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Wrong Type Of Help

I loath government intervention into the private sector, but I also don't
want to see passenger rail service vanish. Actually, if we go back into
history and examine government policy toward transportation, I think much
of today's sorry state of passenger rail is in great part due to past and
present government intervention.

Steve Grande

But isn't it also true that the railroads' most valuable asset, land, was
in large part a gift from the people of the United States?  It was
literally an act of Congress (albeit a poorly drafted one) that facilitated
the building of America's first transcontinental railroad.  How much
financing of railroad capital projects has been done by government issued
or guaranteed securities?  For example, what is the value in today's money
of the government's contribution to the Northeast Corridor Electrification
project?  (This isn't a rhetorical question, I'd really like to know.)  If
government is to stay out of the railroad business, then let's make sure
it's a bilateral proposition, including taxable securities, privately
financed and insured and compensation to the taxpayer for past favors
received.  I wonder what the bill for the real estate alone would come to.

I'm sending this privately because I don't want to provoke a flame war on
one of the net's most civilized lists.  You are certainly welcome to quote
me in whole or in part (in context) and use my name and address.  I claim
no particular expertise on this subject; I just don't want the debate about
government intervention in railroads seem like railroads get nothing but
grief from the government:  They've also gotten their share at the public
trough and then some.  Sure, they pay taxes but who doesn't?



First, let me thank you for allowing me to quote you in context.
I am going to post your feedback to
instead of a newsgroup for the same reasons that you mention.
I read very little from the newsgroups because they do end up
in a flame war where each side gets their backs up. I don't view
my job to be to present op-ed articles. My site is definitely pro-rail.
Others can put up their own web pages to present the other side
of the story. If I am persuaded by counter-arguments, then I will
certainly incorporate that into my own views and postings. But,
I find web sites that promote a particular point of view with
supporting arguments to be a more pleasant and productive
method of distributing information and opinions than through a
flame war in newsgroups or list-servers.

I do agree that the railroads received a lot of government aid
in their early days. However, I don't think that runs counter to
my arguments that government intervention has been a "harm"
rather than a "good". I'd rather the government had not helped
the railroads the way they did in the nineteenth century if that
could go hand in hand with the government not helping the
highways and airways in the twentieth century.

If you read my section on "Reverse History", I think all of it
would still hold true if the government had granted trucking
companies land, payments and bonds to build the highways.
Even with all that government "help", the system of
interstate highways would be in as sad a shape today as are
the railways.  Though what the government granted the
railways was of great value to the railroad companies, it was
of little value to encouraging the creation of a national railway
system that would meet the present and future requirements
of the nation. In contrast, the way the government helped
the highway construction industry resulted in an interstate
system of roads that went a long way of satisfying the needs
of the public and even encourage the growth of that desire
for more highways.

I would agree that the railroads do owe something to the
public. When the railroads were built and the government
gave them the land, payments and issued bonds, it was
seen that the railroads would be providing a means of
transporting both freight and people. When Amtrak was
created, the obligation of the railroads to take responsibility
to transport people was removed from their shoulders.
In exchange, however, they were obligated to provide
passenger equipment to Amtrak (which most railroads had
let deteriorate so much that it was of little use to Amtrak
and had to be replaced at public expense) and were also
obligate to allow Amtrak to use their railways at a
negotiated fee.

I believe the railroads have an obligation to provide the
railways to Amtrak at a rate well below the going "market
rate".  All the government aid that was given to the
railroads was done with the assumption that the private
railroad companies would be providing useful and
affordable rail transportation. Now that the government
has relieved the railroads of this obligation, I don't see
any problem with the government continuing to demand
that the private railroads provide use of the rails at a
rate that will allow Amtrak to continue to provide these
services for fares that are realistic.

On the other hand, even if this is fair, I can see the
railroads continuing to remain hostile toward Amtrak and
using their political and financial clout to try to kill
passenger rail in congress.  The only way out of this
is to change the entire model of rail transportation.
That is why I have proposed trying to put rail at parity
with other transportation modes by having the government
responsible for financing, building, maintaining and
operating the interstate rail network while the railroads
continue to maintain control over actual marketing and
movement of freight over the railways, just as it is with
highways, airways and waterways. I further propose that
with this model we can even return the operation of
passenger rail services back to multiple private companies
with those companies able to operate at a profit.

The tax issue is a complex one which I haven't fully
researched. I do know that the railroads pay taxes on
almost all of their facilities while airports and highways,
being owned by various levels of government, are
exempt from taxes. One of the things that always made
me very angry which I didn't understand until recently,
is why freight railroads rapidly rip up track when a line
is discontinued and often even try to sell the land to
adjacent land owners! Once the rails have been
ripped up and the land sold, it is impossible to ever
re-open that rail line! An irreplaceable transportation
resource is lost every time this is done. I couldn't
understand why the destruction of a rail line was so
important when a railroad decided to close it. Why
couldn't they just hang onto it so that it would be easy
to re-establish in the future if they ever decided it was

The answer is in taxes. As long as the rails remain
and the property belongs to the rail company, it is
considered an "asset" and taxes must be paid on
it, including property taxes on the land. If the rails
are removed, then that segment of railway is no
longer an asset and can't be written off the books
immediately as a tax deductible loss. Further, the
sale of the land removes the property taxes that
the railroad needs to pay on the land. The closing
of a rail line can involve hundreds of miles of land
which might be thousands of square miles of
acreage. That is a lot of property tax to save! Thus,
you will often see a railroad begin to rip up tracks
and sell off land immediately after the closure of a
branch, hardly giving an civic group time to block
the loss of such a unique corridor.  I think we
definitely need some legislation that allows a
railroad to eliminate all taxes on a line that is
closed so that we don't see this immediate push
for such destruction.

Steve Grande

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