Published on: January 30, 2020

Freight railroads are not utilities

U.S. Sen. Rick Scott (R-Fla.) and his colleagues in Congress hear a lot about failing infrastructure in the Sunshine State. From a dire need to revitalize portions of the U.S. highway system to the potential for transformative options like Virgin Trains.

But U.S. lawmakers must not lose sight of the other essential infrastructure critical to the Florida and U.S. economies. This includes broadband Internet and pipelines critical to U.S. energy independence, and it especially includes a freight railroad sector with a major footprint in the Sunshine State.

Each day, some 15 freight railroad companies traverse Florida, and two of those major players CSX and Florida East Coast Railway are headquartered in the state. Industry data shows that there are some 4,800 railroad employees in Florida, earning an average total compensation package of more than $122,000. There is also a robust supplier sector, which collectively accounts for another 20,000 quality careers within the state.

All the while, these freight railroads provide an indispensable transportation mode for some of the state’s most critical sectors, including agriculture, retail and manufacturing. Roughly 837,000 carloads of rail goods started in Florida in 2017, bound for domestic and international markets that enable companies to compete. The connection between ports in Miami, Jacksonville, Pensacola and elsewhere and railroads puts Florida at the forefront of economic activity, particularly in the South.

“Rail is not only more efficient, but it also eliminates the need for trucks that tear up roads and exacerbate local congestion,” says Tampa business leader and Hillsborough County Commissioner Sandra Murman.

Unfortunately, potential changes in federal policy by an entity, known as the U.S. Surface Transportation Board (STB), threatens this reality, particularly private investment by railroads to run their networks. It’s a real lesson in all that is wrong with Washington, D.C.: Powerful lobbying interests, instead of the marketplace, can control policy debates with their money and force government to pick winners and losers.

Leadership is needed from Sen. Scott, who presides on the primary committee for railroads, and others with jurisdiction over the STB to halt regulatory actions that would treat private railroads more like public utilities.

The reason for opposing utility-style regulations for railroads is simple: running a railroad is expensive, with most all costs borne by private industry, and limiting the ability to earn reasonable revenues would limit dollars put into the system. That would leave rail customers and U.S. consumers holding the bag. Analysis shows that consumers enjoy some $10 billion in such benefits and savings.

And, of course, history unequivocally shows this to be true, as the industry was left for dead in 1980, only revived when such economic regulations were removed.

While Congress provides a clear statute to the STB – rate regulation only in uncompetitive markets – these rail regulators want to do “more,” independent of need.

Most worrisome and threatening to fundamental American economic values is the possibility that the STB could cap rates that railroads charge customers. As famed economic commentator Steve Forbes said, “It is a fundamentally anti-capitalist scheme antithetical to U.S. economic doctrine.”

At the same time, the STB is entertaining a measure that would force railroads to let their competitors operate on their infrastructure government-set rates. Aside from being a striking government overreach, this proposal skews the market for railroad transportation by playing favorites, ultimately hurting both as well as consumers. And like the rate caps, it would be an abandonment of core American values in favor of a long-since discredited centrally planned approached.

Before it gets to this place at the STB, we should hope that leaders in Congress reject the call for further government interference in this the overlooked yet critical rail sector. Unlike expensive efforts to revitalize highways, the solution is easy: leave this current system in place.

Matthew Kandrach is president of CASE, Consumer Action for a Strong Economy, a free-market-oriented consumer advocacy organization.