Saving Norfolk Southern
Last week Norfolk Southern announced that its second-quarter profits of $424 million were nearly twice that of the same quarter a year ago. And its coal revenues were up 36 percent over last year. Clearly the company is doing just fine. "We met and exceeded expectations, even our own," Chairman David Goode told analysts, according to a Roanoke Times story.
A few days later, reports the Virginian-Pilot, Congress passes a massive transportation bill that includes $90 million "to modify tunnels and make other changes to rail routes in Virginia, West Virginia and Ohio, so that Norfolk Southern Corp. would be able to increase the number of double-stack container trains it runs from Hampton Roads to the Midwest." Maybe Norfolk Southern could have funded this work itself, you think?
As far as what other transit or rail funding Virginia will get, it's apparently hard to figure. Gov. Mark Warner's transportation advisor, Mary Lynn Tischer, "aid she had not been able to determine how much transit and rail money would flow to Virginia under the bill."
posted by Anonymous @ 8:18 AM
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2 Comments:
The main beneficiary of the $90 million project to upgrade Norfolk Southern's rail lines from Norfolk is Virginia ports. As I understand it, NS is largely agnostic about which freight routes it uses to ship containers from East Coast ports to the Midwest. Baltimore, Philadelphia, Norfolk, whatever... the railroad doesn't care that much, as long as shippers pay the freight. Baltimore and Philadelphia enjoy a modest advantage over Norfolk due to geography -- those cities are both closer to Midwest markets. Improving rail between Norfolk and the Midwest allows NS to run double-stack trains, which shifts the competitive edge back to Norfolk.
As long as NS could serve shippers through Baltimore and Philly, it really didn't have an incentive to invest $90 million in those double-stacker improvements out of Norfolk... especially with Philly aggressively expanding and upgrading its port facilities.
Thus, the most direct beneficiary of the project is the port of Hampton Roads. Other beneficiaries are the drivers who compete with truck traffic for scarce bridge-tunnel capacity across the James River/Chesapeake Bay. It would be interesting to know how many tractor-trailers we end up taking off our Interstates as a result of these improvements.
Does the project make sense as a congestion-mitigation strategy? I don't know because I haven't seen the numbers. Sure, the project is good, old-fashioned pork barrel. But unlike a lot of pork barrel, it is not without its merits as a public investment.
The state may have to kick in some bucks, as well. I doubt $90 million will cover the total bill. But there is every reason to believe that double stacking to points west will relieve congestion, especially close in to the ports in the Hampton Roads area, and create further incentives to use those ports. And I don't understand the antipathy toward using transporation tax and fee dollars (that's what we are talking about here) on this project. One of the failures of the federal bill may turn out to be too few rail projects.
I too am very interested in seeing the details about how Virginia fared in this. Much hoopla is being made with the earmarks, of course, but they are largely froth. The meat is in the big distrubiton formulas. It looks like another $200 million plus a year in the meat and potatos highways programs. Our guaranteed return goes from the current 90.5 cents on the dollar on federal taxes paid up to a whopping 92 cents by FY 2008. That status as a "donor state" is where the rip off meets the road. Many states are in the higher 90s and about half run over 100 percent return.
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