Follow the link below to the Worcester Telegram article.
http://www.telegram.com/article/20100217/NEWS/100219774/1116
Friday, February 19, 2010
Tuesday, February 16, 2010
Congressional Vote on Railroad Re-regulation will have impact on Massachusetts Freight Transportation System
By: Frank S. DeMasi
Because national and regional freight traffic is expected to double in Massachusetts over the next 20 years, the annual net benefits (including logistics and social benefits) of freight transported by rail will increase proportionately only if railroads maintain their market share. The actual growth in rail transportation depends on investment in the national rail system and ability of railroads to grow in a competitive transportation market. For this reason it is important for the Massachusetts congressional delegation to support legislation coming before the congress to enhance rail investment to meet this needed future growth.
A bill proposed in Congress (S not yet assigned/HR 1806) would provide an investment tax incentive for railroads and other businesses to put their own dollars to work expanding the system. Infrastructure tax incentives are needed to modernize and expand the rail network, preparing railroads and businesses to meet the nation’s needs, including new tracks, tunnels, bridges, and intermodal facilities. Every $1 invested would generate $3 of economic output. It is estimated that the total $1 billion of economic output from this incentive would create 20,000 jobs. I urge you to support this bill. The balanced regulatory framework established in 1981 that created the Surface Transportation Board has enabled our freight railroads to invest approximately 30% of every revenue dollar back into their own systems. We need the congress to support continued balanced regulation over this vital industry so railroads can continue to invest in their expansion and provide us with freight movement choices that keep our shipping costs low and make the most efficient use possible of our fuel reserves while protecting our environment.
Twelve privately owned railroads operate in Massachusetts including (2) Class I, (2) regional, (8) short lines, AMTRAK and the MBTA. Railroads also bring employment to our state, not only in terms of the residents they employ but also businesses they attract and retain. These railroads operate over 1,175 route miles in Massachusetts, transporting approximately 38 million commuters, 2 million intercity passengers, and 500,000 rail carloads carrying about 20 million tons of freight. Yet trucks dominate the modal balance carrying over 94% by tons of all freight in the Commonwealth. While rail carries a relatively small portion of freight traffic in Massachusetts, rail is an important component of a balanced, competitive transportation network. The benefits of freight rail are: (1) reduced logistics costs in the range of $250 million per year for businesses and municipalities that use rail; and, (2) reduced social costs in the range of $60 million per year for Massachusetts citizens and taxpayers. These social benefits accrue to the public because rail transportation reduces the number of trucks on Massachusetts highways, reflecting avoided costs for pavement maintenance, congestion, air quality, and safety.
Over 40 % of rail ROW in Massachusetts is owned by the state and much of this network is shared with freight, MBTA commuter, and AMTRAK passenger trains. The state’s acquisition of CSX ROW in Eastern Massachusetts and its current extensive ownership of former B&M/Pan AM Railway ROW will not only offer opportunities for improvement and expansion of commuter rail but may also open the door to modernizing and expanding the use of Freight Short lines over state owned ROW. Third party Short Line operators can provide terminal and switching services over these lines far more economically than class I railroads, making local distribution of rail freight a viable alternative to long truck drays from large Class I rail Terminals far outside metropolitan areas of highest consumption. Short Line railroads operating in Massachusetts handled 123,000 railcars, removing an estimated 353,000 trucks off our most congested and stressed roads and bridges, avoiding an estimated $15,000,000 in pavement damage. In 2007 these private rail companies also paid $538,000 in local and state taxes, and employed 293 persons in Massachusetts. In 2004 (most recent year of short line data) Massachusetts short line railroads in total spent $16,883,238 on Capital and Maintenance expenditures to provide reliable service to over 100 in-state customers. Short line railroad marketing efforts in Massachusetts in 2004 resulted in bringing on line 11 new facilities and creating 268 new jobs in the Commonwealth. Short lines operate over 65% (822 miles) of state owned rail mileage, providing cost efficient movement of freight necessary to retain and further develop our industrial base and goods distribution network. Their safety record is one of the best in the nation.
