Railroad Policy in Virginia: How We Got Where We Are * and Where We Might Go from Here by Richard L

Vol. 89 No. 3 June 2013

The Virginia News Letter

Railroad Policy in Virginia: How We Got Where We Are * and Where We Might Go From Here by Richard L. Beadles

Introduction state-sponsored program of rail development is to The newly passed state transportation-funding bill continue without future challenges, it will likely be was a milestone for railroads in Virginia by pro- necessary to amend the state constitution. viding a steady source of revenue for the state’s There are many reasons why the rail mode of previously unfunded Intercity Passenger Rail transport has reemerged. Rail is now well posi- Operating and Capital (IPROC) fund. Another tioned with respect to energy and environmental new law provides the Secretary of Transportation considerations with its minimal land surface occu- and the Department of Rail and Public Transporta- pancy and favorable “carbon footprint.” Rail is safe, tion (DRPT) a stronger role in the joint oversight efficient, generally unobtrusive, and works particu- and control of publicly funded rail infrastructure larly well in urban corridors where land-use and Richard L. Beadles resources in Northern Virginia. Yet another act congestion are considerations. While rail is expen- empowers DRPT to acquire rail rights-of-way for sive to build, it is arguably less so than equivalent preservation and future development. urban highway lane capacity. Intermodal freight Increasingly since the mid-1970s Virginia rail—which combines longer-haul (500+ miles) rail has concerned itself with preservation and devel- with shorter truck feeder and delivery trips at each opment of rail transportation. Until recently, such end—has great public appeal and user potential, efforts were hardly noticed, but the swing away especially if the network can be expanded to com- from federal and state regulation and control of petitively serve more domestic markets. Under 300 intercity rail transportation to an implicit policy of to 400 miles, passenger rail can presently compete protection and promotion of rail, represents one of in some cases with air travel—and could do so in the most significant reversals of state transportation other longer corridors if rail were improved even policy in more than a century. We are witnessing a modestly as to speed, frequency and reliability. This renaissance in rail that, in some respects, has been latter possibility has attracted the attention of the outrunning formally adopted public policy. In fact, general public, particularly as commercial aviation there was a recent challenge to the constitutional- costs, airport security and airline resource alloca- ity of certain state funding decisions. If a robust tion practices have made short-haul trips by air less attractive.

* This article is adapted from a longer paper on the rich history of rail policy and growth of railroads in Virginia that will be made available later this year by the Virginia Rail Policy Institute. http://www.varpi.org/ The Virginia News Letter

As early as 1966, when planning for the rail development. Then, following the Civil War, Washington, D.C. area’s Metrorail heavy rail tran- it sold virtually all its rail interests, except RF&P, sit system was initiated, certain visionary leaders mainly to northern investors at bargain prices. promoted the idea of a commuter rail element as Freight and passenger rail was generally competi- an adjunct to Metrorail. The result was the 1992 tive with other modes of transportation until the launch of the now highly successful Virginia Rail- post-World War II era, then declined partly as a way Express (VRE) commuter rail service on two result of the Interstate Highway System and the routes, one originating at Manassas and the other commercial jet aviation boom, but also as a result at Fredericksburg. VRE now provides almost five of changes in the nation’s industrial economy million commuter trips annually. and patterns of new development. These devel- The success of VRE highlighted the failure in opments eroded the financial strength of private the 1990s of state transportation policymakers to highly regulated railroad companies, which, in grasp the potential for statewide intercity passen- turn, adversely impacted rail infrastructure and ger rail. As a result, there was not much attention service. The subsequent decline in rail was dra- given to the broader interests and needs of other matic. Examining the state’s evolving policies urban regions and the imperative for a state rail can offer insights about improving today’s poli- network plan that would serve such a network. We cies as rail again resumes an important role in are now witnessing development of such a system transportation. via state-sponsored Amtrak trains. Previously, The following article will briefly recap the policymakers and administrators in Richmond history of railroad growth and policy in Virginia neglected to put in place an adequate governance before moving into developments in the modern mechanism to coherently plan, fund and allocate era. It will conclude with findings and recommen- scarce capacity resources and to otherwise provide dations. A key theme is that since 1870 the Con- general oversight. The fact that VRE was ever suc- stitution of Virginia has included a provision that cessfully organized and launched is remarkable, prohibits state funding for all internal improve- given earlier 20th century history of the relation- ments, except for roads and parks. In the case of ship of the Commonwealth of Virginia with its ports, airports and railroads this leaves the state private railroads. It would be a great understate- open to legal challenges for improving infrastruc- ment to say that the private railroads were skepti- ture and transportation operations. Curiously, it cal, reluctant and cautious, and generally foresaw appears that investment in rail is the only non- no benefit to them; indeed, they saw only poten- highway mode to have been challenged. tial risks and operational problems. As a result of their 100-year long (1880 to 1980) experience Early History and the Beginning of the with federal and state regulation, private railroad Railroad Age companies were uncomfortable with governmen- The long history of railroads in Virginia consti- tal involvement in their affairs. Nevertheless, the tutes a complicated journey. To assist the reader predecessors of the state’s two large private rail- I have included a timeline showing the major roads (Norfolk Southern and CSX) ultimately developments at the end of this article. made significant concessions in long-standing In 1816 the General Assembly passed an and historically well-grounded policy positions Act to Establish a Fund for Internal Improve- in order to assist and facilitate the inauguration ments. The act declared that the fund was being of VRE service. While not publicly recognized by created “… for the purpose of rendering navi- anyone at the time, the coming together of Virgin- gable, and uniting by canals, the principal rivers, ia’s private railroads with public authorities, espe- and of more immediately connecting by public cially with the commonwealth and its Northern highways, the different parts of the Common- Virginia political subdivisions, to launch a com- wealth.”1 The state had been active in funding muter rail service was a historic event and repre- transportation improvements since 1785 and sented a major turning point in the public-private even held stocks in the canal and turnpike com- relationship. panies. The act provided for establishment of a To better understand how this came about Board of Public Works (BPW). Until 1851 gover- and how this public-private rail relationship has nors served as presidents of the BPW, which also progressed, a look back at the history of railroads included private citizens chosen by the General in Virginia can be enlightening. Rail has played a Assembly. Over the years there were several sig- key role in the state for almost two centuries and nificant changes in the makeup of the board and holds a story with complex and tangled elements, in investment policy guidelines and dictates of the effects of which are still felt at times today. the legislature, which reserved for itself all major 2 The commonwealth at first supported and funded decision-making prerogatives. Nevertheless, the Weldon Cooper Center for Public Service • June 2013

canals to railroads. The commonwealth’s Fund for Development of Internal Improvements held out the possibility of a public stock subscription by the state for 40 percent of the capital stock of any new private joint stock company receiving a charter from the General Assembly. Although railroads were not specifically mentioned, the logic of funding rail development was apparently clear enough to most legislators. In January 1830 the legislature granted a charter to the Petersburg Rail Road Early public transportation capital spending was for canals and turnpikes. Source: Harper’s Weekly (October 14, 1865. See also http://xroads. virginia.edu/~Hyper/DETOC/transport/canal.html

