Western Railroad Discussion > MRL might become a Class I.

From Railfan & Railroad: http://railfan.com/montana-rail-link-on-edge-of-becoming-class-one-asks-feds-to-change-the-rules/

Montana Rail Link will become a Class I railroad within two years if the STB doesn't change the rules. A railroad is considered a Class I if it makes more than $450,000,000. MRL wants the criteria to be raised to $900,000,000 so it won't be considered a Class I. If MRL becomes a Class I, it will be held to higher regulatory standards than Class IIs. 

The STB might go along with MRL and change the criteria, but then again it might reject MRL's plea and declare that as a railroad that makes more than $450,000,000, it should be held to higher standards than it currently does as a Class II.

Who remembers when the Class I revenue requirement was $1 million? There were about 100 Class I's in the early 1960's.

TJY

For those in the know,  STB reporting requirements (read as: paperwork requirements) increase greatly for a railroad that desires to transition from Class 2 to Class 1 status. The amount of STB paperwork associated with Class 1 status involves generating more detailed operational and financial  reports.  If anyone wants to bone-up on just one aspect of the paperwork,  check out The Uniform System of Accounts requirements: https://www.transit.dot.gov/ntd/uniform-system-accounts-usoa.  Accountants will need to be hired, more detailed information provided to the STB,  the list goes on. I hope MRL successfully lobbies against becoming a Class 1.  Been there, done that. 

 



Edited 1 time(s). Last edit at 05/21/20 10:41 by BurtNorton.

icancmp193 Wrote:
-------------------------------------------------------
> Who remembers when the Class I revenue requirement
> was $1 million? There were about 100 Class I's in
> the early 1960's.
>
> TJY

Yes, it was $1 million from the start of the classification system in 1911 until 1956.  To compare, $1 million in 1911 is roughly equilvent to $26 million today.  By 1956, $1 million was only the equilvant of $9 million today.

The following is the revenue requirement changes:
1911-1956 - $1 million (113 Class I railroads in 1956)
1956-1964 - $3 million (102 Class I railroads in 1963)
1965-1975 - $5 million
1976-1977 - $10 million
1978-1991 - $50 million (41 Class I railroads in 1978)
1991 to today - fixed at $250 million 1991 dollars

The entire railroad class system is corrupted and needs to be done away with.  It has outlived it's purpose as there are basically no "mom and pop" railroads left.  It simply allows the big class ones to spin off lines to giant corporate short line companies.  They then enjoy recieving all the interchange traffic with half the maintenance and labor costs.  Watco, for example owns 153 different railroads and facilities, and saw nearly 1 billion in revenue last year.  Yet, it's many "short lines" are treated as class 3's since each railroad is kept as a small, separate legal intity while Watco is considered a "non-carrier holding company."  It's a beurocratic loophole that has gutted railroad labor and abused the original purpose of the regulation, which was to allow small, regional railroads to stay profitable. 

One of the most common excuses that I have seen is the claim by class 1s that short line comglomerates run the lines that could not be profitably run by class 1s.  Maybe this is true in very few cases, but not all.  There are some railroads owned by short lines, such as Eastern Idaho railroad, which interchanges hundreds of cars per day to the Union Pacific at Minidoka and Idaho Falls.  There is no competition.  There is no BNSF to interchange with and UP enjoys all of this traffic while the former UP branches get to cut corners, break unions and most offensively, recieve state short line tax credits for their operations.  

If the class system remains, I would like to see all railroad properties owned by a holding company be included in the class decision. It's offensive for giant companies like Watco and G&W to claim class 3 status and short line tax credit status on their properties when they operate such vast railroad empires in multiple countries.



Edited 1 time(s). Last edit at 05/21/20 12:21 by HogheadMike.

Union breaking is becoming easier to do.  The current Secretary of Labor was a highly regarded union de-certifier when he was in private practice. The two new members of the National Labor Relations Board were denounced by Rich Trumpka as no friends to union members.

HogheadMike Wrote:
-------------------------------------------------------
> ... Watco, for example owns 153
> different railroads and facilities, and saw nearly
> 1 billion in revenue last year.  Yet, it's many
> "short lines" are treated as class 3's since each
> railroad is kept as a small, separate legal intity
> while Watco is considered a "non-carrier holding
> company."  It's a beurocratic loophole that has
> gutted railroad labor and abused the original
> purpose of the regulation, which was to allow
> small, regional railroads to stay profitable...  
>
> If the class system remains, I would like to see
> all railroad properties owned by a holding company
> be included in the class decision. It's offensive
> for giant companies like Watco and G&W to claim
> class 3 status and short line tax credit status on
> their properties when they operate such vast
> railroad empires in multiple countries.

What if MRL split into two railroads so as not to reach the Class 1 revenue threshold?  That would be more expense, but less than the expense of Class 1 status.

mapboy

> What if MRL split into two railroads so as not to
> reach the Class 1 revenue threshold?  That would
> be more expense, but less than the expense of
> Class 1 status.
>
> mapboy

I think the whole class system should just be done away with.  As I said, it's outlived it's purpose, coming from an era long before staggers, or airplanes or cross country trucking, or personal automobiles and interstate highways.  

HogheadMike Wrote:
-------------------------------------------------------
> > What if MRL split into two railroads so as not
> to
> > reach the Class 1 revenue threshold?  That
> would
> > be more expense, but less than the expense of
> > Class 1 status.
> >
> > mapboy
>
> I think the whole class system should just be done
> away with.  As I said, it's outlived it's
> purpose, coming from an era long before staggers,
> or airplanes or cross country trucking, or
> personal automobiles and interstate highways.  

If you are on the customer side of the equation, it might make more sense to do away with the class one railroads instead of the class system.

I agree with Mike, all this this just complicates the issues and as far as operating rules, should depend on the traffic density, operating
speeds, train frequency et al rather than your revenue level. 

Out 

>A railroad is considered a Class I if it makes more than $450,000,000.
>1991 to today - fixed at $250 million 1991 dollars

These numbers don't match, has the value changed that much since 1991?



Edited 2 time(s). Last edit at 05/23/20 10:29 by trackplanner.