Together, Class I and Short Line benefits to Massachusetts businesses, municipalities, residents and taxpayers amount to approximately $310 million each year. Freight rail also enhances economic development on a local basis, brings competition to the shipping market, provides options and redundancy within the freight system and enhances Massachusetts' overall competitiveness with regard to international trade. Green businesses such as wind and solar, require large, heavy and often unwieldy products to be shipped such as wind turbine blades that can be moved efficiently on rail. A modern Multimodal Transportation System including a viable freight rail element is necessary to attract alternative energy businesses, providing employment opportunities to position our state well for the business model of the future.
About: Frank S. DeMasi
Frank DeMasi is a retired (2002) Defense Contracts Management Agency (DoD) Logistics and Acquisition Specialist. He is a Wellesley Town Meeting Member, formerly an elected Wellesley Planning Board Member (3 yrs) and now represents Wellesley at the MBTA Advisory Board, Boston MPO - Regional Transportation Advisory Council, and Metropolitan Area Planning Council. He strongly believes that in addition to highway and transit we must expand our freight options in order to help our state’s economy rebound from the current recession. DeMasi has been invited by Go21 members to meet with the Massachusetts congressional delegation in Washington on 25 February to bring Massachusetts delegates up to date on railroad issues and transportation legislation.
(Go21 - “Growth Options for the 21st Century” is a national organization chartered to “Unite citizens support of a stronger economy, effective solutions to highway congestion, cleaner environment, improved quality of life, advocating increased rail freight transportation alternatives to reliance on an overcrowded highway system.”)
The statistics presented are found at the FHWA Web Site and a Massachusetts EOT internal report titled Massachusetts Rail Trends and Opportunities, July 2007.
Because national and regional freight traffic is expected to double in Massachusetts over the next 20 years, the annual net benefits (including logistics and social benefits) of freight transported by rail will increase proportionately only if railroads maintain their market share. The actual growth in rail transportation depends on investment in the national rail system and ability of railroads to grow in a competitive transportation market. For this reason it is important for the Massachusetts congressional delegation to support legislation coming before the congress to enhance rail investment to meet this needed future growth.
A bill proposed in Congress (S not yet assigned/HR 1806) would provide an investment tax incentive for railroads and other businesses to put their own dollars to work expanding the system. Infrastructure tax incentives are needed to modernize and expand the rail network, preparing railroads and businesses to meet the nation’s needs, including new tracks, tunnels, bridges, and intermodal facilities. Every $1 invested would generate $3 of economic output. It is estimated that the total $1 billion of economic output from this incentive would create 20,000 jobs. I urge you to support this bill. The balanced regulatory framework established in 1981 that created the Surface Transportation Board has enabled our freight railroads to invest approximately 30% of every revenue dollar back into their own systems. We need the congress to support continued balanced regulation over this vital industry so railroads can continue to invest in their expansion and provide us with freight movement choices that keep our shipping costs low and make the most efficient use possible of our fuel reserves while protecting our environment.
Twelve privately owned railroads operate in Massachusetts including (2) Class I, (2) regional, (8) short lines, AMTRAK and the MBTA. Railroads also bring employment to our state, not only in terms of the residents they employ but also businesses they attract and retain. These railroads operate over 1,175 route miles in Massachusetts, transporting approximately 38 million commuters, 2 million intercity passengers, and 500,000 rail carloads carrying about 20 million tons of freight. Yet trucks dominate the modal balance carrying over 94% by tons of all freight in the Commonwealth. While rail carries a relatively small portion of freight traffic in Massachusetts, rail is an important component of a balanced, competitive transportation network. The benefits of freight rail are: (1) reduced logistics costs in the range of $250 million per year for businesses and municipalities that use rail; and, (2) reduced social costs in the range of $60 million per year for Massachusetts citizens and taxpayers. These social benefits accrue to the public because rail transportation reduces the number of trucks on Massachusetts highways, reflecting avoided costs for pavement maintenance, congestion, air quality, and safety.
