Back to Rail

Freight Rail

The freight rail industry’s private investment in their infrastructure has been growing over the last five years. The railroads used the slower traffic period during the recession to make improvements and redesign the freight network to meet future need. In 2015, the Class I freight railroads spent $27.1 billion maintaining, modernizing, and expanding their systems with major track and bridge replacement projects, capacity upgrades, and the deployment of the federally-mandated signaling system, positive train control.

Short lines and regional railroads provide a connection to Class I railroads for lower density traffic and are therefore important to help farmers and businesses move goods. Their investment needs are more difficult to fund from freight receipts and they often rely on state and local funding, as well as tax credits, to provide this important freight service. Currently significant investments need to be made to upgrade track to handle 286,000 pound rail cars, as well as repair and replace aging bridges. In 2013 the Federal Railroad Administration estimated that Class II and III railroads would only be able to invest $1.6 billion out of a needed $6.9 billion over the following five years to maintain, modernize, and expand capacity. Federally, the Railroad Track Maintenance Tax Credit—also known as the 45G Tax Credit—helps short line railroads make capital investments by providing a credit equal to 50% of the cost of qualifying infrastructure projects. The tax credit was authorized in 2004 for five years and has been extended repeatedly.

Through the FAST Act, Congress created a new federally-funded, freight-focused competitive grant program. Fostering Advancements in Shipping And Transportation For The Long-Term Achievement of National Efficiencies (FASTLANE) grants will provide $4.5 billion through 2020 to freight and highway projects of national or regional significance.

Passenger Rail

The U.S. invests a much smaller amount in passenger rail, relative to the size of our population and landmass, than many countries in Europe and Asia. Amtrak covered 94% of its operating costs in 2016 with ticket sales and other revenue, but relies heavily on government funding for capital investment. This is not unusual—no country operates a passenger rail system without some form of public funding.

Despite Amtrak’s growing ridership, with 2016 the sixth straight year in which ridership exceeded 30 million, financial support for capital investments in infrastructure has been insufficient. The NEC, which accounts for the majority of infrastructure Amtrak owns and the majority of its ridership, has a state-of-good-repair backlog of $28 billion. $11 billion is needed to fund basic infrastructure projects while $17 billion is needed for major backlog projects.

Amtrak received a $2.45 billion loan from the U.S. Department of Transportation in fall 2016, primarily for the purchase of 28 new high-speed train sets, but also to make track and station upgrades along the NEC. This loan will allow Amtrak to add capacity and improve service along the NEC, but will not solve the large and growing backlog of capital needs.

Back to Rail