BPW survived until 1903, when it was dissolved and replaced by the State Corporation Commis- sion (SCC) in accordance with the Virginia Con- stitution of 1902. Establishment of the internal improvement fund was well before any serious consideration of the development of steam railroads in Virginia or elsewhere in the United States. On February 28, 1827, the Maryland legislature granted a charter to the Baltimore & Ohio Railroad (B&O), which was confirmed by the General Assembly of Virginia a week later. The original B&O route went through Virginia to Wheeling (now West Virginia) on the Ohio River. Of the original 379-mile route, some 59 percent was across Virginia territory (including the area that later became the state of West Virginia in 1863). Unlike Maryland, Virginia had no grand vision, nor strategic plan, for rail development. Instead, an obsession with development of a continuous waterway linking the waters of the James with those of the Ohio River dominated the commonwealth’s internal development priorities and thinking until the Civil War. However, Late 1884 advertisement for the Petersburg Railroad. Source: Wikipedia, Petersburg Railroad. enterprising merchants in towns such as Peters- http://en.wikipedia.org/wiki/Petersburg_Railroad burg, Portsmouth, Lynchburg and Winchester could not ignore railroads. As tobacco production Company, which became the first steam railroad migrated from Tidewater to Piedmont, planters constructed in Virginia. The model for public- and merchants needed desperately to augment private participation in Virginia rail development natural waterway access, which no longer pro- was thus established. vided the necessary reach. Over the next 31 years, 1830-1861, the state The first approximation of a railway to actu- and numerous cities, towns and counties partici- ally become operational in Virginia was the pated in the capitalization and development of 13-mile-long horse and mule-powered line more than 20 private railroad companies, many extending from Chesterfield County coal pits at of which are listed in Table 1.2 In this short span Midlothian to the tidal James River just below of time, about two-thirds of Virginia’s population Richmond that was placed in service 1830-1831. was provided reasonable access to rail service. The French-born military engineer, Claudius Nevertheless, on the eve of the Civil War the Crozet, who immigrated to America in 1816, state’s rail picture offered these confusing ele- was appointed principal engineer for the state’s ments: Virginia railroads often did not physi- Bureau of Public Works in 1823. In his report for cally connect one to the other, as was the case in the year 1831, Crozet noted the rapidly advanc- Richmond where five railroads entered the city, ing field of railroad design and construction, ask- none of them connecting with another. In addi- ing whether Virginia should shift emphasis from tion, there was a problem, not limited to Virginia, 3 The Virginia News Letter

Table 1: Railroad Securities Held by the Commonwealth of Virginia, September 30, 1860 Dollars Common Stock or Railroad Company/ Dividend State Rail Preferred Project Bondsa Projectsb Stock Loans Guarantees Total Alexandria, Loudoun & Hampshire 975,248 975,248 Fredericksburg & Gordonsville 132,399 132,399 Manassas Gap 1,641,500 425,000 2,066,500 Norfolk & Petersburg 899,970 200,000 300,000 1,399,970 Orange & Alexandria 31,600 664,501 210,000 400,000 1,306,101 Richmond, Fredericksburg & Potomac 140,352 275,200 415,552 Richmond & Petersburg 33,408 385,600 419,008 Richmond & Danville 1,185,508 600,000 200,000 1,985,508 Richmond & York River 280,367 200,000 480,367 Roanoke Valley 177,402 130,000 307,402 South-Side Railroad 803,500 800,000 1,603,500 Virginia Central 143,508 1,891,670 30,000 100,000 2,165,178 Virginia & Tennessee 1,688,025 582,500 1,029,475 3,300,000 Winchester & Potomac 120,000 83,333 203,333 Blue Ridge 1,605,423 1,605,423 Virginia & Kentucky 71,500 71,500 Covington & Ohio 2,592,762 2,592,762 Totals 348,868 15,390,575 1,747,500 3,242,808 300,000 21,029,751 Source: Board of Public Works, Annual Report, September 30, 1860, Document 17 which can be viewed at the Library of Virginia (Film #372, Reel #14). a Dividend bonds apparently represented debt instruments taken in lieu of cash dividends otherwise due and payable to the state. b The two principal 100 percent public Virginia rail projects were the Blue Ridge and the Covington & Ohio projects.

