Sunrail gets Grant to expand into Kissimmee

[Anderson]

FWIW, I don't think this is functionally different than the almost innumerable cases of selling non-core lines to shortline operators, something that both CSX and NS have done quite a bit of over the years. As a rule, it seems that the Class Is want to operate high-margin main lines and not a lot else...and I think CSX has been more aggressive on this front than most others. I suspect that when they came to this conclusion it didn't take that much prodding.

Also, isn't the Homestead Sub an isolated chunk after CSX sold the main line to SFRTA?

 

[cirdan]

FWIW, I don't think this is functionally different than the almost innumerable cases of selling non-core lines to shortline operators, something that both CSX and NS have done quite a bit of over the years. As a rule, it seems that the Class Is want to operate high-margin main lines and not a lot else...and I think CSX has been more aggressive on this front than most others. I suspect that when they came to this conclusion it didn't take that much prodding.

Also, isn't the Homestead Sub an isolated chunk after CSX sold the main line to SFRTA?

This would be consistent if Sunrail hadn't just bought the track but also taken over freight operations, shortline style (or given them to a separate agency as in Northern Indiana).

As it is, CSX is still lumbered with actually having to run those low-margin trains. So I can't really see what CSX has gained on the deal.

 

[jis]

Shedding the cost of maintaining the infrastructure.

 

[Alex M.]

CSX also reduces its tax liability.

 

[Caesar La Rock]

I forgot about this, but Sunrail also plans on implementing PTC throughout the corridor.

http://corporate.sunrail.com/wp-content/uploads/2015/09/SunRail-PTC-RFP-E5Y16.pdf

 

[neroden]

I'm not surprised...if CSX can hive off "non-core" lines to agencies while retaining trackage rights during off hours, they seem increasingly prone to doing so: They usually get a substantial one-time infusion of cash, they're relieved of at least some maintenance costs, and the impact on their operations tends to be negligible (if a freight local has to operate overnight, who cares?). And do remember that CSX was willing to sell to both Tri-Rail and SunRail.

Wick Moorman of NS actually openly stated at one point that he thought government ownership with passenger priority and lines maintained for passenger service, and freight "trackage rights" as a tenant was a better business model. Even for mainlines. (NS is already the tenant on two of its mainlines, so they may be more comfortable with this than CSX.)

It's not just the relief of maintenance costs... the Class I (NS or CSX) stops paying *property taxes* on the line. If it's owned by a government, nobody pays property taxes on the land. The trackage rights easements, for whatever reason, don't generally get assessed property taxes either (though theoretically they could have them assessed).

Furthermore, the quality of track maintenance for passenger service is way above and beyond what any of the Class I freight haulers needs for freight service, so they get "overmaintained" lines for nothing.

Basically, 90% of the maintenance costs go to the government, 100% of the property tax liabilities disappear... if they've still got enough slots to run their freight business (and the agreements *always* promise that they will have enough slots to fulfill their common carrier obligation) what's not to like?

Financially it's a very good deal for them.

 

[neroden]

Meanwhile around Tampa.....

http://www.tampabay.com/news/transportation/masstransit/csxs-offer-finally-opens-the-door-to-commuter-rail-in-tampa-bay/2248337

...anyway, I hope the local governments have enough sense to buy the lines. And enough sense to use 'em for something. It would be worth doing a study to figure out how they could best be used for commuter rail.

 

[Anderson]

I'm not surprised...if CSX can hive off "non-core" lines to agencies while retaining trackage rights during off hours, they seem increasingly prone to doing so: They usually get a substantial one-time infusion of cash, they're relieved of at least some maintenance costs, and the impact on their operations tends to be negligible (if a freight local has to operate overnight, who cares?). And do remember that CSX was willing to sell to both Tri-Rail and SunRail.

Wick Moorman of NS actually openly stated at one point that he thought government ownership with passenger priority and lines maintained for passenger service, and freight "trackage rights" as a tenant was a better business model. Even for mainlines. (NS is already the tenant on two of its mainlines, so they may be more comfortable with this than CSX.)

It's not just the relief of maintenance costs... the Class I (NS or CSX) stops paying *property taxes* on the line. If it's owned by a government, nobody pays property taxes on the land. The trackage rights easements, for whatever reason, don't generally get assessed property taxes either (though theoretically they could have them assessed).

Furthermore, the quality of track maintenance for passenger service is way above and beyond what any of the Class I freight haulers needs for freight service, so they get "overmaintained" lines for nothing.

Basically, 90% of the maintenance costs go to the government, 100% of the property tax liabilities disappear... if they've still got enough slots to run their freight business (and the agreements *always* promise that they will have enough slots to fulfill their common carrier obligation) what's not to like?

