A study of long term economic impact of rail line abandonment.

1. INTRODUCTION

Railroads are critical to the success of many businesses in the U.S., especially those involved in largescale production requiring large volumes of bulk raw materials. Railroads are the link between ocean carriers and trucks for shippers moving containers internationally, and intermodal freight is the fastest growing segment of the railroad industry.

Although railroads are an essential part of our nation's transportation system and remain regulated by the federal government, the number of rail carriers has decreased dramatically and operations have evolved radically. Furthermore, the miles of rail line in the network has continually declined so that barely half of the 254,000 miles it had at its peak in 1916 now remains (AAR 2007a). This decline in rail mileage and potential loss of rail service is a major concern of shippers and communities throughout the U.S. (Stewart et al. 1996; Office of Public Services 1997; AHTD 2002; Babcock et al. 2003a; Babcock et al. 2003b). In response to this concern, government policy makers have attempted to balance the needs of shippers and communities with the financial burden on railroads that are forced to continue operations over unprofitable branch lines.

It is not clear; however, that government intervention to prevent rail abandonment is warranted in today's evolving economy. When railroads were the only reasonable form of transportation, they often had monopoly power and sometimes it was abused (Farris 1969). Under those conditions, there may have been a need for protective regulations, but abandonment of unprofitable branch lines can hardly be classified as monopolistic exploitation. In many instances, rail lines are abandoned because of declining traffic levels resulting from more creative shippers selecting other forms of transportation, especially trucks. Protests are made typically on behalf of firms that are thought to have no alternative means of transport. Unfortunately, their traffic volumes frequently are not sufficient to permit profitable operations of the line. Protective policies of this nature may be simply enabling less creative shippers to continue inefficient and archaic business practices.

Shippers who lose rail service because they are "the last to leave" will find either a new, perhaps more efficient way of meeting their customers' needs, or failing a successful transition, they may become victims of abandonment and cease operations. While the failure of a business should not be taken lightly and may be initially a serious problem for owners and employees, it is difficult to imagine that they could not rebound, since others found preferable means of transport prior to the abandonment (Gittings and Thomchick 1987; Office of Public Services 1997). If firms cannot survive without rail service, and the impact of the abandonment is truly serious, the entire local economy would be affected, not just a single company, and those effects should be apparent over a long period of time. In fact, federal abandonment policy requires that the Surface Transportation Board (STB) find "serious, adverse impact on rural and community development" before rejecting an abandonment application (Office of Public Services 1997, p. 10).

The purpose of this study was to examine the long-term economic impact of rail line abandonment. To assess these long-term effects, counties in Arkansas that had no rail service prior to 1980 or had experienced rail abandonments prior to 1996 were compared to counties that had not lost rail service during that period. Conditions relating to population, employment, income, banking, manufacturing, wholesaling, and retailing and changes in those measures between 1980 and 2000 were analyzed, using data from the County and City Data Book (U.S. Census Bureau 2007).

1.1 Pervasiveness of Railroads