of different track gauges. Such deficiencies would private railroad executives naturally were receptive prove to be a severe logistic handicap for the Con- to overtures from investors in Baltimore, Phila- federate Army. delphia and New York. Concurrently, state political and business lines of battle formed on either The Civil War Aftermath and Virginia side of an even larger question: that of honoring Railroads the commonwealth’s outstanding bonded debt The devastation resulting from the Civil War fell or forcing the bond holders to accept a drop of heavily upon most Virginia railroads. Virginia had some of the face value they were otherwise due. been a battleground state and her railroads natu- Ultimately, this decade-long philosophical and rally became military assets coveted by each side practical struggle, and the participants in it, would or objects to be destroyed by retreating armies. come to be known by the terms “Funders” (pay the Massive amounts of capital would be required to debt) versus the “Re-adjusters” (negotiate or walk restore and improve what had previously existed, away). Under such circumstances, Francis Pier- and more importantly, to physically connect and pont, who was the federally designated governor extend lines. Virginia still had a collection of of “the restored government of Virginia,” as early small railroads instead of a network. Since there as 1865, advocated the sale of all Virginia railroad 4 was no way the state could supply needed capital, securities to the highest bidder and indicated his Weldon Cooper Center for Public Service • June 2013 support for railroad consolidation in the interest constitutional convention for the 1869 con- of efficiency.3 stitution “... resolved that the State should no longer lend its support to such undertakings State Constitutional Prohibition of but should leave them to private enterprise.” 4 Further Railroad Investments The so-called Underwood Constitutional Con- Ironically, the state’s pre-Civil War invest- vention, which convened in Richmond on ments in railroads were, arguably, among the December 3, 1867, developed a state consti- better ones. On the eve of the war, ten private tutional prohibition of further investments in railroads representing the bulk of the state’s finan- internal improvements by the commonwealth. cial interests were generating positive operating Although rail investment was not mentioned income, and six of them had income sufficient specifically, the restriction was clearly intended to to maintain a reasonable level of debt service apply to rail as well as canals and turnpikes. The (see Table 2). While the state did incur some rail constraint on state government rail spending was investment losses, they were relatively minor in reviewed by the Supreme Court of Virginia as relation to its total rail securities portfolio. The recently as 2011. most dramatic state losses occurred after the war, The 1869 Virginia constitution included a when the so-called fire sale of Virginia rail securi- provision, which without modification as related ties commenced for reasons not directly related to to railroads, has come down to us today in the their pre-war operational performance. current Constitution of Virginia, which was Despite the ravages of the Civil War, as early adopted in 1971. But the 1869 provision was as 1866, some Virginia railroads were making adopted without much contention. Its proponents remarkable progress toward their physical recon- were a small group of leaders against debt restruc- struction and a return to profitability. Governor turing and with a vested interest in rail consoli- Gilbert C. Walker (D) obligingly signed legislation dation. Article X, Section 10, commonly referred in March 1871, which confirmed the pattern for to as the internal improvements clause and/or the what has to be described as fire sales of potentially credit clause, prohibits, on the face of it, the com- valuable public assets. There had been several monwealth from involvement in “… any work of prior transactions in which the state’s rail interest internal improvement,” but with the express “… had been sold on terms very favorable to acquir- exception of public roads and public parks.” Inter- ers. Northern capitalists quickly bought most of estingly, internal improvements are not defined, the remaining railroads of the Old Dominion. In but in 1869 they included waterways, toll roads, every case except the RF&P, which was not sold, railroads, bridges, telegraph lines and several ear- such railroads were those in which the state pre- lier banks. The exception, relative to roads, came viously had an ownership interest and, in most with the 1902 state constitution, and to parks by cases, a creditor interest as well. amendment in 1928. For a century, from 1869 to the 1970s, and Virginia Railroads in the Early 20th later, it was generally accepted that the consti- Century and the State as Regulator tutional language absolutely prohibited pub- Railroad development in Virginia reached its peak lic investment by the state, and presumably, by shortly after the turn of the 20th century, nota- extension, its political subdivisions as well, from bly with the construction of the former Virginian expending any public funds to preserve, protect, Railway. With ownership and control of virtually develop, maintain, lease, own, operate or other- all of the commonwealth’s railroad companies wise aid transportation by rail. transitioning to predominantly northern hands Regarding the origin of such prohibition, the after the Civil War, the role of the state gradually standard explanation may be found most recently became one of regulator, rather than that of an in a 2011 opinion of the Virginia Supreme Court. investor, promoter and developer of railroads. In response to public outrage about certain This prohibition, along with the one set forth railroad business practices, Congress passed in the credit clause, dates back to the 1869 the 1887 Interstate Commerce Act establish- constitution. It was attributed to substan- ing an Interstate Commerce Commission. This tial financial losses the commonwealth had landmark federal regulation, among the first sustained in previous years from its general federal regulatory laws to have broad applica- investments in entities such as canal, turnpike tion, marked the commencement of almost 100 and railroad companies, engaged in various years of ever-increasing federal and state regula- large scale projects, i.e., “works of internal tion and control of private railroads.5 At the state improvement.” Faced with those losses, the level, the State Corporation Commission took on 5 The Virginia News Letter

Table 2. Debt Service Coverage Capacity of Ten Important Virginia Railroad Companies, 1860 Dollars Gross Net Operating Excess or Railroad Company Revenue Income Debt Debt Servicea (Deficit) Cashb Manassas Gap 281,064 140,532 908,233 90,823 49,709 Orange & 450,427 220,709 2,749,259 274,926 (54,217) Alexandria Petersburg 329,092 187,582 106,284 10,628 176,954 Richmond & 154,149 74,015 219,178 21,918 52,097 Petersburg RF&P 299,456 146,777 814,461 81,446 65,331 Richmond & 560,904 280,452 972,559 97,256 183,196 Danville South Side RR 405,413 186,490 2,054,986 205,499 (19,009) Virginia Central 630,424 271,082 1,275,520 127,552 143,530 Virginia & 740,880 318,578 3,637,958 363,796 (45,218) Tennessee Winchester & 57,439 16,657 175,556 17,556 (899) Potomac Total 3,909,248 1,842,874 12,913,994 1,291,400 551,474 Source: Bureau of Public Works, Annual Report for Railroads in Virginia as of September 30, 1860 which can be viewed at the Library of Virginia (Film #372, Reel #14). However, there were inconsistencies and conflicting numbers at various places in the voluminous source document. a Assumed to be 10 percent of debt. b Net operating income minus debt service.