Financially it's a very good deal for them.

Where is NS a tenant on their mainline? NEC/Main Line (ex-PRR) or somewhere else?

 

[Eric S]

North Carolina Railroad?

 

[MikefromCrete]

In North Carolina between Raleigh and Charlotte, the route of the Piedmonts, where NS runs on the state-owned North Carolina Railroad. NC may also own some other routes used by NS.

Also the Cincinnati, New Orleans and Texas Pacific Railway, between Cincinnati and Chattanooga, is owned by the city of Cincinnati and leased to NS.

 

[Alex M.]

As far as states owning tracks for freight and passenger carriers is one thing. I cringe, however, at the thought of the Feds owning the national network. The bozos in Congress cannot even decide who they want as Speaker. They can't even agree how to fund the Highway Trust Fund.

 

[neroden]

In North Carolina between Raleigh and Charlotte, the route of the Piedmonts, where NS runs on the state-owned North Carolina Railroad. NC may also own some other routes used by NS.

Also the Cincinnati, New Orleans and Texas Pacific Railway, between Cincinnati and Chattanooga, is owned by the city of Cincinnati and leased to NS.

Yep, those are the two I was thinking of.

 

[cirdan]

Shedding the cost of maintaining the infrastructure.

but I guess CSX is paying trackage rights when it runs freights, so are overall costs really going to be lower?

At least when a RR owns the tracks it can defer maintenance to a time that it is more opportune for the balance sheet, whereas when it is trackage rights it has to pay here and now no matter what.

So either trackage rights are insanely low, in which case the commuter authority is indirectly subsidizing CSX, or otherwise CSX has some other justification, for example being a good corporate citizen or this being some part of a bigger deal with the kickback for CSX bering elsewhere. Seeing passenger trains cause far less damage to track than freights, any setup in which the freight RR is not also paying the lion's share towards track work is a finnacial handout for the freight RR. But if CSX is actually paying the lion's share of maintenance, then there is no finnacial gain in it for them, so one must question the motive.

Doesn't make sense to me.

 

[jis]

Trackage rights usage is not that expensive when you are running just a few freight car delivery and pickup runs a week. I am guessing that the CSX accountants know what they are doing, way better than you or I can know what the actual numbers are.

The motive is pretty straightforward reduction in cost and since unlike some here, I don't see the freight railroads as unmitigated devils, I am quite happy to see passenger rail thrive with better control of its own destiny while letting freight railroads reduce their cost of operation. I would strongly encourage takeover of tracks for passenger rail use wherever it can be done for a reasonable price.

CSX has entered deals involving either straight out sale of trackage and property or long term lease of the same at various places and all of it so far has been to the advantage of passenger rail.

The "subsidy" argument goes both ways. If passenger railroads are subsidizing freight on tracks owned by them, presumably the freight railroads are also subsidizing Amtrak where Amtrak runs on freight railroads. So in balance I suppose it all balances out.

 

[MikefromCrete]

Don't forget that CSX will no longer have to pay property taxes on the Sunrail route, that is probably a rather large expense. I don't think that track maintenance for freight trains would be a big expense for Sunrail since CSX would probably just use the route for local trains serving local industries. I imagine most through freights will use the alternate freight-only route. Just about all the trackage sold by CSX to MBTA as well as the proposed Miami-area routes are simply local industrial lines, which have lost importance in recent years.

 

[jis]

Besides most passenger railroads these days maintain tracks to at least 286 level if not 312 level as far as freight is concerned. Without that, some of the behemoths that pass for passenger locomotives these days will split the tracks anyway. If the freight RR requires a standard of maintenance beyond what the passenger railroad plans to maintain they can always pay for the differential in maintenance. However, I believe this is very unlikely to come to pass.

Yep, through freights to the north will use the CSX truck through Ocala, Gainsville. What is being offered is not part of any trunk.

 

[cirdan]

just use the route for local trains serving local industries. I imagine most through freights will use the alternate freight-only route.

Is there an alternative route for CSX? I didn't realze this. If this is the case, it changes the picture entirely?

So if you count FEC, there are three separate main lines going into Miami? That's pretty good.

 

[jis]

No. there are two main lines going to Miami, one is CSX + Tri-Rail (south of West Palm) and the other is FEC (plus AAF by trackage rights soon, and maybe Tri-Rail by trackage rights soon thereafter). The CSX stuff that they are offering for sale is south of Hialeah to the Homestead area with a few longish industrial spurs, not the trunk between West Palm and Auburndale. I guess one needs to get in front of a map to get oriented.

After the sale CSX will own nothing south of West Palm Beach. They already use Tri-Rail via trackage rights tog et to Miami from West Palm Beach. Similarly, they use trackage rights on Sun Rail to get to Orlando from Auburndale, or from Deland.

