Railroaders' Nostalgia > Who owns and pays for freight cars?

As you stand trackside watching a train pass by, the incredible variety of freight cars makes one wonder who owns these cars and how does the accounting for them get done?
Because several freinds have asked me to explain what is apparently a confusing mismash, I thought I would try to explain how the system works.  There are about 1.5 million freight cars in the US and Canada and Mexico.  Nearly all of those cars can move on any railroad.  A uniform accounting system is in place to keep track of when cars are interchanged between railroads, and when repairs are made to cars.
There are two ways freight cars are "owned".  The first of course, is when a railroad owns or leases freight cars.  These cars can be identified by reporting marks on the car ( no, not the graffitti!) such as BNSF, UP, KCS or NS, or many short line railroads.  Railroad reporting marks do not end with "X", with one exception.  Can you think of the exception?
Railroads exchange information about cars as they pass from railroad to railroad.  If a railroad has a "foreign" cars on its line, it will pay an hourly rental, perhaps 75 cents per hour, and a mileage fee of perhaps 10 cents per mile.  Car hire accounts between railroads are settled by a clearing house monthly.  On a railroad annual report, look for the expense item "equipment rentals" .  I do not know if the figures shown include locomotive hoursepower hours.  Some roads earn a net income from freight car rents, others pay out a bit annually.
The other method of ownership of freight cars is privately owned cars.  Many shippers own or lease freight cars.  Tank cars are the best examples of this.  Tanks cars are highly specialized, and often sit in a factory or chemical plant for months, so railroads have never supplied tank cars.  Some grain moves in privately owned cars instead of rail owned cars.  Railroads pay the shipper a mleage charge to compensate the shipper for furnishing his own cars.  Some railroads have eliminated the mileage fee by adjusting the freight rates to reflect car ownership costs.  All privately owned railcars (not railroad owned) have the last letter of the reporting marks as an "X", such as GATX, PROX or CBTX.
Years ago, railroads found that some shippers would use the longest rail route to increase their mileage income.  Route the car via a 500 mile longer route and get en extra $500, and the freight rates were often the same.  
TTX ( Trailer Train ), is a pool of all railroads  All those container flats you see stored for long periods of time ( 30 days or more) are usually not earning any rental fees
Another accounting system exists for repairs to freight cars.  If a BNSF is repaired by an NS shop, the NS submits a bill thru the car repair system against BNSF.  Not all repairs are "billable" against the car owners.  There is series of rules that outline who pays - handling line, or owner.  Wreck damage - clearly belongs to the handling line.  Bad bearing or thin wheel - probably owners reponsibility.  Broken knuckle - owner.  And so forth.
This is admittedly just a brief outline of two of the 5 major accounting systems.  Someday when I am feeling ambitious, maybe I will try to explain the basics of railway accounting for freight claims, freight charges, and joint facility accounting. 
 

Norman Orfall
Helendale, CA
TIOGA PASS, a private railcar

I remember when I was in my conductors promotion class, the Trainmaster holding it told us that anytime we changed a knuckle ,air hose, or set the car on line as a B/O, we were to fill a form found on the caboose; the number of the form I have long since forgotten.  and list all what was done and sign and submit  on tie up.  According to what he told us, roads who cars had been repaired on line would not reimburse the Mop for the repairs unless this form was filled out.  I have forgotten the amount,but the it was a substantial amount the Mop  had lost in uncollected repair due to the form not being filled out. 

Each road kept a check and balance with each other and settled at the end of the year with each other on repairing cars. Private car owners are billed for each repair or they can elect to send the car to a home shop for repairs

For those thinking that the one "X" exception is CSX, they would be incorrect.  Our reporting marks officially are CSXT.
That way we retain our common carrier status and aren't a private car owner.

Sorry, but have to correct you on "no railroad owns tank cars"  The Texas & Pacific owned several hundred (close to 1000) tank cars in the 1930's-1950's.  They were heavily used from the Permian Basin in west Texas to on line refineries.  Those trains varied in length from 50 to 75 cars depending on what the refinery could handle at one time.  And of course during WWII they made many off line trips.

But, I will also say you are probably young enough that you were not around then.



Edited 1 time(s). Last edit at 04/17/16 12:10 by tomstp.

Norm, that is a nice summary of one of those obscure (but essential) bits of the railroad business.  I was in car management with SP and later with GATX, and after I retired a friend still working at the UP asked me to discuss this kind of thing with some of his employees becaue it is an obscure part of the business even for those who work in the business.  The "per diem" rules were changing about the time I started doing other things and I have kind of lost track of how things are done currently.  It is one of those interesting dark corners of the business, just like some of the other things you mentioned, like joint facilities.  Keep it coming.