Over 40 % of rail ROW in Massachusetts is owned by the state and much of this network is shared with freight, MBTA commuter, and AMTRAK passenger trains. The state’s acquisition of CSX ROW in Eastern Massachusetts and its current extensive ownership of former B&M/Pan AM Railway ROW will not only offer opportunities for improvement and expansion of commuter rail but may also open the door to modernizing and expanding the use of Freight Short lines over state owned ROW. Third party Short Line operators can provide terminal and switching services over these lines far more economically than class I railroads, making local distribution of rail freight a viable alternative to long truck drays from large Class I rail Terminals far outside metropolitan areas of highest consumption. Short Line railroads operating in Massachusetts handled 123,000 railcars, removing an estimated 353,000 trucks off our most congested and stressed roads and bridges, avoiding an estimated $15,000,000 in pavement damage. In 2007 these private rail companies also paid $538,000 in local and state taxes, and employed 293 persons in Massachusetts. In 2004 (most recent year of short line data) Massachusetts short line railroads in total spent $16,883,238 on Capital and Maintenance expenditures to provide reliable service to over 100 in-state customers. Short line railroad marketing efforts in Massachusetts in 2004 resulted in bringing on line 11 new facilities and creating 268 new jobs in the Commonwealth. Short lines operate over 65% (822 miles) of state owned rail mileage, providing cost efficient movement of freight necessary to retain and further develop our industrial base and goods distribution network. Their safety record is one of the best in the nation.
Together, Class I and Short Line benefits to Massachusetts businesses, municipalities, residents and taxpayers amount to approximately $310 million each year. Freight rail also enhances economic development on a local basis, brings competition to the shipping market, provides options and redundancy within the freight system and enhances Massachusetts' overall competitiveness with regard to international trade. Green businesses such as wind and solar, require large, heavy and often unwieldy products to be shipped such as wind turbine blades that can be moved efficiently on rail. A modern Multimodal Transportation System including a viable freight rail element is necessary to attract alternative energy businesses, providing employment opportunities to position our state well for the business model of the future.
About: Frank S. DeMasi
Frank DeMasi is a retired (2002) Defense Contracts Management Agency (DoD) Logistics and Acquisition Specialist. He is a Wellesley Town Meeting Member, formerly an elected Wellesley Planning Board Member (3 yrs) and now represents Wellesley at the MBTA Advisory Board, Boston MPO - Regional Transportation Advisory Council, and Metropolitan Area Planning Council. He strongly believes that in addition to highway and transit we must expand our freight options in order to help our state’s economy rebound from the current recession. DeMasi has been invited by Go21 members to meet with the Massachusetts congressional delegation in Washington on 25 February to bring Massachusetts delegates up to date on railroad issues and transportation legislation.
(Go21 - “Growth Options for the 21st Century” is a national organization chartered to “Unite citizens support of a stronger economy, effective solutions to highway congestion, cleaner environment, improved quality of life, advocating increased rail freight transportation alternatives to reliance on an overcrowded highway system.”)
The statistics presented are found at the FHWA Web Site and a Massachusetts EOT internal report titled Massachusetts Rail Trends and Opportunities, July 2007.
Friday, February 5, 2010
An Open Letter to Warren Buffett
By: Michael Sussman, President & Founder, OnTrackAmerica, Inc.
Mr. Buffet, congratulations on your purchase of the BNSF Railway. It is a significant and welcome investment in North America’s rail transportation system. It also provides a timely opening to address a systemic, long-standing problem—the incongruence between our investment of capital, energy, and land for freight and passenger transportation and the inherent value of railroads to any well-functioning modern society.
Only by understanding this shortcoming and seizing the opportunity to transform its causes can we bring North America out of its economic malaise and environmental jeopardy. If we act wisely, your acquisition will become a watershed moment.
But first we must evolve beyond moving money simply to where the investor receives the highest return on investment, and adopt a new principle—moving capital into an industry, system, or region in a way that maximizes the benefit of that capital to that system. Out of that shared benefit, the investor receives their return.
Just a few more words, but they make all the difference in the depth of thinking, the sustainability of the system, and the long-term profitability of serving that market.
Even while new capital enters the rail industry, our network of freight lines is shrinking. Much like with the deforestation of the Amazon rainforest, rational justifications abound for this depletion of resources. Every year, the U.S. abandons enough rail lines to stretch from Boston, MA, to Richmond, VA. Since 1990, 20% of our system has vanished.
Branch line segments are deemed “uneconomic” after years of downward pressure from too narrow an economic lens and an incomplete policy perspective. The wider view of the larger system and the longer term is missing.
Your own reflections about the BNSF purchase have been well publicized. Your commitment to the country, to the environment, and to the shareholders of BNSF and Berkshire Hathaway has come shining through. One remark, however, while completely understandable for its business logic, speaks to what is driving investment capital toward a diminished contribution to society. The New York Times quoted you as saying, “From my standpoint, it’s a lot easier to make one $32 billion investment than ten $3 billion investments.”