a similar regulatory role, replacing the Board of related to roads and highway safety, there was Public Works, pursuant to provisions in the 1902 no thought of public financial investment in, or Constitution of Virginia. assistance to, railroads in Virginia until the col- By the 1920s, an anti-rail constitutional inter- lapse of the Penn Central in 1970. Even then, it pretation became useful to road building propo- took a while for the implications to sink in. Ini- nents, who needed all the public funding they tially, the bankruptcy case was handled in the could get. Then, with the rise of the commercial customary manner, which traditionally had led to trucking industry, yet another powerful voice was a reorganization and relaunch of a railroad com- added to the chorus of opposition to anything pany in receivership, subsequent to the shedding beneficial to railroads. Moreover, Virginia rail- of some debt. Not obvious to the general public, roads, like their national peers, were generally but painfully clear to rail industry insiders, the opposed to any form of governmental involve- Penn Central collapse represented something new ment in their business. and different. The railroad was in such difficult and impossible circumstances that it would never Decline of American Railroads, be a candidate for reorganization. Drastic steps of 1957-1977, and Renewal of State unprecedented nature would be required. Involvement While the northeastern rail disaster adversely The years 1957 to 1977 roughly bracket the decline affected Virginia railroads, rail mileage within the of rail in North America. Those two decades, state was only slightly impacted, the most signifi- which coincide with the construction of much of cant direct case being that of the former Pennsylva- the modern Interstate Highway System and the nia Railroad line down the Delmarva Peninsula to rise of commercial jet aviation, saw the financial Cape Charles, which extends by means of a Ches- condition of the private rail system deteriorate, apeake Bay rail car ferry to Norfolk and Southside especially in the Northeast. Another major factor Hampton Roads. Virginia’s 65-mile Eastern Shore was the decline of heavy industry. rail line was among the 15,000 plus miles of so- Except for public financial assistance pro- called excess rail route miles winnowed out of the vided to private railroads in Virginia for highway- former northeastern rail system, about a quarter 6 rail grade-crossing protection systems, clearly of what had formerly existed. Local business and Weldon Cooper Center for Public Service • June 2013

N&W Train No. 89, “The Cannonball,” when operating between Richmond and Norfolk in the heyday of 20th century railroading. The train is pictured at Richmond’s Byrd Street Station in 1918. Source: Photograph from the collection of the author, Richard L. Beadles. agricultural interests on the Eastern Shore were Interstate Commerce Commission, giving most unwilling to allow their railroad to be abandoned. such authority to the ICC. Meanwhile, the private Accomack and Northampton counties, with state rail industry continued its advocacy for much approval, formed a public commission to acquire broader relief from regulation or at least the same and operate the line. Ever since then the line has degree as other modes of transportation. That been funded in part by the state, under what is objective was largely achieved with the passage in now known as the Short-Line, or Rail Preser- 1980 of the Staggers Rail Deregulation Act. Then, vation Program, administered by the Virginia in 1995 a new federal regulatory agency, the Sur- Department of Rail & Public Transportation. That face Transportation Board (STB) was created to is how Virginia resumed its financial support of replace the ICC. Legislation creating the STB went rail freight lines, a bit more than 100 years after it even further than the Staggers Act. As a result of ceased to do so. this the Virginia State Corporation Commission Most of the financially challenged private found itself with very limited authority over rail- railroads were quite willing to support congres- roads in the state. sional legislation creating a quasi-public entity to assume responsibility for operating money-losing Launching the Modern Era: Mergers intercity passenger trains. The public solution was of CSX and Norfolk Southern the National Railroad Passenger Corporation, All of this roughly coincided with two huge Vir- or Amtrak, which came into existence, May 1, ginia railroad merger transactions; namely, that of 1971, less than a year after Penn Central’s filing CSX in 1980 and of Norfolk Southern in 1982. for bankruptcy. The Commonwealth of Virginia With the SCC largely out of the game and in assumed no responsibility for Amtrak’s intercity the absence of a comprehensive rail policy posi- rail passenger service, took little or no interest, tion of the General Assembly, the incumbent and with a few minor exceptions, would not for governor, John N. Dalton (R), and his executive another three decades. staff effectively handled those two far-reaching Predating Amtrak, when the private railroads rail consolidation transactions. While Virginia were often thwarted in their efforts to discon- may have gained more than it lost as result of the tinue money-losing passenger trains, the federal mergers, the fact that 95 percent of the state’s rail Transportation Act of 1958 included provisions route miles were consolidated with little more to clarify the regulatory roles of states and the than a few pleasantries exchanged between rail 7 The Virginia News Letter

