The National Academies

NCHRP 08-36/Task 43 [Completed]

Return on Investment on Freight Rail Capacity Improvement
[ NCHRP 08-36 (Research for the AASHTO Standing Committee on Planning) ]

  Project Data
Funds: $50,000
Research Agency: Cambridge Systematics
Principal Investigator: David Hunt
Effective Date: 4/9/2004
Completion Date: 4/30/2005
Comments: Completed---Final report sent to AASHTO

There is a growing perception that inadequate transportation capacity in particular corridors or urban bottlenecks may be having an inordinate impact on regional productivity and, perhaps, national competitiveness. The difficulty some states are experiencing in adding urban freeway capacity in critical freight corridors is leading them to consider the cost effectiveness of additional freight rail capacity as a supplement to highway expansion plans. Concurrently, there is a concern the rail industry has only enough business and profit to operate but not to replenish its capital stock sufficiently to keep up with forecast demand (e.g., modal share), let alone assume a greater burden in relief of the highway system.
In combination these issues have led a variety of transportation interest groups (e.g., AASHTO, AAR, Freight Stakeholders Coalition) to propose a number of ways to increase public investment in freight rail infrastructure. These include: (1) expanded capital resources for rail passenger service improvements, which coincidently could improve rail freight service; (2) legitimizing certain railroad improvements for federal-aid highway funding under CMAQ or an expanded borders and corridors program; (3) increased funding for the Section 130 highway rail grade crossing program; (4) expansion and alteration of the Railroad Rehabilitation and Improvement Financing Program; and (5) allowing railroads to finance infrastructure investment through the issuance of tax-exempt indebtedness.

There are a number of issues Congress will consider in evaluating the need for and the means of increasing public investment in rail freight capacity. The one on which this task is to be focused is how to demonstrate what the public obtains in terms of benefits from its investment in rail capacity improvement(s). Even with a strongly made case that the railroad industry will need strategic public investments in order to perform the economic role required of it, Congress may still require a clear means of demonstrating of how these investments will generate the public benefits for which they were intended.

As envisioned here, there are three basic approaches, which may be more or less appropriate depending on the programmatic source of the federal/state revenue. These are:
  • Benefit/cost or cost effectiveness - This is a traditional methodology adaptable to the program objective (e.g., minimize highway investment, reduce grade crossing accidents and delay, increased passenger service speeds or service levels).
  • Return on investment (ROI) - Standard business analysis a railroad would undertake to internally justify a capital investment.
  • Capital plan - A planned series of improvements, which could be multi-modal or public/private, designed to achieve a set of outcomes (e.g., reduced train delays, greater yard capacity, faster running times). This approach could incorporate aspects of the previous two.

This task is to investigate these and, perhaps, other methods of analyzing public investments in freight rail capacity from the perspectives of (a) different likely revenue sources, (b) practicality, and (c) likely policy implications.

The contractor's final report was sent to AASHTO and is posted at http://onlinepubs.trb.org/onlinepubs/nchrp/docs/NCHRP08-36(43)_FR.pdf

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