Yes, it is easier to move capital in larger quantities, but the world’s small and midsized businesses and communities need access to capital (and access to railroads) if we are going to sustain the systems that warrant the larger transactions. Unfortunately, in the everyday world of business and finance, it is still said that “it takes as much effort to do a small deal as it does to do a large deal, so why do the small ones?” While there are many facets to the decrease in urban and rural freight and passenger rail systems over the last century, this maxim is one of the least examined. The resulting gap in capital and attention is a primary contributor to our continuing abandonment of rail lines, leaving more and more cities, towns, and rural populations with a major challenge to revitalization, congestion relief, and job creation.
Much of the energy within the logistics industry and major railroads is directed toward the consolidation of freight between major terminals along high-volume corridors. While this contributes to transportation efficiency, it nonetheless fosters a devastating increase in regional truck traffic where we can least afford it—on the local roads and highways of small towns and large metropolitan regions across the continent that are increasingly suffering from congestion and air pollution.
Pennsylvania, my state, has become a hotbed of warehousing and distribution facilities built, alarmingly, not only “truck out” to cover the Baltimore-to-Boston market, but also “truck in.” Consequently, more and more goods carried long-haul by the railroads are unloaded in large intermodal terminals in small towns, instead of being delivered directly via branch line railroads.
Just last week, in your home state of Nebraska, two articles in The Chadron Record showcased yet another version of this problem. One described a bulk loading facility for grain being built to consolidate shipments from small-town elevators around the region. Volume pricing is designed to redirect the grain movements from existing rail lines onto trucks traveling on local roads. The second article relates county residents’ complaints about deplorable road and bridge conditions causing serious vehicle breakdowns, with the county out of funding for gravel and road repair. $14.5 million for the new grain facility is being provided by federal stimulus funding, while the county’s budget struggles deepen. This can’t be what the American public expects from its tax dollars.
We are facing a systemwide drive toward consolidation fueled by the largest logistics and transportation providers—as well as by the financial community—which all thrive on bigger transactions. As a result, many more branch lines are about to be pushed into abandonment, even while state and local governments spend millions in futile attempts to preserve them. This is not a healthy prescription for America’s long-term economic vitality.
As C.K. Prahalad documents in Fortune at the Bottom of the Pyramid, those companies around the world that serve the large market of smaller individual customers contribute to thriving communities and enjoy significant profits. Intermodal and unit train movements of high-volume freight can serve the continent well if parallel attention is dedicated to local, carload, short-haul, and direct rail service to small and large shippers alike.
Mr. Buffet, we invite you to study our work at OnTrackAmerica and to collaborate with us toward building a more profitable rail system that supports the best interests of the continent by serving businesses of all sizes and as many communities as possible.
About Michael Sussman and OnTrackAmerica
OnTrackAmerica, a 501c3 nonprofit transportation consultancy, is founded on fifteen years of research and dialogue with stakeholders throughout industry, government, and academia. We have promoted a bold, yet pragmatic vision for advancing transportation efficiency through thousands of individual conversations and numerous multi-stakeholder summits. During this time, founder Michael Sussman through his company Strategic Rail Finance has coordinated financing in 23 states, particularly for branch railroads that previously suffered from underinvestment. Mr. Sussman's commitment to maximizing the transportation industry's contribution to economic vitality and livable communities has led to the creation of OnTrackAmerica. Visit www.ontrackamerica.org for more information.
Mr. Buffet, congratulations on your purchase of the BNSF Railway. It is a significant and welcome investment in North America’s rail transportation system. It also provides a timely opening to address a systemic, long-standing problem—the incongruence between our investment of capital, energy, and land for freight and passenger transportation and the inherent value of railroads to any well-functioning modern society.
Only by understanding this shortcoming and seizing the opportunity to transform its causes can we bring North America out of its economic malaise and environmental jeopardy. If we act wisely, your acquisition will become a watershed moment.
But first we must evolve beyond moving money simply to where the investor receives the highest return on investment, and adopt a new principle—moving capital into an industry, system, or region in a way that maximizes the benefit of that capital to that system. Out of that shared benefit, the investor receives their return.
Just a few more words, but they make all the difference in the depth of thinking, the sustainability of the system, and the long-term profitability of serving that market.
