Railroads & Property Taxes

[John Bobinyec]

The general belief, back in the day, was that railroads were taxed by local municipalities for every mile of track that they had. The natural tendency therefore was to reduce the number of track-miles to that which is absolutely necessary. That would at least partially explain why railroads have reduced their capacity willingly, over time.

Can anyone elucidate? Please cite your sources.

jb

 

[Shanghai]

I had read that many railroads were removing unused tracks to avoid paying taxes.

Once removed, they were taxed as vacant land instead of productive land.

I also read that in the state of Montana, the railroads taxes pay for 71% of the

school costs.

 

[seat38a]

Does Amtrak pay any property tax on the tracks they own such as the NEC?

 

[NW cannonball]

What I learned in High School, here in Minnesota, back in the 60's was - that there, then, railroads didn't pay property taxes to Minnesota..

They paid a gross revenue tax to the state of Minnesota. No real estate tax.

Changed a lot since then.

Was taught that, then, in Minnesota, that was why so many acres of in-city land was held by railroads, and stayed as disused rail-yards for decades.

Other states, newer times, all that changed. Don't know when the tax structure changed here. Do know that lots of old rail yards have been redeveloped since then.

Now, here, railroad land is taxed, and pays sewer fees and such, and is being slowly redeveloped.

But I'd have to dig out my tax and fee notices to say more -- maybe railroad land is nearer golf courses and cemeteries, not multi-family ??

For sure roads and freeways pay no land taxes at all here, only consume tax money.

 

[Just-Thinking-51]

State by State issue.

New York has a colorful history. Not sure if New York does or does not charge taxes today, it seem to change ever few years.

 

[PRR 60]

Does Amtrak pay any property tax on the tracks they own such as the NEC?

No.

 

[xyzzy]

Track abandonment to avoid taxation is only part of the story. So is demolition of surplus buildings such as passenger or freight stations disused in the 1950s and 1960s, although demolition had additional motivations (elimination of liability, elimination of utility payments, and opportunity for redevelopment).

In the case of the state-owned North Carolina RR, the annual tax burden is approximately $2 million. Most of this tax burden is passed through to Norfolk Southern, pursuant to terms of the lease and operating agreement. See page 24 of http://www.ncga.state.nc.us/PED/Reports/documents/NCRR/NCRR_Report.pdf .

 

[Paulus]

This will probably help you out

 

[George Harris]

Varies wildly state by state. Tennessee used to be very high is property tax on railroad, and yes the every mile of track and anything and everything else comes to mind. Property value for tax purposes was assessed county by county and city by city. Property value for private utility property, including railroads, pipelines, telephone lines, electric lines, was assessed by the state. Their was assessment was at 100% of theoretical market value. Usually property values for other properties locally assessed was assessed at a fraction of theoretical market value, for some as low as around 10% and none over 50%. Also, there was no depreciation on railroad property. There was finally a lawsuit where all the private utilities got together and sued the state and won to obtain equitable assessment. For at least one middle Tennessee county with a low population it was said that the railroad owned 2% of the acreage but paid something over 50% of the total taxes collected by the county.

Alabama was quite different. For the L&N their practice was to, in Tennessee pull up any track they could just about within hours of the passage of the last train over it. In Alabama lines that might have any conceivable future use were kept. That does not mean maintained. One I saw that was going to be put back in use had 6 inch diameter pine trees growing between the rails. Another which was to be abandoned had Kudzu growing over the whole thing to past knee deep. That was when and where I learned that Kudzu has small flowers which were enthusiastically attended by honey bees. For this one, it was decided to leave the track material in place as the cost of getting it out exceeded the value of the steel.

New York is reputed to be a high tax county.

 

[seat38a]

Well it also probably explains why local government or transit agency's can get former private railroad property for cheap. Sell it off and no taxes or in the case such as SANDBAG and LOSSAN, sell the rails to the agency's and then operate on the rail through trackage rights rather than own it out right. I'm guessing you don't pay taxes for trackage rights.

 

[George Harris]

Well it also probably explains why local government or transit agency's can get former private railroad property for cheap. Sell it off and no taxes or in the case such as SANDBAG and LOSSAN, sell the rails to the agency's and then operate on the rail through trackage rights rather than own it out right. I'm guessing you don't pay taxes for trackage rights.

No taxes, but trackage rights are not free. The guy operating through trackage rights is paying a fee to the track owner for the right to do so.

 

[seat38a]

Well it also probably explains why local government or transit agency's can get former private railroad property for cheap. Sell it off and no taxes or in the case such as SANDBAG and LOSSAN, sell the rails to the agency's and then operate on the rail through trackage rights rather than own it out right. I'm guessing you don't pay taxes for trackage rights.

No taxes, but trackage rights are not free. The guy operating through trackage rights is paying a fee to the track owner for the right to do so.

Oh course not, but its got to be cheaper than maintaining the rails yourself or paying the tax on top of it. Since the trackage rights are coming from local government agency owned rail line, it can't be that bad. No property tax to amortize into the "toll rate."

 

[Paulus]

Well it also probably explains why local government or transit agency's can get former private railroad property for cheap. Sell it off and no taxes or in the case such as SANDBAG and LOSSAN, sell the rails to the agency's and then operate on the rail through trackage rights rather than own it out right. I'm guessing you don't pay taxes for trackage rights.

No taxes, but trackage rights are not free. The guy operating through trackage rights is paying a fee to the track owner for the right to do so.

Oh course not, but its got to be cheaper than maintaining the rails yourself or paying the tax on top of it. Since the trackage rights are coming from local government agency owned rail line, it can't be that bad. No property tax to amortize into the "toll rate."

The rate (in SoCal at least) is also based on historical freight usage rather than actual wear and tear by the freight railroads. That being said, SoCal picked up its lines during the general "Spin off everything" stage, you likely couldn't do that again.

 

[railiner]

Does Amtrak pay any property tax on the tracks they own such as the NEC?

No.

Indeed. Amtrak doesn't pay taxes....in fact they "collect" taxes......

 

[seat38a]

Well it also probably explains why local government or transit agency's can get former private railroad property for cheap. Sell it off and no taxes or in the case such as SANDBAG and LOSSAN, sell the rails to the agency's and then operate on the rail through trackage rights rather than own it out right. I'm guessing you don't pay taxes for trackage rights.

No taxes, but trackage rights are not free. The guy operating through trackage rights is paying a fee to the track owner for the right to do so.

Oh course not, but its got to be cheaper than maintaining the rails yourself or paying the tax on top of it. Since the trackage rights are coming from local government agency owned rail line, it can't be that bad. No property tax to amortize into the "toll rate."

The rate (in SoCal at least) is also based on historical freight usage rather than actual wear and tear by the freight railroads. That being said, SoCal picked up its lines during the general "Spin off everything" stage, you likely couldn't do that again.

The corridor agencies getting the tracks have probably been the best thing that could have happened on the corridor. Lots of money has been spent and still being spent on double tracking and other improvements such as removing all at grad crossings. In Orange County, I think something like 95% of all at grade crossings have been removed.