Getting Back on Track

Railroads will continue to invest heavily in their networks, but expenditures will focus on projects with high expected rates of return for the railroad.  This focus on internal returns is necessary and appropriate in a free market economy.  However, it discourages investments that would yield primarily public benefits - such a reduced congestion, cleaner air, improved safety, and enhanced mobility - but insufficient direct financial benefits to railroads.

This major problem can be partially mitigated through a more pronounced use of public-private partnerships (PPPs) for rail infrastructure improvement projects, especially in cases where the fundamental purpose of the project is to provide public benefits or meet public needs.  PPPs, which combine the efficiency of the private sector with the equity of public participation, are not "subsidies" to railroads.  Rather, they are an acknowledgement that private entities should pay for private benefits and public entities should pay for public benefits.

Communities across the country are investing in rail operations that are not only making their lives better but boosting their local economies.  These public private partnerships are examples of tomorrow's potential success stories.

A sharper focus on PPPs is supported by the American Association of State Highway and Transportation Officials (AASHTO), which wrote in January 2003 that "[R]ealizing the benefits of a strong freight-rail system will require a new partnership among the railroads, the states, and the federal government."

For more information on the benefits of public private partnerships, review AASHTO's Freight Bottom Line Report or the Association of American Railroad's background paper on rail investment.