Jobs, Output & Taxes: New Report Quantifies Freight Rail’s Economic Impact

With the fourth largest freight rail infrastructure in the nation, Ohio’s role as a cargo transportation hub is a major driver of the state’s economy. Now, for the first time ever, a new study has quantified the economic impact of freight rail investments—and how private rail spending “ripples” throughout America’s national and local economies.

For every dollar freight railroads spend on building, maintaining and enhancing America’s 140,000-mile rail network, $10 is generated in economic impact, according to the study from Towson University’s Regional Economic Studies Institute (RESI). Freight rail investments also support 1.5 million jobs across the country—nine jobs for every rail job.

Researchers examined the economic impact of freight railroads’ private investments, which surpass $600 billion since 1980 and are expected to reach $26 billion in 2016. In a State of the Industry report released along with the new study, the Association of American Railroads (AAR) says that the findings demonstrate freight rail’s “powerful economic ripple effect across a myriad of U.S. industries.”

“Whether selling and building automobiles and houses, powering businesses or enabling manufacturers to reach new customers, American industries rely on rail to get raw goods and products to market in the United States and beyond,” writes Ed Hamberger, AAR CEO and President. “The net economic effect is profound.”

Across Ohio, railroads are a crucial component in transporting almost 144 million tons of cargo that originate or terminate in the state in a given year. They also employ thousands of Ohioans in well-paid, community sustaining jobs.

Ohio is home to 13 intermodal facilities – the second most in the nation. These terminals take advantage of the standardized container and other technologies to efficiently move freight between modes of transportation. Intermodal has redefined logistics and now allows freight to travel the farthest distance possible on the most efficient and cost effective mode. For Ohio, this means our manufacturers and farmers have access to some of the greatest logistical options and efficiencies in the nation.

Massive rail investments require a vast supplier network to produce the locomotives, rail cars, track, crossing signals, and other components utilized in the national 140,000-mile rail infrastructure. In 2010, the Ohio Department of Transportation estimated that railroad investments supported nearly 100 companies and 25,000 jobs in the state.

In 2014, the year that was examined in the study, spending by Class I railroads created $274 billion in economic activity and generated nearly $33 billion in total tax revenues. Of these taxes, $11.9 billion were collected at the local and state levels, exceeding the tax revenues collected by 30 states.

The study links the success of this powerful economic engine to the Staggers Rail Act of 1980, which created a balanced regulatory framework that allowed railroads to run like businesses and earn enough capital to invest back into their network.

Researchers pointed to the impact of these private investments for customers, noting that rail productivity has increased 139 percent since the Staggers Act. “Most of these productivity gains were passed through to rail customers—decreasing the cost of utilizing rail transportation,” the report says.

Freight trains deliver just about everything that keeps Ohio moving forward; from the chemicals that purify our drinking water, to the wheat in our bread, to computers, clothes, cars, and the energy used to generate 70 percent of the state’s electricity. Were it not for massive railroad investments, this freight would be on our highways, which are already strained to capacity in many places.

Today, the nation’s railroads are moving record volumes. Businesses are producing more, consumers are buying more and railroads are playing a bigger part in getting American goods to market, both domestically and globally. From consumer goods and automotive parts to agricultural and industrial products, railroads are flexible, efficient and responsive to shippers.

Most impressive is that average inflation-adjusted freight rail rates are down 42 percent from 1981. That means today’s rail customer can move nearly two cars for the price of moving one 30 years ago. No other mode of transportation can boast this surge in efficiency and market competiveness.

As freight railroads invest record amounts in their infrastructure, Ohio will continue to be a major beneficiary of these private sector enhancements. The rail renaissance has arrived and shippers that recognize the cost benefits of rail are steadily realigning their geographic assets to be strategically located by rail. Under this scenario, Ohio is a must-look-at state. And given the projections for increases in freight transportation over the next 20 years, there does not appear to be any end in sight to current trends.

America has the best, safest and most affordable freight rail system in the world. The heart of that system runs through the Buckeye State and will continue to define and enhance our quality of life for another generation.

GoRail is a national non-profit promoting the benefits of freight railroads. Learn more about freight rail’s economic impact in your community and read the study here.

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