Rail Growth Capitalization IntelliConference

Background Statement

North American freight railroads require substantial capital investment and strategic alignment among many stakeholders. While private capital has historically driven the development and maintenance of this system, it alone isn't enough to meet future demands for growth and modernization. Intelligent collaboration between the private investment community, rail management, and government fosters a rail growth strategy that strengthens our multimodal network, incentivizes both public and private investment, and optimally serves supply chains. The key to facilitating this long-term growth strategy is to broaden investors’ valuation horizons, integrate public policies, and empower rail management.

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Core Question

What performance measures, financial incentives, and public policy adjustments can investors, rail management, and government reconceive to expand capitalization of the modernization and growth of North American freight railroads and enhance their strategic value to supply chain efficiency?

Dialogue Questions

Round One
Current Freight Rail Capitalization

1. What is the approximate annual capital reinvestment by the railroad industry, expressed as a percentage of total annual revenue, for:
   1. Maintaining a state of good repair?
   2. Expanding capacity?
   3. Modernization efforts?
2. What are the primary investment factors considered by investors, policymakers, and senior rail management when evaluating the current Class I business model, specifically concerning rewards and penalties?
   1. What are the typical return-on-investment (ROI) levels and timelines anticipated?
   2. What are the typical operating income levels and timelines expected?
   3. How are sustainability outcomes incorporated into reward structures?
3. How do these stakeholder groups (investors, policymakers, and senior rail management) currently view the influence of rail growth on overall supply chain optimization?
4. What substantive and realistic rail service growth plans have been adopted by rail management, investors, and policymakers?
5. When rail growth projections are communicated by these stakeholder groups, what are the underlying drivers for those goals?
6. How do the ROI levels and timelines for privately owned rail infrastructure projects compare with those for publicly owned infrastructure projects in other transportation modes?

Round Two
Freight Rail Capitalization to Support Growth

1. Why is collaboration among rail management, investors, and policymakers essential to enable rail service modernization and growth?
2. What are the current obstacles to collaboration among these groups, and how can we overcome them?
3. What shared objectives do these stakeholders want to align on as part of a significant growth initiative?
4. Within a rail service growth strategy, how should the levels of annual capital investment change for:
   1. Maintaining a state of good repair?
   2. Expanding capacity?
   3. Modernization?
5. What opportunities and risks emerge from adjusting investment time horizons?
   1. How can we mitigate these risks?
6. What other risks need to be addressed to stimulate growth investment?
   1. How can we mitigate those?
7. How should compensation programs and performance incentives for rail management be adjusted to support long-term rail service growth?
8. What public-sector policies and funding programs could be modified to encourage or incentivize private-sector capital investment in rail?
9. How can we accommodate useful collaboration that integrates with anti-trust concerns?
10. What changes are required to facilitate enhanced capital access for expansion and modernization projects among Class II and III railroads, smaller rail shippers, and other transportation providers?