Legislative Update
ACACSO Convention
Kansas City, MO
Ed McKechnie
May 13, 2010
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1. Short Line Tax Credit
2. STB Reauthorization
3. Positive Train Control
4. Truck Size and Weight
5. As Of Today…
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45G Tax Credit - Status
• 45G Expired on Dec. 31, 2009.
• One-year (Tax Year 2010) extension of 45G
included in H.R. 4213 – “Extenders Package”.
• House passed H.R. 4213 on Dec. 9, 2009.
• Senate passed H.R. 4213 on Mar. 10, 2010.
• H.R. 4213 could be “conferenced” to resolve
differences.
• Chairman Levin wants to see action on bill “in
this work period” (i.e. before Memorial Day).
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45G Tax Credit – Status (cont.)
• Problem: Congressional rules require tax
credits to be “paid for.”
• “Solution”: Raising revenue elsewhere to
pay for tax reductions like 45G.
• Additional Problem: To pay for a one-year
extension of all expiring tax provisions
requires finding $30 BILLION in “new”
revenue.
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45G Tax Credit – Status (cont.)
Total Cost of H.R.
45G Tax Credit “scores” (i.e. “costs”)
4213 =
~$140
billion
$165
million
for each year
extended
Federal
Medical Adjustment
Percentage (FMAP) = $25 billion
Other Health Care = $14.4 billion
Unemployment Benefit
Extension = $61 billion
COBRA Premiums = $9.9 billion
Total “Extenders” = $30 billion
45G = $165 million
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45G Tax Credit – Status (cont.)
$110 billion is “Emergency
$30
billionthat
“Tax
Extenders”
Total
Cost
Spending”
doesof
notH.R.
portion
be “paid
for.”
“need”
“paid
for” billion
4213tomust
=be~$140
Federal Medical Adjustment
Percentage (FMAP) = $25 billion
Other Health Care = $14.4 billion
Unemployment Benefit
Extension = $61 billion
COBRA Premiums = $9.9 billion
Total “Extenders” = $30 billion
45G = $165 million
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Topic 2 – STB Reauthorization
The issue formerly known as: “Rereg”
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Meanwhile, back at the ranch…
• Sen. Rockefeller has introduced S. 2889
• Senate Commerce Committee unanimously
“reported” S. 2889 on Dec. 17 with no
Republican votes against
• Sen. Brownback (R-KS) and Sen. Snowe (RME) have expressed concern re: short line
impacts
• Sen. Rockefeller has promised those Senators
that he will “work on” short line concerns
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STB Status (cont.)
• Rockefeller staff seeking compromise bill
that can attract near unanimous Senate
approval
– Unable to do so, yet.
• AAR has at least 11 outstanding issues,
including anti-trust, network compensation,
and paper barriers
• Rail unions are generally supportive of
R.R. position on STB & Anti-trust issues.
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STB Status (cont.)
The Legislative Clock is ticking…
…and time is running out.
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Sec. 301 – Paper Barriers
• S. 2889 would:
– Prohibit new PBs unless “reasonable and in the public
interest.”
– Allow challenges to existing PBs, and allow STB to
“take appropriate action”
– Allow STB to set valuation for buyout of PB at option
of a short line
– Allow short lines to surcharge customers for PB
buyout
– Make PB buyout eligible for RRIF financing and
provide grants for credit risk premiums
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Sec. 302 - Bottleneck
• S. 2889 would:
– Require Class I’s “upon request” and short
lines “as deemed appropriate” by STB finding,
to establish bottleneck rate.
– Note: All carriers were originally required to
quote rate upon request. Partial short line
carve out represents initial ASLRRA lobbying
success.
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Sec. 302 - Bottleneck
• S. 2889 would:
– Require Class I’s “upon request” and short
lines “as deemed appropriate” by STB finding,
to establish bottleneck rate.
– Require STB to set standards for determining
a “reasonable” bottleneck rate.
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Sec. 303 – Terminal Access
• S. 2889 would:
– Board may require Class I’s to make areas
available to other carriers.
– Board may require short lines to make
terminal areas available “as deemed
appropriate.”
– Access available where R.R. has “market
dominance.”
– Require STB to set standards for “reasonable”
terminal access rates.
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STB – House of Representatives
• House has twice called a hearing on STB
Reauthorization only to cancel the hearing.
• C.C. appears to be pressuring House T&I
Chairman Oberstar to accept whatever
comes out of the Senate.
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Topic 3 – Positive Train Control
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PTC
• The Basics:
– RSIA of 2008 Mandates Positive Train Control
Systems by December 31st, 2015 for Class I RR
Main Line segments (carloads > 5M per year)
which:
• Transport PIH or TIH Materials ( carloads > 100 per
year)
• Host or Operate Over Passenger Lines
– Short Lines are tentatively exempt from PTC
requirements, expect those that:
• Operate on Class I lines Carrying PIH / TIH Materials
• Host of Operate over Passenger Lines
• Have At Grade Crossings Over Lines Required to Have
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PTC*
PTC Costs
• FRA estimates ≈ 60 Short Lines Will Need to
Equip Locomotives with PTC Technology
– Estimated Costs (FRA):
•
•
•
•
•
$55,000 – $220,000 per locomotive
Industry Wide Implementation ≈ $13.2 M
Annual Maintenance ≈ $1.98 M
Total Industry Front End Investment ≈ $15 M
Other costs: Training, Economic, Derailments
– Actual Costs:
• We Don’t Know
• But We Need to Know, Soon.
– This will cost the rail industry billions with little or
no economic return
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PTC Funding Solutions
• Grants
– Safety Technology Grants
• RSIA 08 authorized $50 M annually 2009-2013
• Maximum Federal Match of 80%
– Rail Line Relocation Program
• Typically Appropriated ≈ $ 25 - $30 Million Annually
• Maximum Federal Match of 90%
• Program is well known and increasingly competitive
• Tax Credits
– Class I Tax Credit
• AAR is working on making PTC upgrades eligible under a yet-to-be passed Class
I credit
– Section 45G
• PTC upgrades could fall under the category of Signal Upgrades and would
therefore qualify for the Section 45G credit
• Loans
– Commercial loans are not a viable option due to basic economics of
PTC
– RRIF Loans
• Modify to allow for a 35 year, 1% loan for PTC upgrades and/or increase cap
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Topic 4 – Truck Size and Weight
Update
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TSW Update
• Threat continues
• Not going to happen in Congress until next
year
• State level attacks will continue
– Florida
– Idaho
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Topic 5 – As Of Today
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As Of Today
• Republicans make gains in House
– Probably take back majority
– Most probably stopping majority of threats to
rail industry
• Re-reg is a bigger problem than most want to
admit
• Senate gets closer to 50/50 (D’s 52-48)
• New Congress moves forward
– Then figures out in about April 2011 that this
is harder than their press releases said
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