interviewed by Trains magazine said Harrison’s pay demands are at the high end of the scale, but not unreasonable by CEO pay standards.

Once the news broke that Harrison was seeking the top CSX job, the value of CSX stock jumped $10.4 billion, an increase of 30 percent.

Ben Branch, a finance professor at the Isenberg School of Management at the University of Massachusetts, told Trains that CSX stockholders might think Harrison has a “dramatic plan” for improving the company.

“It’s rare,” Branch said. “You don’t have many situations where a CEO almost single-handedly is expected to deliver dramatic improvement.”

Jason Shiel, a managing director of finance firm Cowen and Company, told Railway Age the pay demanded by Harrison is a negotiating point and he is likely to receive less, although not necessarily much less.

Harrison is known for his scheduled precision railroading operating philosophy, which some railroad industry analysts say is similar to what CSX practices now.

Ultimately, some think Harrison’s long game is to engineer a merger that creates North America’s first transcontinental railroad. It is an idea he been peddling for years and failed to pull off last year when he proposed a merger between CP and Norfolk Southern.

For us mere mortals whose primary connection with CSX is watching its trains pass by, all of this talk about eight- and nine-figure executive compensation is nothing more than a parlor game.

The numbers baffle ordinary people who have no chance in their lifetime of ever earning a salary exceeding five figures a year. Most of us can’t fathom how you become a CEO of a Fortune 500 company.

For most CSX employees, having Harrison rather than Ward at the top will make little difference.

They will continue doing what they have been doing even if there may be some changes in how they do it.

Yet it is likely that some may find themselves victims of Harrison’s expected cost cutting.

In the eyes of Harrison and other high-ranking and well-paid railroad executives, labor costs are just another number to be reduced in order to please Wall Street.

How those reductions affect individual CSX employees financially and emotionally won’t be a subject of discussion at the special CSX board meeting. It never is.

All they talk about are numbers and for most of us that is all Harrison’s pay demands are.

Divorcing Amtrak is Hard to Do

February 6, 2017

The great Hoosier State privatization experiment is about to end. It started in July 2015 when Iowa Pacific Holdings began “operating” the quad-weekly Chicago-Indianapolis train.

On TransportationI put the word “operating” in quotation marks because, technically, IP did not “operate” the Hoosier State.

In practice, it was a partnership with Amtrak. IP provided the equipment and marketing support, and was in charge of on-board service.

But the operating crews were Amtrak employees and the nation’s passenger carrier handled the relationships with the host railroads, primarily CSX.

As it turned out, Amtrak has received most of the money paid by INDOT and its partner communities that fund the service.

For a while, Iowa Pacific received many kudos because of what it wasn’t, which is Amtrak.

Under Amtrak auspices, the Hoosier State was a bare-bone operation used to shuttle equipment between Chicago and the Beech Grove Shops in suburban Indianapolis.

By comparison, the IP operation of the Hoosier State was a luxury train, with business class, meals freshly prepared on board, and a full-length dome car for those willing to pay extra fare.

IP head Ed Ellis – who once worked at Amtrak – talked about expanding service and the need to cut the travel time.

He said IP would aggressively market the service, seeking to build markets that Amtrak had ignored.

One marketing gambit IP talked about was running a bus between the Crawfordsville station and Bloomington, the home of Indiana University.

IP correctly recognized the college market is a good source of passengers, but apparently the Bloomington shuttle never got on the road.

Iowa Pacific had a lot of people rooting for it to succeed with the Hoosier State, many of whom believe that a private operator can provide better service than Amtrak.

Some also want to believe that a private operator can make money on passenger service by providing better and more economical service than Amtrak. Ellis and IP apparently believed that, too, but the Hoosier State didn’t yield the expected financial returns for IP.

Ellis always knew the daily service and faster trains he desired hinged upon the willingness of government entities within Indiana to provide the capital funding needed to upgrade the slow meandering route used by the Hoosier State and Amtrak’s tri-weekly Chicago-New York Cardinal.

If IP could demonstrate that the Hoosier State was a success despite its route limitations, then perhaps Indiana officials would be amendable to funding track work in the same manner that the departments of transportation in neighboring Michigan and Illinois have.

But that has always been a long shot. Indiana has never been as supportive of intercity passenger rail as its neighbors.

Amtrak will take back the Hoosier State in Toto on March 1. Although INDOT said it has a verbal agreement that some of IP’s services will be retained, that is not a sure thing.

It remains to be seen if INDOT will seek an operator other than Amtrak and, for that, matter, how much longer the state and on-line communities are willing to pony up money to underwrite the operating losses.

One key take away from the IP Hoosier State experiment is that divorcing Amtrak is more difficult than it might seem.