JBWX

 

    I would have thought the original question was asking who owns the cars such as BNSF owns the cars with their reporting marks and obviously the BNSF pays for that. Private owners pay for their cars and the reporting mark for any private car is denoted by an 'x' at the end of the four letter 'mark'. Som e cars are 'leased' to users but in the end, the owner pays for the car and leaser just pays the lease - no different than renting or leasing a home or auto. You pay but the owner 'owns' it. Wasn't that the answer to the original question ?
    Repairs to cars is no doubt a most interesting and horridly messy trail of record keeping ( or not ) and a question all in its own. Same as how does a private car owner really know 'his' car needed or even recieved repair parts and that they weren't put on some other car. That would be a hot potatoe question to answer.



Edited 1 time(s). Last edit at 04/17/16 10:47 by dcfbalcoS1.

X = non-railroad owned car
Z = non-railroad owned trailer
U = non-railroad owned container

Even the bad old Soviet Union had to use these marks or the US rrs wouldn't transport them. FESCU is the Far Eastern Container Lines reporting marks: www.fesco.ru/en/

It used to be that if repairs to a car were less than an certain amount, the situation was "handling road make the repairs and doesn't bill the owing road". Above the threshold, "owing road makes or pays for the repairs". This had to do with the costs of the intracies of the paperwork involved in pre-computer days. And example of this would be repairing a sliding door on a box car: handling road (depending on the extent of the repairs of course). Plug doors are much more expensive to replace and repair, which put them over the cost threshold to "owning road's responsibility". Not sure if this is still true or not.

tomstp you flatter me.  I was a result of the panic over Pearl Harbor, being born nine months following that epic attack in 1941, so I do remember the 50's - vaguely.  In discussing any complex topics like railroad accounting, it is necessary to generalize and summarize, so I said railroads did not usually furnish tank cars to shippers.  Santa Fe had a fleet of tank cars for company service carrying diesel fuel, lub oil, and waste oils, but those tanks were not used by shippers.  Most other railroads also owned a fleet of tank cars for their internal use.
    My experience with this area of railroading not only came from my working for Santa Fe, but from my investing in a small fleet of freight cars during the late 70's and 80's.  During the 1970's, the ICC thought they could cure chronic boxcar shortages by raising the "per diem" rates for frieght cars to incentivize investment in freight cars.   It worked far too well. The industry suddenly had a surplus of 50 foot boxcars which were referred to as doctors and lawyers cars.  It took 30 years to work off the surplus and you still occasionally see a straggler with obscure reporting marks.  Before I could invest in freight cars, I had to seek clearance under the Santa Fe's conflict of interest policies from our attorneys.  I was cautioned that, if one of the cars I owned was moving on Santa Fe, I should not influence its handling in any way.  I was very careful to adhere to that policy. One night, the hump yardmaster called me in the high tower and said "We have a car here on the crest of the hump that we don't dare hump!  We are going to try and set it out in the "set out" spur at the hump".   Of course, I drove to the hump and found a boxcar being shoved into the set out track.  The car was a yellow 50-foot boxcar lettered TSBY ( Tuscola and Saginaw Bay ) 60000,  and bore a small stencil by the left side of the door " Leased from ARONCO -  Barstow, Ca" .  The founder and president of Tuscola and Saginaw Bay Railway of Michigan was a friend and railfan, and he had designed and applied  the stencil with a roadrunner emblem without my knowledge.  Some sharp eyed switchman had seen the stencil and the joke was on me!   I never did find out who and how they made the connection to me.
Ever since then, I have watched the rail freight car fleet carefully.  With a few "inside" details, there's a lot of interesting sights out there.

TIOGA PASS

 

Norman Orfall
Helendale, CA
TIOGA PASS, a private railcar

One of the tidbits my fading memory stills recalls is between regular time and mileage and incentive per diem, on the SP it was not unusual for the car hire to exceed the gross revenue for some moves.    Many of the per diem box cars were built in the PNW by Paccar and Gunderson and were headed to shortlines in the east or southeast.  Usually car owners in such situations allowed the local roads who needed empties (SP, UP, BN, etc.) to load the cars locally to avoid having to pay tariff rates to haul the cars empty for delivery.  But the per diem players insisted on paying for the empty movement, because it was a capitalized cost and helped jack up the car hire the cars could earn.  The per diem lessors had found a loop hole in the car service rules that allowed them to put cars into the system the railroads had no real need for, and at very high cost thanks to the idiocy of the ICC's incentive per diem.  It was an interesting game and cost the Class I railroads a lot of money until the demand for boxcars collapsed and the shortlines didn't have enough track to store all their surplus cars on.  But it was beneficial for me, because the mess created a need at GATX that allowed me to escape from SP before SP started going down the tubes.  After the collapse the per diem lessors accused the Class I's of conspiring against them, and there was a Federal grand jury inquiry to which I was summoned.  But the grand jury could find no evidence of evil doing.  The fact is the Class I's followed the law despite the huge cash hemorage the cars cost them.  Which I suppose is good, it certainly was the railroad culture in those days, but one can also argue there should have been a smarter, more aggressive response given the huge cost to the railroads.