CEOs and the incumbent governor was rather from 206,265 in 1970 to 99,250 in 2000 and is remarkable. somewhat less today.6 The shift of manufacturing The Norfolk Southern merger involved con- offshore resulted in dramatic growth of interna- solidation of the Southern Railway System with tional container shipping. The Port of Virginia Norfolk & Western (the latter having by that emerged as a major East Coast player. Trucking, time absorbed the Virginian, the Nickel Plate, long a vital and increasingly dominant compo- the Wabash and other northern rail companies). nent of U.S. freight movement, brought problems On the negative side of the ledger, however, fed- of highway congestion, maintenance and general eral rail deregulation subsequently permitted annoyance to the public. Some major highways, railroads, under certain circumstances, to obtain such as I-81, which had been designed and con- short-cut exemptions from normal and custom- structed to accommodate less than 20 percent ary line abandonment procedures. This was often truck traffic, experienced as much as 30 percent or done by railroads after discouraging, and even- more in certain areas. 7 The daily commute of Vir- tually minimizing or eliminating, local freight ginia workers was ever lengthening, especially in business on any line segment otherwise served Northern Virginia, as urban sprawl caused people at either end, and then asserting that such line to travel longer in both time and distance. High- segments were not required for railroad business way traffic congestion was a growing problem in purposes, nor for the convenience and necessity most urban areas. Energy and environmental con- of the public. The petitioning railroad company cerns increasingly emerged as mainstream issues. might thus obtain an exemption that permitted To the surprise of some, Amtrak intercity ser- approval of such line-segment abandonment by vice in Virginia began to grow in numbers of trains the Surface Transportation Board on an expedited and passengers carried. Nevertheless, the stark- schedule, with very little, if any, meaningful public ness of the every-shrinking U.S. and Virginia rail notice, and no public hearing. Such abandonment maps was striking. The private freight railroads, cases often failed to consider the strategic public even though now freed of so many regulatory interest involved. To cite the most egregious case burdens, were not well, financially or otherwise. in Virginia, CSX-owned SCL/Family Lines used CSX, perhaps the leader in non-rail diversifica- such short-cut exemption to quietly abandon its tion, struggled to assimilate and achieve syner- 65-mile Petersburg-North Carolina “S” line. In gies from acquisitions in ocean shipping, oil and hindsight this was bad for the state, requiring it to gas, inland waterway transportation, resorts, real recently obtain a purchase option that will permit estate and other activities. Cross-county double- future passenger rail service linking Richmond stack intermodal freight trains became the new and Raleigh as part of the so-called future South- highway-rail operational optimum, but short- east High Speed Rail route. The sad fact of the haul rail freight continued to migrate to highways. matter is that when this abandonment case was Conversely, Amtrak’s Northeast Corridor, and a pending in 1985-1986, Virginia had no vision, few other short-distance routes, showed prom- nor policy, regarding future rail requirements, ise as viable alternatives to highway and aviation. and undoubtedly would not then have officially Commuter rail reversed a long downward slide, objected, nor moved to acquire the right-of-way, and in several major metropolitan areas rail began had the state been afforded the opportunity to do to find favor with road-weary drivers. There were so. At a minimum, however, an empowered SCC notable new-starts in such service, including the would have at least held a public hearing, which Virginia Railway Express, the Northern Virginia would have elevated public awareness. commuter railroad. While prior to 2000 Virginia was not actively Developments in the National planning for intercity rail, events north of the Economy Affecting Railroads Potomac River were indirectly creating rail trans- Following the heady round of U.S. rail mega- portation opportunities, as well as challenges, for mergers of the 1980s and 1990s several trends the Old Dominion. In 1976, as part of the United began to emerge. North American freight rail- State Railway Association effort to salvage a viable roads consolidated into seven major lines, aug- core from the bankrupt northeastern railroads, mented by Amtrak passenger service, over a the association assigned the 456-mile Washington, dozen publicly owned commuter railroads, doz- D.C.-New York-Boston rail corridor to Amtrak, ens of regional freight railroads, and hundreds of thereby relieving Penn Central (and its emerg- so-called short lines such as the commonwealth’s ing successor, Conrail) of responsibility for that Buckingham Branch which operates the former remarkable piece of railroad, arguably the most CSX route from Richmond to Clifton Forge. In unique, yet expensive-to-maintain, in America. 8 the process U.S. railroad main-line mileage shrank There followed a $2.5 billion federal grant to Weldon Cooper Center for Public Service • June 2013 repair and improve the Northeast Corridor (NEC) functioning generally below the radar, and sus- for faster, more convenient, and more comfort- tained by monies siphoned, albeit legislatively able intercity passenger service. Other large fed- sanctioned, out of the highway and roads pot of eral grants for higher-speed infrastructure and money. trains in the NEC followed over time. This made Economic and transportation events in the the route much more attractive to the public. Northeast and elsewhere, including highway con- However, a largely unanticipated impact was that gestion, oil shocks, the rise of the environmen- as the number, speed and frequency of Amtrak tal advocacy community, unimaginable urban trains increased, corridor capacity was consumed. sprawl, and related mobility constrains, all began This problem was further exacerbated by even- to raise public awareness of the desirability of con- larger numbers of commuter trains. As a result the sidering all options. NEC ceased to be a suitable option for non-local rail freight. Earlier this corridor was the preferred Amtrak in Virginia route used by the private Class I railroads and Despite long odds Amtrak continued to intermit- their customers in the routing of time-sensitive tently obtain additional funding from Congress, cargo north of the Washington Gateway. notwithstanding various White House efforts to shut it down. New trains and new Amtrak service Amtrak and Commuter Rail for in Virginia, all having one end of the run in the Virginia Highways and Rail Northeast Corridor, began to attract riders from Highways and urban mass transit—not intercity all walks of life, including the business commu- railroads—were at the top of the state’s priority nity. Suddenly, people began to see the utility and funding list in the mid-1980s, followed closely convenience of urban rail corridors. One of the by the Port of Virginia and aviation. In a most successful new trains then in the Amtrak 1986 special session of the General Assembly, system was the Colonial, between Newport News Governor Gerald L. Baliles (D) pushed through and Boston, inaugurated in the 1970s, on a route, a transportation funding package which included which had never enjoyed such service. The North increases in state vehicle fuel taxes, as well as an Carolina-sponsored Carolinian, linking Charlotte unprecedented 0.5 percentage point increment and New York, followed that. Soon afterward on the state’s general sales tax dedicated to a new Amtrak added yet another train on the Newport Transportation Trust Fund divided among roads, News-Boston run. Virginians demonstrated they transit, ports and aviation. Freight and passenger were ready to embrace rail, but Amtrak, CSX and intercity rail was conspicuously omitted. DRPT were not yet prepared to deliver. Although Northern Virginia had experienced Not until 2009-2010 did the commonwealth several years of good service from the popular commit to underwrite the cost of any Amtrak Metrorail system (classified as heavy rail transit), service. North Carolina had begun to do so in the commuter rail was still thought by many to 1980s. Prior to 2009, all Amtrak service in Vir- be unlikely to ever get started, and of dubious ginia, except the Carolinian, was funded to the utility even at that. Had anyone asked the typical extent necessary by the federal government. Some- member of the legislature at that time about time prior to the 1980 CSX merger, Amtrak had funding intercity rail, the response would likely paid for construction of a new rail connection on have been: “the state constitution prohibits it!” 17th Street Bottom near downtown Richmond to In the always-keen competitive environment facilitate the operation of the new Newport News for transportation funding, highway interests Colonial. The connection, originally known as, were equally prepared to recite that same line; that Amtrak Junction or AM Junction, has since been public investment in railroads was prohibited by enhanced by CSX because it is now a key compo- the state constitution. Moreover, Virginia’s private nent of CSX Richmond Terminal infrastructure. railroads, by then dominated by CSX and Norfolk Southern, were not particularly inclined to get Accommodating Virginia Rail Express involved with the public sector, having as recently Caught up in the 1990-1993 whirlwind of activity as 1980 been effectively freed of most federal and associated with the split-up and sale of the former state regulatory control. There were, of course, RF&P Railroad to CSX and the related acquisi- several minor rail-funding elements that came tion of RF&P Corporation (the residual real estate out of the 1980s, including the already-mentioned component) by the Virginia Retirement System short-line preservation program and extension (VRS), there was a requirement for relocation of of the industrial access program to include rail about four miles of main line rail tracks within spurs. Neither of these programs had a dedicated the bounds of the site previously occupied by rail source of funding; they were modest in scope, the former RF&P Potomac Yard freight complex 9 The Virginia News Letter

