Thursday, September 01, 2011

Serving the nation through public-private partnerships

Written by  Wick Moorman, chief executive, Norfolk Southern
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Serving the nation through public-private partnerships William C. Vantuono

In the coming decades, America faces an infrastructure crisis. Freight volume in the U.S. is projected to grow by 70% by 2020. We are already seeing the first inklings of the crisis. Gridlock chokes many of our cities, and the problem is worsening as freight traffic continues to build and underfunded highways continue to crumble. The costs to society are lost productivity, wasted fuel, polluted urban air, rising highway maintenance costs, impaired highway safety, and lost opportunity. It all adds up to a tremendous drag on an already struggling economy.

The railroads can help the nation avert this crisis. An intermodal train can take 300 trucks off the highways. A 25% shift of freight from trucks to rail in urban areas by 2026 would save every commuter an average of 41 hours and $1,000 in congestion costs annually. Every ton-mile of freight that moves by rail instead of highway reduces greenhouse gas emissions by two-thirds and uses one-fourth the fuel. Increasing rail’s share of freight by just 10% would reduce fuel consumption by a billion gallons a year.

It is estimated that the Class I railroads must invest about $135 billion during the next three decades to meet the infrastructure demand. The railroads themselves are expected to be able generate about $96 billion toward this cause. This would leave a balance of about $39 billion, or $1.4 billion a year, that would have to be made up from public sources, through public-private partnerships or investment tax credits.

Even in the face of powerful political forces to cut government spending, there is still a strong case to be made for partial public funding of railroad infrastructure projects. Given the challenges we face, in fact, the nation cannot afford not to make these investments. Public-private partnerships are an effective way to fund railroad capacity projects that benefit both the railroad and the public, but which neither party would be able to support on their own.

Today, every Class I has a public-private partnership story to tell, but Norfolk Southern has taken an industry-leading, proactive approach. Every partnership is different, tailored to the needs and resources of the projects and the stakeholders involved. Here are some examples, already familiar to most Railway Age readers, that demonstrate the varied forms these partnerships can take:

The Heartland Corridor. Most of this project involved raising tunnel and overhead obstruction clearances between Roanoke, Va., and Columbus, Ohio, to allow doublestack trains to travel a more direct route from the Port of Virginia to Chicago and to provide stack service to markets in West Virginia and the Columbus region. Work began in October 2007 and was completed in September 2010. Including a new intermodal terminal in Columbus and the relocation of the Commonwealth Railway serving Portsmouth, Va., this was a $321 million project, of which Norfolk Southern contributed $140 million. The rest came from federal and state sources. Often pointed to as a model public-private partnership, it was years in the making. In fact, putting the partnership together and securing the funding took at least twice as long as the physical work itself.

The Crescent Corridor. Building on the experience gained in putting the Heartland Corridor partnership together, in 2007 Norfolk Southern launched this multiyear, $2.5 billion effort to increase intermodal capacity in a corridor stretching from the Gulf Coast to New York/New Jersey, with a branch to our Memphis gateway. This corridor has tremendous potential for diverting freight from highway to rail, but achieving that potential will require passing sidings to be added or lengthened, sections to be double-tracked, signal systems to be upgraded, and terminals to be built or expanded. How quickly this happens—that is, how successful we are in heading off the infrastructure crisis—depends on large part on the availability of funding. Norfolk Southern will certainly pay for its share, but again, for the reasons noted above, it is in our nation’s and the public’s interest to help fund these improvements.

And the public has begun to step up to the plate. The Commonwealth of Virginia provided funding for rail infrastructure improvements in the corridor’s most critical choke point in northern Virginia. Federal funds, through TIGER grants, have enabled us to begin construction of new intermodal terminals in Tennessee and Alabama. Pennsylvania provided substantial funding to assist in the construction of multiple terminals. These public funds became available because far-sighted public servants recognized the long-term benefits to the economy—not only in heading off the infrastructure crisis, but in stimulating economic development in the areas served by these projects.

CREATE (Chicago Region Environmental and Transportation Efficiency Program). Chicago is the busiest U.S. rail gateway. Each day, 1,200 trains pass through the region, resulting in rail shipping delays, traffic jams, and commuter delays. Demand for freight rail service in Chicago is expected to double in 20 years. CREATE is a partnership of local, state, and federal government agencies and passenger and freight railroads. Its purpose is to reduce local traffic delays and congestion by building overpasses and underpasses where heavy auto and pedestrian traffic currently crosses tracks, and to separate freight and passenger tracks. The benefits include reducing emissions from vehicles and locomotives, reducing noise from idling and slow-moving trains, decreasing shipping times, boosting the competitiveness of manufacturers and businesses, and saving shippers $40 million yearly in inventory costs. The estimated cost is $1.5 billion. In the first phase, $100 million in public funding and another $100 million in railroading funding—including all of the Class I’s—have been secured.

The need to invest in our nation’s ability to move freight cannot be legislated away. The pressure to cut public spending will be intense for years to come, and rightly so, but the stresses on our infrastructure will be no less relentless—no matter which way the political winds blow. Wise public servants will recognize that infrastructure spending deferred today will magnify government budget deficits tomorrow, and the costs to rebuild these transportation assets in the future will be many times the cost of finding the funds to invest in them today.

For decades, private-sector railroads have eschewed public funding. However, given the size and complexity of the infrastructure challenges that face the nation—and the public benefits associated with these projects—the industry’s position is changing.

As more of these partnerships come together and their benefits are realized, it will become easier to find and support such projects, to craft the proper balance needed to succeed, and to protect both the public and private interests while advancing the common interest.

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