California State Rail Plan 2007-08 to 2017-18

Chapter XVIII – FundingCHAPTER XVIIIFUNDINGSYSTEM CAPITAL NEEDSRailroads are extremely capital intensive. In general, they spend about five timesmore to maintain their systems and equipment than the average U.S. manufacturerspends on plants and equipment. In 2000 for example, Class 1 railroads spent17.8 percent of revenues on capital improvements compared to 3.7 percent for allmanufacturing industries in the nation. With such an expenditure required forcapital improvements, investors have been prudent in putting monies intorailroads. Consequently, the amount of funds for maintenance and expansion hasnot been as great as for many other industries. Nevertheless, railroads continue tofund the expansion of their systems.BNSF Railway for example, will expend $2.75 billion in capital expenditures in2007. A total of $750 million will be for track and facility expansion while$1.6 billion will go towards refreshing track, signal systems and structures.One recent project particularly relevant to California is the expansion of the2,200-mile Chicago-Los Angeles corridor; as of 2006 all but 51 miles has beendouble tracked. This capacity expansion will enable the railroad to increase trafficform 60 trains a day in 2000 to 100 trains a day in 2006 along this corridor.The Union Pacific Railroad will spend approximately $3.2 billion in 2007on capital improvements network wide. This includes double tracking of their760 mile Sunset Route from L.A. to El Paso, Texas. In California a total of$55 million will be spent on commercial facilities such as terminals and yards, and$222 million on track, and signal systems for this route.Stable and long term funding is critical to the preservation, maintenance andexpansion of California’s freight rail system.. The AASHTO Freight Rail BottomLine Report provides scenarios for funding needs at several levels. These include:• No Growth – where, with minimal investment the railroads could carryapproximately the same amount of traffic in 2020 that they carry today,thereby shifting large amounts of freight tonnage onto trucks.• Constrained Investment – under this scenario, railroads could affordimprovements paid for by revenues and borrowing – the railroads couldhandle additional traffic but not keep pace with increasing freight traffic.• Base Case - where, with a higher level of investment, the freight systemcould keep its current share of traffic and accommodate a greater share offorecasted increases. Funding would come from a combination of railroadinvestment and public sector participation.245