Even while new capital enters the rail industry, our network of freight lines is shrinking. Much like with the deforestation of the Amazon rainforest, rational justifications abound for this depletion of resources. Every year, the U.S. abandons enough rail lines to stretch from Boston, MA, to Richmond, VA. Since 1990, 20% of our system has vanished.
Branch line segments are deemed “uneconomic” after years of downward pressure from too narrow an economic lens and an incomplete policy perspective. The wider view of the larger system and the longer term is missing.
Your own reflections about the BNSF purchase have been well publicized. Your commitment to the country, to the environment, and to the shareholders of BNSF and Berkshire Hathaway has come shining through. One remark, however, while completely understandable for its business logic, speaks to what is driving investment capital toward a diminished contribution to society. The New York Times quoted you as saying, “From my standpoint, it’s a lot easier to make one $32 billion investment than ten $3 billion investments.”
Yes, it is easier to move capital in larger quantities, but the world’s small and midsized businesses and communities need access to capital (and access to railroads) if we are going to sustain the systems that warrant the larger transactions. Unfortunately, in the everyday world of business and finance, it is still said that “it takes as much effort to do a small deal as it does to do a large deal, so why do the small ones?” While there are many facets to the decrease in urban and rural freight and passenger rail systems over the last century, this maxim is one of the least examined. The resulting gap in capital and attention is a primary contributor to our continuing abandonment of rail lines, leaving more and more cities, towns, and rural populations with a major challenge to revitalization, congestion relief, and job creation.
Much of the energy within the logistics industry and major railroads is directed toward the consolidation of freight between major terminals along high-volume corridors. While this contributes to transportation efficiency, it nonetheless fosters a devastating increase in regional truck traffic where we can least afford it—on the local roads and highways of small towns and large metropolitan regions across the continent that are increasingly suffering from congestion and air pollution.
Pennsylvania, my state, has become a hotbed of warehousing and distribution facilities built, alarmingly, not only “truck out” to cover the Baltimore-to-Boston market, but also “truck in.” Consequently, more and more goods carried long-haul by the railroads are unloaded in large intermodal terminals in small towns, instead of being delivered directly via branch line railroads.
Just last week, in your home state of Nebraska, two articles in The Chadron Record showcased yet another version of this problem. One described a bulk loading facility for grain being built to consolidate shipments from small-town elevators around the region. Volume pricing is designed to redirect the grain movements from existing rail lines onto trucks traveling on local roads. The second article relates county residents’ complaints about deplorable road and bridge conditions causing serious vehicle breakdowns, with the county out of funding for gravel and road repair. $14.5 million for the new grain facility is being provided by federal stimulus funding, while the county’s budget struggles deepen. This can’t be what the American public expects from its tax dollars.
We are facing a systemwide drive toward consolidation fueled by the largest logistics and transportation providers—as well as by the financial community—which all thrive on bigger transactions. As a result, many more branch lines are about to be pushed into abandonment, even while state and local governments spend millions in futile attempts to preserve them. This is not a healthy prescription for America’s long-term economic vitality.
As C.K. Prahalad documents in Fortune at the Bottom of the Pyramid, those companies around the world that serve the large market of smaller individual customers contribute to thriving communities and enjoy significant profits. Intermodal and unit train movements of high-volume freight can serve the continent well if parallel attention is dedicated to local, carload, short-haul, and direct rail service to small and large shippers alike.
Mr. Buffet, we invite you to study our work at OnTrackAmerica and to collaborate with us toward building a more profitable rail system that supports the best interests of the continent by serving businesses of all sizes and as many communities as possible.
About Michael Sussman and OnTrackAmerica
OnTrackAmerica, a 501c3 nonprofit transportation consultancy, is founded on fifteen years of research and dialogue with stakeholders throughout industry, government, and academia. We have promoted a bold, yet pragmatic vision for advancing transportation efficiency through thousands of individual conversations and numerous multi-stakeholder summits. During this time, founder Michael Sussman through his company Strategic Rail Finance has coordinated financing in 23 states, particularly for branch railroads that previously suffered from underinvestment. Mr. Sussman's commitment to maximizing the transportation industry's contribution to economic vitality and livable communities has led to the creation of OnTrackAmerica. Visit www.ontrackamerica.org for more information.
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