If the trackage on offer in Tampa is acquired by Hillsborough County then they will be accessing Tampa too via trackage rights. But whether that will happen or not is an open issue as of today.

 

[MikefromCrete]

just use the route for local trains serving local industries. I imagine most through freights will use the alternate freight-only route.

Is there an alternative route for CSX? I didn't realze this. If this is the case, it changes the picture entirely?

So if you count FEC, there are three separate main lines going into Miami? That's pretty good.

There are two CSX routes in central Florida: one runs through Orlando and that is now used by Sunrail and Amtrak. The other runs through Ocala and is freight-only. South of Lakeland there is only one CSX route. And south of West Palm Beach that is owned by Tri-Rail. The FEC is a separate route that is now freight-only and will be used by All Aboard Florida and maybe Tri-Rail.

 

[Caesar La Rock]

Just to let everyone know, CSX does run freights through the Sunrail corridor during the off peak hours. Sunrail runs a train every two hours, so it allows them to sneak some freights in. It doesn't happen as frequently compared to the pre-Sunrail era, but it does happen nonetheless.

 

[Caesar La Rock]

Construction of the second phase is delayed until early next year.

http://www.bizjournals.com/orlando/blog/2015/10/sunrail-phase-2-south-construction-start-delayed.html?ana=e_orl_bn_newsalert&u=le1O48c4zijx0ETR5Sf%2Fng0d04608e&t=1445360926

 

[jis]

Just to let everyone know, CSX does run freights through the Sunrail corridor during the off peak hours. Sunrail runs a train every two hours, so it allows them to sneak some freights in. It doesn't happen as frequently compared to the pre-Sunrail era, but it does happen nonetheless.

This of course raises the interesting question about whether someday CSX might choose to sell off or lease out the segment between Poinciana and Tampa too, if there are any takers of course

 

[Caesar La Rock]

Just to let everyone know, CSX does run freights through the Sunrail corridor during the off peak hours. Sunrail runs a train every two hours, so it allows them to sneak some freights in. It doesn't happen as frequently compared to the pre-Sunrail era, but it does happen nonetheless.

This of course raises the interesting question about whether someday CSX might choose to sell off or lease out the segment between Poinciana and Tampa too, if there are any takers of course

I'm moreover shocked Sunrail is running at all, since CSX did turn down the idea about commuter rail in Orlando years ago (either late 80s or 90s). I guess anything is possible nowadays.

 

[Anderson]

Just to let everyone know, CSX does run freights through the Sunrail corridor during the off peak hours. Sunrail runs a train every two hours, so it allows them to sneak some freights in. It doesn't happen as frequently compared to the pre-Sunrail era, but it does happen nonetheless.

This of course raises the interesting question about whether someday CSX might choose to sell off or lease out the segment between Poinciana and Tampa too, if there are any takers of course

I'm moreover shocked Sunrail is running at all, since CSX did turn down the idea about commuter rail in Orlando years ago (either late 80s or 90s). I guess anything is possible nowadays.

Well, FEC has done an about-face as well (and how!). It would seem that either dispensing with tax obligations and one-time payments with continuing operation rights have begun to outweigh the "annoyance" of dealing with a commuter (or passenger rail) system.

This is actually an outgrowth of the "cut back to a core system" approach we've been seeing throughout the country as a whole (NS selling the line in MI, CSX dumping the rest of the East Hudson line in NY into a long-term lease, BNSF more or less looking to do the same with the Raton Pass line). The main difference between this and, say, SP dumping tracks to California in the 90s is that this is at least theoretically being done on a "rational" basis: For the most part these lines are "surplus to requirements" for the freights beyond either acting as a "backup line" or doing some limited local moves.

Also...this pattern, after a fashion, has been going on since at least the 70s with abandonments and short-line spinoffs. The main difference is that local/regional/state authorities are buying up the lines instead of them going to a Class II/III operator or simply being dumped/handed over to the cyclists.

 

[neroden]

I would add that the "scheduling" benefit of owning the line is pretty much squandered by your average class I freight railroad, who don't seem to know how to schedule their way out of a paper bag. CN advertises that deliveries will arrive on the day they promise, and that's what passes for scheduled, because it's more scheduled than the others. Oy.

So the only thing they lose is that they have some cap on number of freight trains they can run -- a cap which isn't absolute or permanent. Because of the common carrier rules, the contracts always allow them to run more freight trains if they pay for the upgrades in advance. So basically the freight railroad is only selling off the potential future value of capacity which they own but are not currently using. Financially, I'm sure that looks like a low-return-on-assets asset on the balance sheet!