Beadles Blog
Volume I, No. 16, August 24, 2009
Public/Private Partnerships-Railroads, Part II
So, why should it be so difficult to achieve a fair and balanced partnership between the public sector and the private freight railroads?
Most public rail initiatives are likely to turn out to be less than ideal because the public sector -- a gross generalization lumping federal, state and regional/local governments together -- has not yet figured out what it wants to achieve. Does high speed rail, whatever that turns out to be in the U.S., trump everything else? Or is commuter rail the thing? Is rail freight simply to be stimulated by occasional public funding grants in an effort to minimally compensate for the unlevel highway-competitive environment in which rail has been forced by public policy to compete -- with only marginal results? Or are we seeking a formula to significantly transform rail freight services, particularly domestic intermodal, such that railroads are able to actually shift a meaningful amount of cargo from our roads to the rails?
We have yet to formulate, in conjunction with the states, a comprehensive national rail strategy and implementation plan; a plan that responds to public needs, while recognizing the rights of the private railroads. If public needs ultimately conflict with and outweigh those of the private rails, then a public taking of private rights should not be ruled out, but that would be the least desirable alternative. Much to be preferred is a fair and balanced public/private partnership. There are many approaches to structuring such arrangements, one of which we shall explore on another occasion, but until the rails understand exactly what the public sector wants, and what the public is willing and able to pay for, the parties will likely continue talking past one another.
Freight rails are tough negotiators. In the privacy of their corporate hearts, they pride themselves on getting the better of their public "partners". Rails generally hold most, but not all, of the high-value cards. Until very recently, they refused to believe that they needed to do business with the public sector. They had learned how to survive in their marginalized zone of limited transportation competitiveness by focusing only on what they could do reasonably well, and profitably. Making the most of limited capital resources, maximizing profitability by obsessively controlling costs, these publicly-traded companies have generally been risk-averse, somewhat less interested in volume growth than in unit-margin growth. This often puts them at odds with public expectations.
The problem for the freight rails is that what worked well for them between 1980 and 2009 may not be a viable strategy in the next three decades. With coal traffic probably peaking out, the chemical and automotive industries facing environmental constraints, and the flows of consumer imports changing significantly, the time is right for both the rails and the public sector to seek common ground. The pending federal reauthorization of the surface transportation bill may present our best opportunity to begin to figure these things out over the next five years. It is imperative that we attempt to do so.
Private rails and the public sector; they really need each other!
(c) copyright 2009 Richard L. Beadles
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