JBWX

jbwest Wrote:
-------------------------------------------------------
> One of the tidbits my fading memory stills recalls
> is between regular time and mileage and incentive
> per diem, on the SP it was not unusual for the car
> hire to exceed the gross revenue for some moves.
>    Many of the per diem box cars were built in
> the PNW by Paccar and Gunderson and were headed to
> shortlines in the east or southeast.  Usually car
> owners in such situations allowed the local roads
> who needed empties (SP, UP, BN, etc.) to load the
> cars locally to avoid having to pay tariff rates
> to haul the cars empty for delivery.  But the per
> diem players insisted on paying for the empty
> movement, because it was a capitalized cost and
> helped jack up the car hire the cars could earn.
>  The per diem lessors had found a loop hole in
> the car service rules that allowed them to put
> cars into the system the railroads had no real
> need for, and at very high cost thanks to the
> idiocy of the ICC's incentive per diem.  It was
> an interesting game and cost the Class I railroads
> a lot of money until the demand for boxcars
> collapsed and the shortlines didn't have enough
> track to store all their surplus cars on.  But it
> was beneficial for me, because the mess created a
> need at GATX that allowed me to escape from SP
> before SP started going down the tubes.  After
> the collapse the per diem lessors accused the
> Class I's of conspiring against them, and there
> was a Federal grand jury inquiry to which I was
> summoned.  But the grand jury could find no
> evidence of evil doing.  The fact is the Class
> I's followed the law despite the huge cash
> hemorage the cars cost them.  Which I suppose is
> good, it certainly was the railroad culture in
> those days, but one can also argue there should
> have been a smarter, more aggressive response
> given the huge cost to the railroads.
>
> JBWX

When the SP economy started toi tank in 1980, too many RBOXs and shortline XMs were being loaded instead of SP's own cars thus creating a huge inbalance. That was when the RBOXs got stored everywhere and shortline cars sent home or to shortage lines like the McCloud. Of course at this same time, the IRS came down on the doctors and lawyers involved in the ownership of the cars fro Itel and others and they got got their returns audited and back taxes notices went out

Ineresting stuff, I've often wondered about who owns and pays for rail equipment.   This brings a question to mind, where do leased cars go after unloading, or privatlely owned ones for that matter?  

This topic brought back a memory.  It's related only in that it deals with damaged railcars, but just as an officeworker's experience; no actual detail info, please skip if desired.

My first job after being discharged from the Army at Brooklyn Army Terminal in 1964, was as a typist for the New York Central Railroad, in Manhattan.  460 Lexington Avenue, actually.  The building is now long gone  It was an ancient affair, with no air conditioning.  There were about two dozen of us typists, sitting at wooden desks in a large classroom-like atmosphere.  We all faced the front, where a small row of desks were sitting, facing us.  Those employees exclusively handled damaged rail equipment between the NYC and other railroads.  They dictated letters into Dictaphone machines.  We had Royal manual typewriters and Dictaphone players as the sole occupants on our desks.  This large room was sprinkled with square pillars that had four fans mounted high up, blowing the hot air around the room. in all four directions.  As we finished typing each letter, we'd carry it with its numerous carbon sheets, and the Dictaphone loop up front to the desks.  The Dictaphone loops could not be reused, but I guess they had to be stored for some period of time. 

The letters were very similar. In fact, one got very used to the sing-song rhythmic chant of those dictating up front, and could usually anticipate the wording, except for specifics, such as car numbers, time/date, etc. 
 
One did not leave one's desk for practically anything.  Pride kept us holding our bladders for as long as we could.  We actually did get a 15 minute coffee break, but only when the coffee cart was rolled into the room.  Oh, how we listened for the sound of those wheels coming up the hallway! 

The perk of course, was an NYC Employee pass.  It was good up to Harmon, but not south of NYC.  Since I was a trolley fan, I would seek to take daytrips down to Philadelphia where PCC's where abundant.  This meant I'd meet a train in Pennsylvania station, and hopefully talk a conductor into accepting my pass as far south as Philadelphia.  I don't ever remember being turned down, but of course this meant one hoped for a return success, coming home.



Edited 1 time(s). Last edit at 04/27/16 23:34 by norm1153.