in Alexandria and Arlington. The purpose of greatest potential for commercial success of any of the relocation was to make the former rail yard the other corridors examined around the U.S. This site available for commercial real estate develop- was explained, in part, by Richmond’s proximity to ment. Simultaneously, all parties recognized that the Northeast Corridor and its draw of multistate the new, publically-sponsored, Virginia Railway riders. Publication of this report elicited support Express commuter rail operation would require in the Southeast, more so initially in Charlotte and additional through-put rail-line capacity in the Atlanta, than in Virginia. In 1998 the SEHSR Cor- area in question. CSX took the position that two ridor route designation was extended to Atlanta main tracks would be adequate for its purposes. in response to pleas from Georgia. Norfolk area No one wanted to step up and pay for the desired leaders had meanwhile lobbied for the inclusion third-track. Finally, it appears that RF&P Corpora- of Hampton Roads as a spur off of the SEHSR tion, now owned by the retirement system, capitu- spine. Later, Hampton Roads passenger rail access lated and paid for the track in question in order would emerge within the commonwealth as a to resolve the matter and to expedite commercial higher priority than the link with North Carolina. redevelopment of the former rail yard property. In 1997 the Commission on the Future of Thus was built, at public expense, what is believed Transportation in Virginia adopted by an over- to have been the very first significant section of whelming majority the group’s most aggres- new main-line rail infrastructure in Virginia, on sive scenarios on transit and rail. The group also private rail right of way, for shared private freight weighed in on the growing shortfall in transpor- and public passenger usage. A precedent of sorts tation revenue, none of which pleased Governor had been set.8 George Allen (R) (1994-1998), as reflected in the comments of Secretary of Transportation, Robert New Thinking About Passenger Rail in E. Martinez. Virginia Railway Express and other Virginia transit programs were warmly supported by the The decade of the 1990s may have represented majority, but there was little said about inter- a turning point in national transportation think- city passenger rail and nothing new in regard to ing at both the federal and state levels of govern- freight rail. ment. Passage of the Intermodal Transportation In the western part of the state, I-81 had Efficiency Act of 1991 (ISTEA) gave encour- become notorious for its truck traffic, with fre- agement to those who sought fair, even-handed quent occurrences of terrifying accidents involv- and comprehensive evaluation of all transporta- ing eighteen-wheelers, presumably justifying the tion options. This prompted the Virginia Depart- need to expand capacity throughout much of the ment of Transportation (VDOT) to commission Interstate’s 324-mile route between Bristol and a study in 1997 to evaluate planned I-64 capac- the state line north of Winchester. This would ity improvements between Hampton-Newport cost $3 to $4 billion dollars depending upon what News and Richmond. Although it appeared that was to be done. Sometime around 1997, Wiley F. no one opposed some level of highway capacity Mitchell, Jr., a former state senator and then Nor- improvements, the enhancement of intercity rail folk Southern general counsel, had an epiphany passenger service was one of the options identi- while reading about I-81 at his breakfast table. fied and rail was strongly supported by many in What caught his eye that morning was an article the public at hearings conducted in 1998. As a describing the intent by the Virginia Department result, metropolitan planning organizations in of Transportation (VDOT) to award one or more Richmond and Hampton Roads voted in favor high-dollar contracts for construction of addi- of an alternative, which incorporated significant tional lanes on the Interstate in the Bristol area. rail enhancements. Some of the contemplated Why, he questioned, should not the parallel railroad improvements were subsequently made in road line located virtually side-by-side I-81 for the Hampton-Newport News area, but nothing most of the Virginia corridor, be viewed as an has yet been done to significantly improve the two alternative solution? His subsequent inquiry of daily Amtrak round-trips between Richmond and VDOT officials confirmed that they did not think Newport News. in such terms, and that there was no Virginia One thing that did occur, as result of ISTEA, mechanism to do so. This was the first stirring was a 1997 report on high-speed ground trans- of rail freight versus highway capacity alternative portation produced by the Federal Railroad cost-benefit analysis in Virginia. Administration.9 Remarkably, it found that the It was later reported in a study from the proposed Southeast High-Speed Rail Corridor Virginia Secretary of Transportation that an (SEHSR) covering Washington, D.C.-Richmond- appropriate investment of public capital in rail 10 Raleigh-Durham-Greensboro-Charlotte had the infrastructure improvements on the parallel rail Weldon Cooper Center for Public Service • June 2013 line would provide equal or better public ben- and staff support for what came to be known efit. 10 The benefit would come from diversion of as the Trans Dominion Express (TDX). With a some percentage of large, heavy, long haul trucks somewhat tougher case to make, the TDX group from highway to rail. Just as important, the study worked even harder, perhaps, than the eastern concluded that VDOT might achieve considerable Virginia proponents of rail. annual savings on road surface maintenance since During the 1990s, a handful of states invested truck user taxes failed to fully cover their share of in passenger rail service as part of their compre- such maintenance. While further study was rec- hensive, multimodal, transportation planning. ommended, the conclusion was that rail should California took the lead. Closer to home, North be considered by VDOT and the Department of Carolina, under the leadership of several pro- Rail and Public Transportation as an option in gressive governors, took unprecedented steps to future planning for I-81 and other transportation advance development of rail, including as previ- corridor capacity expansion projects, as well as ously mentioned, state sponsorship of the Amtrak in consideration of regular highway maintenance Carolinian service between Charlotte and New planning. York, via Richmond. This opened some eyes Between 1992 and 2005 the state helped to in Virginia; the Tar Heel State was providing a fund several main-line rail infrastructure projects train, which served the Old Dominion. On the on the Richmond-Washington, D.C. rail corridor, other hand, there were yet some Virginians who including a $10 million reconstruction, expansion reasoned that the commonwealth need not take and upgrade of a major rail junction in the city action because North Carolina had no choice but of Alexandria where the main lines of Norfolk to find a way to pay for development of connect- Southern and of CSX converge and construction ing rail through Virginia if it wanted Northeast of a $26 million second rail bridge over Quantico Corridor access. This was true up to a point, but Creek in Prince William County. The bridge proj- shortsighted. A central piece of North Carolina’s ect appears to have represented the largest com- rail program was the state-owned North Carolina mitment of public funds to a joint public-private Railroad. In addition, North Carolina for a long Class I intercity rail infrastructure project in Vir- time had a policy of acquiring rail lines and rights- ginia to that point in time. of-way that would have otherwise been cast off by In 1994 Congress passed the Swift Rail the same two Class I freight rails that serve Vir- Development Act, declaring that development of ginia; namely, CSX and Norfolk Southern. high-speed rail (HSR) was in the national inter- The striking contrast between North Caro- est. (Although there is no universally accepted lina and Virginia rail activities in the 1990s was definition of high-speed rail, in the U.S. it is in the of concern to many rail advocates. They reasoned range of 125-150 miles per hour; that speed is cur- that Virginia would never be able to undertake rently attained in the Northeast Corridor.) Earlier or accomplish very much in terms of intercity high-speed rail initiatives in Texas and Florida freight or passenger rail development, without had gone nowhere, but the Northeast Corridor first adopting a broad legislatively-sanctioned appeared to be fertile ground for HSR. Amtrak pro-rail development policy supported with an President Tom Downs accepted the challenge and internal organizational structure and funding sought to prove the point. He signed the contract mechanisms. There emerged about that time the for the now popular Acela NEC trains. The buzz concept of a state rail authority, comparable to the reached Virginia, where Downs spoke about the then-widely admired Virginia Port Authority. potential benefit to riders north of Washington, Not everything was at a standstill in Vir- D.C., Richmond and Hampton Roads were tan- ginia. On February 18, 1999, the Commonwealth talizingly close. It did not take much imagination Transportation Board (CTB) officially endorsed to visualize HSR being extended in the future the concept of developing the Washington, D.C.- through Virginia’s Eastern Urban Crescent. In Richmond rail corridor to accommodate more, 1993-1994, a few community leaders, with some better, and faster rail passenger service. Work on business support, laid the foundation for what is behalf of Amtrak and on improved Washington, today, Virginians for High Speed Rail (VHSR), a D.C.-Richmond passenger rail by DRPT Director passenger rail advocacy organization.11 Leo Bevon produced remarkable news later in that Elsewhere in central and western Virginia a year. On October 28, 1999, Governor Jim Gilmore coalition of rail advocates seeking restoration of (R) announced that the state would be a financial passenger rail service linking Bristol and Roanoke partner with Amtrak and CSX to establish high- via Lynchburg and Charlottesville with Wash- speed rail between Richmond and Washington, ington, D.C. joined together with the Lynchburg D.C. While generating headlines, it is now clear Chamber of Commerce, which provided a home that none of the principals had a grip on reality. 11 The Virginia News Letter

