U.S. railroads are lobbying Congress to back tax-credit legislation aimed at boosting rail investment, citing the need for an injection of cash to help lay fresh track."This country needs to boost its rail infrastructure," said Wick Moorman, Chief Executive of Norfolk Southern Corp., "and we can only justify adding new rail capacity if we get a sufficient return on our investments."
The Freight Rail Infrastructure Capacity Expansion Act of 2007--for a 25 percent tax credit on track expansion--was introduced into both houses of Congress in the spring with some bipartisan support and the backing of some industry groups.
But some customers argue the tax credit should be linked to changes in oversight for the rail industry, especially as the major railroads are seeking federal handouts at a time when they are raking in record profits.
"This country needs to improve its rail infrastructure, but the railroads need to plow some of those profits back into capacity," said Jack Gerard, president of the American Chemistry Council (ACC). "The system is broken and needs to be fixed before we talk about a tax credit."
Industry groups like the ACC say they want taxpayer money for new rail track to focus on domestic U.S. industries rather than benefiting imports from developing nations like China.
That has some railroad officials expressing concern Congress may attach unwelcome conditions to their bill.
"The rail industry is one of the most capital intensive industries out there," said Erik Autor, vice president of lobby group the National Retail Federation (NRF), which backs the tax credit bill. "The railroads are putting a lot more money into expansion, but it's not enough."
The NRF, in particular, wants to see rail bottlenecks removed on lines from the U.S. West Coast ports--where the overwhelming majority of consumer goods arrive from Asia. A list of backers for the rail tax credit bill provided by the Association of American Railroads, includes a number of ports plus firms like Hewlett-Packard and Nike Inc. that import products or components made in Asia.
According to a July report from the American Association of State Highway and Transportation Officials, U.S. truck freight will double by 2035 and rail freight will rise 60 percent. Rail intermodal freight will double by 2040. Intermodal services use standardized containers that can move by truck, ship or train and usually hold consumer goods.
Railroads say their expansion must have sufficient returns or Wall Street will punish them.
"If the railroads took out huge loans for expansion, their stocks would probably take a beating." agreed NRF's Autor.
But customer groups representing some utilities and the chemical industry have legislation pending in Congress aimed at improving government oversight and preventing railroads from gouging customers. After their complaints are dealt with, they say, they will be ready to back the rail tax credit. But only under certain conditions.
"This bill would need some requirements to ensure that it supports our domestic economy," ACC president Gerard said," not simply add capacity to support Chinese imports."
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