Sen. Wayne Schmidt
After eight months of fact-finding, the commission created by Gov. Rick Snyder to study Michigan’s infrastructure systems recently presented its findings. Thirty-nine percent of our roads and 27 percent of our bridges are structurally deficient. Aging water and sewer infrastructure systems also led to closures at nearly 25 percent of Michigan beaches due to contamination in 2015. The list goes on.
While these infrastructure problems are deeply serious, they should not be unexpected. Michigan ranks near the bottom of states investing in infrastructure. According to the report, “…maintenance has been deferred for decades, leaving us in a state of disrepair.”
As our state and federal elected officials, including me, identify ways to address these spending shortfalls, we should consider and learn from infrastructure success stories. Freight railroads — and their efficient, world-renowned 140,000-mile network — are a prime example of how private investments can generate innumerable public benefits.
Trains help to power the economy, hauling 40 percent of intercity freight and one-third of U.S. imports. They connect Detroit’s auto manufacturers to markets near and far, they provide businesses in Northern Michigan, Traverse City, Saginaw, the Upper Peninsula and elsewhere with the raw materials needed for production, and they deliver for consumers every day.
And this success story — rail’s productivity, efficiency — is born of a deep commitment to infrastructure investment. Freight rail companies have put a collective $600 billion into building, maintaining and expanding the national rail network since 1980. Over the last five years they’ve spent $26 billion annually, some 40 cents of every dollar earned. These investments generated $274 billion in economic activity and nearly $33 billion in total tax revenues in 2014, according to a Towson University study.
But prior to 1980, the freight rail network had a lot in common with Michigan’s current failing infrastructure systems. Government intrusion into the railroad business — rate and schedule controls, for example — had driven many rail carriers into bankruptcy. Deferred maintenance was similarly the rule of the day, as most companies were not earning enough to reinvest into the maintenance of their lines.
The Staggers Rail Act of 1980 reversed this faltering course for freight railroads. The legislation provided a balanced regulatory framework for carriers, allowing them to run like businesses without the government intruding in day-to-day operations.
While the economic deregulation of railroads has resulted in increased productivity, lower shipping rates and huge safety gains in the intervening years, the Surface Transportation Board (STB) recently proposed a set of rules that would undermine the whole system. The STB, which provides economic oversight to freight railroads, is considering something called “forced access,” which would require rail companies to open their lines to competitors — at rates and schedules determined by the government.
This raises a number of red flags. As discussed, infrastructure investment is crucial — for our citizens, businesses, and the economy. Reregulation would fly in the face of this assessment, ultimately undermining railroads’ ability to invest in their infrastructure. We saw rail infrastructure fall apart in the pre-Staggers era, and there’s no reason to think there would be a different outcome today.
In fact, one estimate says government-mandated rail traffic controls could jeopardize $8 billion in rail revenues, undermining the ability of railroads to invest back into track and equipment, and impact an estimated 7.5 million carloads of traffic.
Today, when we know that Michigan must spend $4 billion more annually on infrastructure to make up for our current gap, we must embrace the pieces of our infrastructure system that work. Private freight rail spending not only works for Michigan, it powers the national economy and provides an excellent “user-pay” example to emulate. Let’s not hamper rail’s private spending with new regulations.