Railway Turnpike Ton-Mile Calculator

Overview

A true turnpike pays all of its expenses using revenues based upon each user's access and use. The concept conforms to Adam Smith's observation from his book "The Wealth of Nations" (Book V, Chapter 1, Part III, Article 1):

"When the carriages which pass over a highway ... pay toll in proportion to their way to or their tunnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them. ... This tax or toll, too, though it is advanced by the carrier, is finally paid by the consumer, to whom it must always be charged in the price of goods. As the expense of carriage, however, is very much reduced by means of such public works, the goods, notwithstanding the toll, come cheaper to the consumer than they could otherwise have done; their price not been so much raised by the toll, as it is lowered by the cheapness of carriage."

For railway turnpikes, the assessment should be based upon the ton-mile each train engine and car uses the rail network.

In a theoretical railway turnpike, all administration costs including maintenance of way costs would be paid for by ton-mile assessments. That calculation is as follows-

Determine the Total Annual Network Ton-Miles

For each train on a network, multiply its tonnage by its distance traveled;
Sum all the ton-miles for one year.

Determine the Total Network Track Miles

"Track Miles" is the distance in miles of all individual tracks in a network or route;
"Route Miles" is the distance in miles between two points.

Determine the Annual MOW per Track Mile

\$25K MOW per track mile for ~50 MPH freight track (recommended by US DOT Inspector General for Class I rail carrier traffic U.S DOT Office of Inspector General Archives);
\$5K for FRA Class II 25 MPH freight track (recommended by Roy Blanchard, The Blanchard Company)
At least \$1K for no traffic on a line (recommended by the Ohio Rail Development Commission http://www.dot.state.oh.us/Ohiorail/)
Note - These costs are prior to at least 40% construction and MOW price increases due to the recent runup in energy prices (Ohio DOT Director James Beasley 3-13-2007 testimony).

Determine Annual Network MOW

Multiply Total Network Track Miles * Annual MOW.

Determine Ton-Mile Assessment for MOW

Divide Annual Network MOW by Total Annual Network Ton-Miles.

Determine Ton-Mile Assessment for All Expenses

Add all other expenses to Annual Network MOW;
Divide all expenses by Total Annual Network Ton-Miles.

Support Documents-

Spreadsheet of scenarios for 10, 200, and 1200 mile single, double, and triple track routes hauling between 0-250M tons annually, with variable administration costs (MMY RR VC Calc 5-21-2008.xls) 84KB, no macros; hardcopy (MMY RR VC Calc 8-31-2009.pdf) 125KB

Variable Cost Scenario Runthrough Using the Pittsburgh-Columbus Panhandle Line-

Suppose Conrail's Pittsburgh-Columbus Panhandle route was still continuously intact and selected for a public railway turnpike. The route from Pitt-Grant/MP 191.1 was ~191 miles. If the freight route was extended east via the Monongahela Line to Thompson Yard for interchanging with multiple carriers its length would be ~200 miles. What would the variable costs be to administer the line for 50M annual tons of traffic (the amount Conrail was running on the Panhandle before they out-of-routed it elsewhere and eliminated other customers)?

The variable administration costs scenario; 200 route mile, double-track line; Case 6 50M Annual Tons is used. The equivalent number of 100-car trains using the segment annually is determined by dividing an arbitrarily set 10K ton per train amount (at 100 tons per car) into the total tonnage, i.e., 50M tons / 10K tons per train = 5K trains.

The number of ton-miles on the 200 mile segment is determined by multiplying the 10K tons per train by the number of trains (5K) by the 200 route mile distance, i.e., 10K tons per train * 5K trains * 200 miles = 10B ton-miles.

The route was originally single track then upgraded to multiple tracks and subsequently downgraded back to single track and abandoned between MP 11-MP 39. For this exercise the whole route will be double track meaning the track miles will be twice the route miles, i.e., 200 route miles * 2 tracks = 400 track miles.

Per the US DOT Inspector General's recommendation for heavy use Class I rail lines, the annual MOW per track mile is set to \$25K.

The annual network MOW cost is determined by multiplying the track miles by the \$25K per mile MOW value, i,e., 400 track miles * \$25K = \$10M annual MOW for the entire route.