Nevertheless, the intent was good, and the sub- doing, or they just as easily will resist, and declare sequent 2000 General Assembly session actu- impossible, anything they really don’t want to do! ally produced the first real state funding for such service. A Comprehensive Virginia Rail Plan In the four years leading up to the 2000 Gen- In September 2001, the board of Virginians for eral Assembly, the Greater Richmond Chamber High-Speed Rail released a comprehensive Vir- of Commerce and others lined up in support of a ginia Rail Plan. The document sought to ana- comprehensive menu of multi-modal transporta- lyze virtually every major element of intercity tion projects under the banner of the Richmond rail transportation in Virginia; it discussed public Transportation Advocacy Board (RTAB). Former policy and competitive economics and it recom- Governor Baliles, fondly known as the “transpor- mended a course of action for future consideration tation governor” for his 1986 accomplishments, by public policymakers. The document identified was enlisted to advise and provide leadership. needs, estimated costs, suggested priorities, and Renovation of Richmond’s downtown train recommended a funding strategy. Total needs so station and improvement of Washington, D.C.- identified were estimated to be $2.5 billion over Richmond rail service were among a dozen or so 15 years. Among other things, the plan recom- priorities. Main Street Station was a project con- mended creation of a state rail authority. ceived and launched by the city of Richmond in The concept of a Virginia rail authority gained the early 1990s, a well-intentioned but misguided some traction during the years 2001-2004, but venture, sustained with large grants of federal dol- the concept was obviously deemed premature lars. It remains a work-in-progress. or troubling by some in state government. The Remarkably, the Virginia Transportation reasons for rejection were never entirely made Act of 2000 provided approximately: $66 mil- clear, there being hundreds of authorities that lion for Richmond-Washington, D.C. rail corridor had previously been approved and established for improvements, $18 million for Virginia Railway diverse purposes throughout the commonwealth. Express, and $8 million for the Trans Dominion Senator John Edwards (D) of Roanoke, an ardent Express. Trans Dominion Express and I-81 rail propo- Inspired by North Carolina’s enthusiasm for nent, embraced the concept and sponsored a rail the Southeast HSR project, encouraged by many authority bill in 2003, albeit without adequate other things then occurring, and with the aid of a preparation. While there was broad support from $100,000 grant from DRPT, Virginians for High- many quarters, naysayers prevailed in the General Speed Rail, together with other partners, most Assembly. Edwards continued to persist thereafter notably Amtrak, organized the first Southeast but was unsuccessful. Nevertheless, the aggressive High-Speed Rail Conference and Expo, which VHSR State Rail Plan proposals of 2001 clearly was held in Richmond in November 2000. Among shook up the DRPT and perhaps other agencies in the legacies of the conference was the genesis of state government. a Virginia-North Carolina High Speed Develop- ment Compact. State Senator John C. Watkins (R) Governor Warner’s Interest in Rail was the leading proponent. In January 2002 newly elected Governor Mark During these years, Trans Dominion Express Warner (D) appointed former Delegate Whit- proponents worked hard to convince the legisla- tington W. Clement as his Secretary of Transpor- ture of the need for, and feasibility of, the so-called tation. The new administration appointed as head Bristol train, even to the point of taking a small of the Department of Rail and Public Transpor- group of General Assembly members to the Pacific tation, Karen J. Rae, an energetic and capable Northwest to ride the Talgo-built trains operating public transportation professional. Faced with the in the state of Washington. Such trains constitute challenges of dealing with CSX, which was still a technology option not requiring as extensive bogged down with Conrail integration and not in and expensive investment in fixed infrastruc- a particularly receptive mood relative to DRPT’s ture as Norfolk Southern and CSX desire, indeed efforts to implement the Virginia Transportation demand. Both railroads were clearly preoccu- Act 2000 projects in the Richmond- Washington, pied with their own problems stemming primar- D.C. Corridor, Rae, with the help of outside con- ily from the 1999 Conrail transaction. However, sultants, launched DRPT’s first effort to formu- most rail industry observers would agree with a late a comprehensive state rail plan. The public fairly commonplace characterization of rail indus- had limited input until most of the plan had been try culture—rail executives tend to be people of developed. However, the resulting Virginia State great worth and reliability, but with regard to new Rail Plan released in June 2002, was by far the 12 ideas they can do anything they set their minds to best effort to that point in time. Weldon Cooper Center for Public Service • June 2013

