WATCHING WASHINGTON, RAILWAY AGE DECEMBER 2019 ISSUE: Kermit the Frog won our hearts singing “lovers, the dreamers and me,” while Thomas the Tank Engine’s “yes we can” encouraged us and Barack Obama’s “Audacity of Hope” inspired us. These words also describe small-railroad entrepreneurs providing the first and last mile for one of every five carloads.
Unlike the seven major railroads with which they partner, many smaller railroads—579 short lines; 24 regionals—are but a washout, derailment or customer defection away from financial calamity. Plus, like their major-railroad connections, they stand in harm’s way of reinvigorated economic regulation; further liberalization of truck size and weight limitations; uncertainty as to trade and tax public policy; and government-mandated minimum train crew size lacking an evidence-based nexus to safety.
With small-railroad track traversing 49 of 50 states and 350 of 435 congressional districts, a unified message is an essential rampart against such harm. Performing the coordination, which extends to relationships with federal regulators and state agencies, is the American Short Line and Regional Railroad Association (ASLRRA), whose leadership performs a multi-tasked selling job demanding more than what playwright Arthur Miller (“Death of a Salesman”) described as “riding on a smile and a shoeshine.”
ASLRRA President Charles H. (Chuck) Baker, age 41, surely has an infectious smile, and probably a shoeshine, but his February 2019 selection to lead the nation’s small railroads is owed to gilded credentials—policy studies at Rice University; mergers and acquisitions analysis at Deutsche Bank; and as a partner at the Chambers, Conlon & Hartwell lobbying shop representing the National Railroad Construction and Maintenance Association, OneRail Coalition, American Railway Development Association, CN and Norfolk Southern.
Less than a year into the ASLRRA top job, Baker already is credited with demonstrating exceptional deftness in aligning interests of his small-railroad members with those of the majors represented by the Association of American Railroads.
For many short lines, especially some 250 independent—and often family owned—railroads not under a holding company financial umbrella, every external economic threat menaces their ability to remain an essential carload collection and distribution partner.
Atop those financial hazards is loss of an investment tax credit, known as 45G for its provision in the federal tax code. Since its 2005 inception, 45G has stimulated track, track structure and equipment rehabilitation and expansion that, for many small railroads, might not otherwise have been affordable.
Where the 2017 Tax Cuts and Jobs Act delivered some $1.5 trillion in tax benefits, it flowed primarily to large businesses, many of which did not reinvest it as anticipated. By contrast, the 45G tax credit, which expired in 2017, applies only to actual investment that better secures and adds to rail employment while directly benefitting shippers and Class I connections.
With Congress having failed to extend for 2018, and beyond, the 50% investment tax credit (previously capped at $3,500 per mile), many small railroads have had to borrow the difference or defer capital investment. Understandably, Baker spends considerable time urging its congressional restoration; he now counts almost 300 House sponsors and 62 of 100 Senators supporting legislation to make 45G permanent and retroactive to Jan. 1, 2018.
Equally disquieting is an increase in extreme weather events—hurricanes, tornadoes, blizzards, intense heat waves, record cold snaps—plus related floods and fires. Similarly threatening small railroads financially are cyberattacks, with 80% of corporate America reportedly experiencing them annually, along with thousands of ransom attacks (malicious software blocking computer access until ransom
In “thinking through small-railroad disaster planning and recovery,” Baker superintended creation of a computer accessible best-practices resource library for small railroads typically lacking routing alternatives, and which cannot afford higher levels of layered insurance available to Class I’s.
And as privately owned railroads are ineligible for Federal Emergency Management Agency (FEMA) relief or Department of Transportation programs benefitting other modes, Baker is pitching to Congress creation of a permanently funded disaster relief program capped at $25 million annually.
“We fight and claw for every inch,” Baker says. “For short lines, inches are the difference between winning and losing.”
This Baker surely appears to possess ingredients and a plan to promote, sustain and advance small railroads.
Frank N. Wilner is author of six books, including Amtrak: Past, Present, Future; Understanding the Railway Labor Act; and Railroad Mergers: History, Analysis, Insight, all published by Simmons-Boardman Books. Wilner earned undergraduate and graduate degrees in economics and labor relations from Virginia Tech. He has been assistant vice president, policy, for the Association of American Railroads; a White House appointed chief of staff at the Surface Transportation Board; and director of public relations for the United Transportation Union. He is a past president of the Association of Transportation Law Professionals. Wilner drafted the railroad section of the Heritage Foundation’s Mandate for Leadership (Volumes I and II), which were policy blueprints for the two Reagan Administrations; and was a guest columnist for the Cato Institute’s Regulation magazine.