Rail Growth Capitalization IntelliConference

Background Statement

North American freight railroads require significant capital investments and strategic alignment among multiple stakeholders. Intelligent collaboration between the private sector investment community, rail management, and government will foster a rail growth strategy that strengthens a multimodal network, incentivizes 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 1
Current Freight Rail Capitalization

1. What level of annual capital investment does the railroad industry reinvest in as a percentage of operating income:
   1. State of good repair?
   2. Capacity expansion?
   3. Modernization?
2. What are the investment factors that investors, policymakers, and senior rail management consider when determining base rewards and penalties within the current Class I business model?
   1. What are the expected return-on-investment (ROI) levels and timelines?
   2. What are the expected operating income levels and timelines?
   3. How are sustainability results factored into rewards?
3. How do these stakeholder groups currently relate to rail growth's influence on supply chain optimization?
4. What substantive, realistic rail service growth plans have rail management, investors, and policymakers adopted?
5. When rail growth projections are communicated by these stakeholder groups, what drives those goals?
6. How do the ROI levels and timelines for privately owned rail infrastructure projects compare with publicly owned infrastructure projects in other modes?

Round 2
Freight Rail Capitalization to Support Growth

1. Why should rail management, investors, and policymakers collaborate to empower rail service modernization and growth?
2. What are current barriers to collaboration on the part of rail management, investors, and policymakers? How can these barriers be addressed?
3. What goals do these stakeholder groups want to align on as part of a bold growth initiative?
4. Within this rail service growth strategy, how should the levels of annual capital investment change for:
   1. State of good repair?
   2. Capacity expansion?
   3. Modernization?
5. What opportunities and risks are created by modifying investment time horizons?
   1. How can these risks be mitigated?
6. What other risks need to be addressed to stimulate growth investment?
   1. How can these risks be mitigated?
7. How should compensation programs and performance incentives for rail management be adjusted to facilitate long-term rail service growth?
8. What public-sector policies and funding programs could be modified to seed or incentivize private-sector capitalization?
9. What needs to be addressed differently so that Class II and III railroads, smaller rail shippers, and other transportation providers gain greater access to capital for expansion and modernization?