     After unloading a leased car, it better get back to whoever is leasing it ( if they are loading it ) OR it better get back to the place that loads it for the leasee, pronto. Can't go anywhere else if it is being leased for a specific haul.
     A private owner car better go back and forth to whereever the owner wants it to go for the owners use, hauling whatever its supposed to. An HWCX ( for example ) hopper or pneumatic would leave after unloading an be moved back to the cement, flyash, bentonite, etc location for reloading. Then right back to the same unloading place. Preferably as quickly as possible.

As I remember  the rules for private cars, the owner was allowed empty movement to whereever he wanted, up to 110 percent of the loaded miles, or some such.   The basic assumption is they would be routed directly back to their previous loading point. The extra 10 percent was an allowance for out of route movement to repair locations.   But that is a vague memory and the details may well be wrong.  Moreover in todays world of contract movements, a lot of the contracts (unit train coal is probably the best example) have their own provisions governing empty movement.

"General service" railroad owned cars were subject to Car Service Rules 1 and 2 that said an empty car must be moved loaded or empty in the direction of its owner.

Some "specialized" railroad owned cars (RBL's for canned goods loading and covered hoppers might be examples) were subject to Rule 145 (I think that was the number) that required they be returned empty to their owner.

The varioius General Superintendents of Transportation (or their equivalents) who were on the AAR Car Service Committee ran a rather mysterious and very specialized world of trying to manage empties and manage car hire payments.  As a young MBA I got thrown into the middle of all this and without going into details it was an incredibly inefficient way of doing business.  But things slowly changed.  My last job with SP was Manager of Backhaul Operations, and we were slowly learning how to play the truckers game of getting two way loads.  Empty car movement was a huge expense to the railroads and one of the reasons they had so much difficulty in competing with trucks who were masters at finding return loads.

JBWX 

Great thread with some very knowledgeable input.  Norm's exactly right in that these processes have changed significantly over the last few decades.  

Per diem, for example, went to being 'car hire' and changed from a daily charge to an hourly charge.  They also went from pure paper reporting to a data exchange and from prescribed rates to 'deprescribed'/negotiated rates.  Today's car hire data is stored in a database called Liability Continuity System (LCS) which is adminstered by Railinc. Then car hire was centralized to a degree, with amounts being netted via the Railway Clearing House (RCH).  The car hire rules are very complex and understood well by very few.   The unusual thing about car hire is that it is payee self invoicing.  The one who owes the car hire calculates the amounts and then the car owner audits these payment statements.  There's some great presentations on the ACACSO (Association of Car Acounting and Car Service Officers) website that details such topics as private car mileage equalization, Rule 22, Rule 15, TOL, etc. They also have the complete car hire rules (OT-10).  There's also pretty much an exception to every rule.  

On the car repair side there have been similar changes with additions of data exchanges and use of the RCH.  Car Repair rules can be found in the Office and Field Manuals.  Basically, everything has a line item for part removed, why made code, and part applied.  Wheels get scrap credit and so have extra measurements input for flange depth, etc.  Probably the biggest change here is the proliferation of contract shops.  Used to be there was an AAR and RAC Pricemaster (for the US and Canada respectively) which set the standard rates for all repairs.  With contract shops these basically are negotiated.  There's a lively business in auditing freight car repairs, as you can imagine.

Now if you really want to have fun we could get into the Railway Accounting Rules and talk about abstracting vs ISS, breakpoints and parent child Rule 11 moves, and other obscure topics!

aronco Wrote:
-------------------------------------------------------
> Railroad reporting marks
> do not end with "X", with one exception.  Can you
> think of the exception?

Realized this wasn't directly answered.  Of course, TTX boxcars and gons are very much subject to car hire, so RBOX, TBOX, GONX, etc. have car hire.

There are now occasional other exceptions, which is why any railroad needs to get up to date car hire rates (the CHARM file) as sometimes a railroad will lease a FURX or something and put it in a car hire pool.

Also should have probably discussed pools more, but have to get back to work.

Waybiller Wrote:

> Also should have probably discussed pools more,
> but have to get back to work.

Forget work---share more of your wisdom!

Man, maybe computers can sort this all out????  I'd hate to be the data enterer.  That probably won't pass "check spelling "   either.

There is so much of the so called "behind the scenes" stuff that we all sort of know that it happens but as far as most of us know, it it were not for smoke and mirrors, the railroads wouldn't run at all.  We know that smoke and mirrors don't get the job done but we don't know what does.  Having those smoke generators and the mirror manipulators exposed and explained takes some of the mistery out of how things work and how stuff gets done and how that carload gets from the shipper to the receiver.

I usually read several other forums on TO before I look at the "Railroaders' Nostalgia" section.  This forum is like the icing on the cake.  I get the other thing out of the way and come here for the desert, and what's better than desert?  

John