ASLRRA chief makes case for extending short line railroad tax credit
November 03, 2011
With a December 31 deadline looming for a short line railroad track maintenance credit looming, the top executive of the American Short Line & Regional Railroad Association (ASLRRA) pulled no punches in explaining why it needs to be extended.
Speaking at the RailTrends conference in New York presented by Progressive Railroading magazine and independent railroad analyst Tony Hatch, ASLRRA President Richard Timmons said the tax credit has the support of 156 Congressional co-sponsors and 40 of the 87 House freshman, whom Timmons said are “generally skeptical” of tax credits, as well as the support of the United States Chamber of Commerce and the National Association of Manufacturers.
This credit has been in place since 2005 and represents real and immediate infrastructure investment and job creation that preserves transportation and economic development opportunities, according to the ASLRRA.
This credit creates a strong incentive for short line railroads to invest private sector dollars on freight railroad track rehabilitation and improvements and is capped based on a mileage formula, according to the ASLRRA. It added that the credit creates an incentive for short line railroads to invest in track rehabilitation by providing a tax credit of 50 cents for every dollar the railroad spends on track improvements
“With this credit, there are huge potential job creation opportunities and in 99.9 percent of the materials that goes into these projects is American-made,” said Timmons. “There is this ripple effect throughout the economy as we start to improve the infrastructure for rail bridges, right-of-ways, yards and facilities. The small railroads are contracting out all of that work as very few of them have their own maintenance departments. What they are doing [with this credit] is getting large numbers of railroad contractors, railroad material manufacturers and transporters work.”
Timmons said there is a reasonable opportunity to get this credit extended by the end of the year but cautioned there is a lot of work to be done for that to happen.
This tax credit provides myriad benefits for railroad and intermodal shippers and carriers alike.
“The real benefit is accruing to the [shipper],” said Adam Nordstrom a lobbyist for the ASLRRA and a partner in the Washington, D.C.-based law firm Chambers, Conlon & Hartwell, LLC, in a previous interview. “This is not about saving short line railroads; it is about keeping short line railroad customers connected to the national railroad network with adequate and safe rail service.”
There are more than 500 short line railroad carriers in 49 states, which serve as the first and last mile for more than 11,000 rail shippers. And preserving and upgrading short line railroad tracks is critically important to so many economies and communities throughout the U.S.
When freight railroads were deregulated in the U.S. in 1980 through the Staggers Act, there were 200 short line railroads, and today there are more than 550. Deregulation in effect encouraged the creation of short lines, which would have otherwise been abandoned, and short lines were previously owned by Class I railroads whom did not want to operate them anymore, because they were not past of the Class I’s core networks and were not financially viable for them, although they were financially viable for short line operators.
What’s more, abandoned short lines had suffered from decades of deferred maintenance, which supported the point of passing the tax credit to create a way of effectively lowering the costs of infrastructure upgrades so that more infrastructure upgrades could take place and preserve rail lines that would have otherwise been abandoned.
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