The ton-mile toll assessment for MOW only is determined by dividing the annual network MOW cost by the total ton-miles, i.e., \$10M annual MOW / 10B ton-miles = \$0.001 per ton-mile. Thus the fee for a 100 ton car going the 200 mile route would be 100 * 200 * \$0.001 = \$20.

Since all other public railway turnpike administrative costs are unknown for now, a table was created listing theoretical administration costs (including MOW) based upon what percentage MOW would be of all other administrative costs. The percentages used ranged from 50%, 25%, 10%, 5%, 2.5%, and 1%. For comparison, the Ohio Turnpike Commission's 2005 MOW was 21.98% of their operating expenses before debt service, and the Alameda Corridor Transportation Authority's 2005 MOW was 11.82% of their operating expenses before debt service. (See OTC's 2005 CAFR .pdf p.31 and ACTA's 2005 CAFR .pdf p.9)

The ton-mile assessment for all administrative costs including MOW is determined by dividing the theoretical administration costs by the total network ton-miles. Say all administrative costs could be held to 10% MOW costs, just under ACTA's 11.82%. The toll for a 100 ton car going the 200 mile route would then be 100 * 200 * \$0.01 = \$200.

Fixed Administration and Variable MOW Costs

While in a theoretical railway turnpike all administration costs including MOW costs would be paid for by ton-mile tolls, in reality more of the administrative costs would instead be "fixed" and not as "variable" as MOW costs. Thus another scenario is necessary to better account for those differences.

Support Documents-

Spreadsheet of scenarios for 10, 200, and 1200 mile single, double, and triple track routes hauling between 0-250M tons annually, with fixed administration costs (MMY RR FC Calc 8-31-2009.xls) 85KB, no macros; hardcopy (MMY RR FC Calc 8-31-2009.pdf) 123KB

Fixed Cost Scenario Runthrough Using the Pittsburgh-Columbus Panhandle Line-

Again using the Pittsburgh-Columbus Panhandle route for a public railway turnpike, the fixed administration costs scenario; 200 route mile, double-track line; Case 6 50M Annual Tons is used. The ton-mile MOW assessment is the same as in the variable cost example, with 50M annual tons over 400 track miles at \$25K MOW per mile requiring \$0.001 per ton mile.

Since all other administrative costs are again unknown for now, a table was created listing theoretical administration costs, this time excluding MOW costs, based upon what percentage MOW costs would be of all other administrative costs. The percentages ranged from 50%, 25%, 10%, 5%, 2.5%, and 1%. Using the previous example, if administration costs excluding MOW costs could be held to 10% and the MOW costs are \$10M, the administration cost would be \$90M, i.e., \$10M MOW is 10% of \$100M, and \$100M - \$10M MOW = \$90M administration alone.

A per-car administration "fee" to cover all administrative costs excluding MOW is determined by dividing the administration costs by the total number of cars using the network annually, i.e., at 10% MOW the administration cost is \$90M, \$90M / 500K cars (5K trains * 100 cars per train) = \$180 per car.

The ton-mile toll is then be added together with the administration fee to determine the total assessment charge for each engine and car. The combined toll and fee assessment for a 100 ton car going the 200 mile route would be (100 * 200 * \$0.001 = \$20 MOW) + (\$180 administration) = \$200.

Caveats:

1) A public railway turnpike is assumed to be administered by a non-profit government agency using a non-profit, closed-loop, unsubsidized and un-cross-subsidized business model.

2) A public railway turnpike is assumed to be property tax free on its rights of way, infrastructures, and certain facilities.

3) A public railway turnpike is assumed to be consist-neutral except in cases where special attention, clearances, or escorts are necessary and may require an additional fee.

4) Capital expenditures for non-MOW projects are considered to be additional debt most likely financed by public tax-free revenue bonds. Bond interest and amortization payments may be added to the administration costs with requisite assessment increases, and once defeased the assessments would be re-adjusted to cover regular administration costs. If the fixed cost model is used, other costs would be added to the administration fee and not the MOW toll.

5) Carriage, energy, insurance coverage, labor, and other associated costs are the responsibilities of the carrier, shipper, and/or receiver and not of the turnpike provider.