CTS Publications

By: Dr. Harvey A. Levine, Director, Crossing to Safety®

Since the early 1970’s, the government has expended about $200 million annually for the installation of automated gates at railroad crossings.  About $165 million comes from the federal government’s so-called Section 130 money that is dedicated to the improvement of warning devices at crossings, while the other $35 million has been derived from the combination of other federal monies and State programs.  (A very small amount comes from private interest groups.)  At the same time, the railroad industry has invested close to none of its own money for gate installations.  At one time in our history, railroads were required to pay half of the cost of gates, but this contribution shrunk to 10%, and eventually to nothing -- although in a limited number of cases, railroads make a minor contribution.  In fact, the industry may profit from installing gates in that they not only charge the government for time and materials, they also are reimbursed for overhead allocations and “additives” (a surrogate for profit).  The basis for the railroad industry’s shrinking contributing toward gate installations seems to have changed over the years.

Originally, the 50-50 percent sharing arrangement was attributed to the fact that railroads and public road authorities shared ownership of public grade crossings.  Without the track structure there would be no grade crossings.  On the other hand, the same could be said for the absence of highways.  But as the overbuilt, inefficient, and financially-troubled railroad industry became mired in bankruptcies, deferred maintenance, and inadequate capital in the decades following World War II, the government increased its contribution to 90 percent.  The change was also justified on three underlying premises.  First, it was espoused that since railroads preceded highways, that highways crossed railroads and as such, were a nuisance to railroads.  As a spokesman from the industry’s trade association – the Association of American Railroads – said, It’s the state highway people who decided to put highways . . . over the railroad tracks.  They’re the highway experts.  We didn’t put the highways in, and frankly, we would prefer that they not be there.  (Statement of Tom White as cited in the Omaha World-Herald Company, September 29, 1999.)  Second, it was thought that since motorists, and not railroads, were the overwhelmingly prime beneficiary of automated gates (and other crossing improvements), that the government should fund gate installations.  After all, collisions between trains and motor vehicles often resulted in death and injury to motorists, but rarely to railroad personnel or passengers (in the case of Amtrak and commuter lines).  And the fact that railroads had the right of way over motor vehicles at gated crossings, was in itself evidence that motorists needed protection from trains – not the other way around – and hence, that the public benefited from crossing improvements.  Rhetorically speaking, why should railroads pay for informational and safety devices that offered almost no benefits to them?

        All three of the underlying premises have serious flaws, but since the railroad industry had been in the financial doldrums during much of the 20th century, and the industry’s powerful lobbying efforts did not face counter-veiling forces, the railroad industry managed to get itself excused from paying for gate installations.  And to this day, the general public has no idea who pays for improvements at grade crossings, and what the relative roles are of the railroad industry and the government.  But today’s railroad industry is not that of our grandfathers, or even our fathers.  The industry has consolidated into seven Class I (the largest railroads based on annual revenue) systems, with four railroads dominating the industry.  The seven Class I railroads enjoy over $40 billion of annual operating revenue, with about 93 percent of that amount going to the top four systems (Union Pacific, Burlington Northern/Santa Fe, Norfolk Southern, and CSX Transportation).  Two of the other three Class I railroads are owned by large Canadian-based railroad systems.  These mega-railroads operate in many monopoly markets, enjoy significant profits, have experienced large increases in the price of their stock, and have paid their executives substantial salaries, bonuses, and grants of stock.  They can well afford to pay for the installation of gates, not only because of their strong financial posture, but also because the actual cost of installing gates is less than they charge the government, and because such costs are pre-tax expenses.  In a number of cases, these railroads pay far lower income taxes than other companies because their capital intensity allows for significant accumulated tax deferrals.

Aside from the major change in the financial ability of the railroad industry, the other underlying premises – as cited above – have a logical contrary perspective.  For example, while railroads were built prior to highways (the industry was initiated in 1830, long before the development of motor vehicles), railroads did not precede the movement of goods and passengers by horse-drawn power.  In essence, the need for people and commodities to travel between various locations existed long before the advent of trains.  Furthermore, it was the public that granted railroads the land that they operate on, and provided them with exclusive licenses to run commercial ventures.  In other countries, the railroads were owned and operated by the federal government (the one exception was a single large Canadian railroad).  In this sense, railroad track structures cross roads and highways needed and used by the public and thus, they interfere with societal needs.  While it is true that the public benefits more from grade-crossing improvements than do railroads, it is the railroad industry that caused the conditions to exist whereby track and roadways intersect.  The public also incurs the cost of having to yield to trains at grade crossings, resulting in wasted time and more importantly, deaths and injuries caused by a variety of factors, including inadequate warning devices and deficient crossing structures.  Thus, the benefit to the public from installing automated gates is due to the fact that the public suffers from having gates at only about 30 percent of public crossings.  Gates are by far the safest protective device at grade crossings, as federal statistics show them to be 3-4 times safer than such passive devices as crossbucks.  And finally, just because trains have the right of way over motorists at grade crossings, does not mean that railroads are exempt from their responsibility to warn motorists when trains are approaching.  The granting of the right of way was a matter of physics – not a matter of identifying relative responsibilities between railroads and the public.

Based on their monopolistic positions, their financial wherewithal, their interference with societal needs for the movement of people and goods, their exclusive operating licenses granted by the public, and the havoc they cause the public when accidents occur, it is time for the railroad industry to pay for the installation of gates at grade crossings.  The cost to railroads is far less than their charge to government agencies and in many cases, they can pass the added expense on to their customers.  The railroad industry is currently faced with so much demand that traffic congestion has become a much talked-about issue.  To combat such demand, the industry has been raising its rates (prices) in order to maximize profits.  For an industry that has been experiencing steady increases in its annual revenue, it has both the moral responsibility and financial ability to single-handedly pay for the installation of automated gates at crossings throughout the country.  In summary, the 10 reasons why railroads should pay for the installation of crossing gates are as follows:  

  1. The concept of time and place utility – that is, having people and goods at times and locations -- preceded the development of the railroad industry in this country.

  2. The existence of pathways, trails and streets preceded the development of the railroad industry in this country.

  3. Railroads were granted their land and their rights-of-way by the public and in return, have a responsibility to provide safe travel over their track structures.

  4. Trains were given the operational right-of-way over motorists at grade crossings, and in return, have a responsibility to provide motorists with safe crossing.

  5. Train-motor vehicle collisions result in death and injury to motorists, but not to on-train personnel or passengers, and thus, railroads should provide maximum safety to motorists at their crossings.

  6. If railroads paid for the installation of automated gates, the total cost would be lower in that overhead charges could be absorbed by railroad customers and additives (profit) would be non-existent.

  7. By paying for the cost of grade-crossing installations, railroads would have the incentive to make such installations in a more effective and especially, efficient, manner.

  8. By taking over the expense of installing crossing gates, government expenditures for gates, as well as the bureaucracy of federal and State agencies, would be eliminated, thereby reducing the burden on taxpayers.

  9. The railroad industry has been re-monopolized into four mega and three other large railroad systems and these carriers can well afford to pay for the installation of crossing gates.

  10. With the lower cost of gate installations, more crossing gates would be installed in a shorter period of time than is currently the practice.
If the railroad industry was required to pay for the installation of automated gates at their crossings, the end result would be the reduction of grade-crossing accidents, and fewer injuries and deaths among the general public.



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