Nate Kaplan: Through private investment, California freight rails are helping public infrastructure
May 8, 2018
California's surging economy is on track to overtake the United Kingdom as the world's fifth largest, but this rapid growth is also placing added strain on an infrastructure system that is already struggling to keep up. Alleviating this strain will require more than government spending alone.
Fortunately, the freight rail industry, which maintains a strong presence in California and pours millions annually into its state and national network, demonstrates how private infrastructure investment can produce lasting economic and public benefits. This is the message rail advocates and employees took to Sacramento for the annual California Railroad Day at the Capitol last month, hosted by the California Short Line Railroad Association.
The American Society of Civil Engineers estimates that half of California's roads are in poor condition, contributing to a massive backlog of more than $130 billion in infrastructure repair projects. The gas tax revenue generated from the state's infrastructure plan passed in 2017 only covers about one-third of these costs and provides little in terms of more ambitious infrastructure improvements.
Through private investment, the state's freight rails are helping to bridge this infrastructure gap. According to the California Department of Transportation, freight rail is a cost-effective avenue for improving infrastructure and boosting the state's economy, yielding $3 in economic output for every dollar of investment. The Association of American Railroads, which represents major freight railroads, found that the industry's investments, averaging $26 billion annually in recent years, supports more than 1.5 million jobs and generates $33 billion in state and federal tax receipts.
There is also inherent benefit to moving commodities in bulk via rail. As a result, maintaining an efficient rail system can drive businesses to move fewer products by truck, reducing stress and congestion on the state's highways.
Much of this impact is rooted in the Staggers Act in 1980, legislation that partially deregulated the economics of the sector. Specifically, the law allows the industry to behave like most other private actors, determining rates and routes largely in boardrooms, not government halls. Railroads and shippers are equally protected, equipped with a venue to air grievances when necessary.
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Since the enactment of Staggers, the sector has spent more than $635 billion, which has improved safety and efficiency here in northern California and across the nation.
For example, Union Pacific has made a series of tunnel improvements along the Donner route in recent years, allowing double-stacked intermodal trains to pass through the route. This new-and-improved route replaces the Feather River Canyon route, providing a shorter, faster and more efficient connection between the Port of Oakland and the state's 4,800 miles of track.
Investing in more efficient infrastructure that can move more goods faster is vital for California's economy. This is especially true in Northern California, where the prominent agricultural sector produces many of the goods best suited for rail transport. In general, rail transportation is reserved for "hard" products, such as grains, nuts, onions, potatoes and carrots.
But Northern California is not the only region that stands to benefit from more efficient transport of agricultural goods. More than a third of the country's vegetables and two-thirds of the country's fruits and nuts are grown in California, and the Port of Oakland is the state's largest exporter of these products by sea vessel. With the Donner route improving access to this port, the rail industry's investments are creating better connections between global markets and a key sector of the U.S. economy.
As California's policymakers work to keep up with demands of a growing economy, they should follow the freight rail industry's example in supporting private investments that provide a public benefit.
Nate Kaplan is the California State Director for GoRail. He resides in Los Angeles.