Governor Warner made a cameo appear- been made to do so, but what are the chances ance at the annual meeting of Virginians for of perfecting the state’s right to redress, cure or High-Speed Rail in Norfolk in May 2004. There reimbursement in the event of various potential he announced his decision to create a Commis- failures by grantees? Moreover, the threshold sion on Rail Enhancement for the 21st Century. for achievement of satisfactory performance was The commission was tasked with reviewing the often set so low, or so ambiguously, as to make Virginia State Rail Plan as well as doing a study it highly unlikely that the state would ever have of a rail development authority, and making rec- grounds for seeking reimbursement. Eventually, ommendations for enhancing rail service and in the first year of Governor Bob McDonnell’s infrastructure. The governor appointed Sharon (R) administration (2010-2014), with Sean T. Bulova, then vice chair of the Fairfax County Connaughton serving as Secretary of Transporta- Board of Supervisors, to chair the commission. tion, and Thelma Drake as Director of DRPT, the Under pressure from the administration, the com- Rail Advisory Board was summarily discontinued mission reluctantly agreed to not recommend an in the name of improved government efficiency. authority. Nonetheless, in its final report the com- Notwithstanding any of the concerns mission observed that such an authority might be described above, Virginia has made enormous desirable at some time in the future. In lieu of progress over the years 2005-2013 in rail develop- endorsement of an authority, the administration ment, including the inauguration of new intercity promised to support creation of a dedicated fund- passenger services. This has largely been done by ing source for rail, as well as a rail advisory group horse-trading infrastructure money or the prom- of some type. ise of infrastructure funding highly beneficial to freight operations, in return for Class I freight Virginia Rail Enhancement Fund railroad consent to the operation of additional A dedicated source of funds for rail, the Virginia passenger trains on economic terms which would Rail Enhancement Fund (REF), emerged from the not otherwise be acceptable to them. 2005 Session of the General Assembly, together with provision for a related Rail Advisory Board. Governor Kaine’s Amtrak Initiatives The funding source was to be a fraction of the Governor Tim Kaine (D) (2006-2010), long a receipts from an existing state tax on motor vehicle proponent of more and better intercity passenger rentals. In fiscal year 2012 the rental tax provided service, wanted to launch several new Amtrak $26 million to the REF. There was a 20 percent regional trains during his time in office. Two local match, most often from one of the Class I major problems loomed: access to existing rail railroads. The REF permitted in-kind contribu- lines and funding to guarantee Amtrak that it tions of project support—a provision long cov- would not lose relative to the cost of operation eted by private railroads in other publicly funded of such trains. Ripe for such service was the so- situations such as highway construction involving called Piedmont Corridor, also known as the rail-highway grade crossing construction projects. U.S. Route 29 Corridor, extending from North- Moreover, full 80 percent REF grants were not ern Virginia southwesterly through Culpeper, required; they could be less, or they could be loans, Charlottesville and Lynchburg. This became but DRPT has never done anything other than one of DRPT’s top priorities during the Kaine simply make grants. Finally, calculation of “pub- years. The first problem involved the sharing lic benefit” was so constructed as to make almost of limited rail line infrastructure capacity on a any project qualify, so long as the resulting public route, which Norfolk Southern had rediscovered. benefit was greater than the dollar investment of While Norfolk Southern never lost sight of its state funds. The significance and importance of Piedmont route, the railroad had earlier placed the Warner Administration’s contribution to the a higher priority on obtaining Virginia funding future of rail in Virginia cannot be overstated. The assistance for its east-west Heartland Corridor Rail Enhancement Fund program represented the project, linking the Port of Hampton Roads most progressive step forward in promotion of with the Midwest. The north-south corridor, a intercity rail in Virginia since the 1830 commit- system involving two roughly parallel rail routes ment by the State Board of Public Works to sub- with several cross connections one to the other, scribe to 40 percent of the stock in the Petersburg had long been the subject of studies, planning, Rail Road Company. Nonetheless, many impor- evaluation and even some 1980s era downsizing. tant issues were still unsettled, and some have The twin spines of the Piedmont/Crescent cor- never been fully addressed. For example, how is ridors consist of the once-double-tracked former the commonwealth’s investment in infrastructure Southern Railway main line linking Northern to be protected? Certainly, diligent efforts have Virginia and Atlanta, augmented by the more 13 The Virginia News Letter

challenging former N&W Shenandoah line, Funding for the Heartland Corridor forming a route between Tennessee points and and the National Gateway Harrisburg, Pennsylvania. CSX was caught napping when Norfolk South- In order to induce Norfolk Southern coopera- ern successfully lobbied federal and state officials tion, money would have to change hands between in support of the Heartland Corridor. However, DRPT and the railroad. Since there was no imme- CSX soon recovered and put together something diately available pot of new-start intercity passen- called the National Gateway. While any rail cor- ger capital funding, the Rail Enhancement Fund ridor improvement initiative is commendable, the became the funding source. Based upon DRPT’s CSX pitch to Virginia has never been as clearly record of REF grants made and promised over articulated, or as plausible, as was that of Norfolk the 13-year period 2006-2018, about $94 million Southern in the case of the Heartland Corridor. of REF funds have been disbursed or promised Nevertheless, DRPT has committed $24 million to Norfolk Southern for I-81/I-66 Crescent Cor- of Rail Enhancement Fund money to the CSX ridor rail infrastructure, plus an additional $ 32.8 Virginia Avenue Tunnel improvement project in million from a 2008 General Assembly earmark, the District of Columbia. bringing the total to $126.9 million.12 Some of this In the midst of a bitter struggle among has been earmarked for passenger capacity and the Virginia Port Authority, its friends and the some for freight, but since additional rail capac- McDonnell Administration over the merits of ity can be used for either purpose, a distinction several port privatization proposals, CSX man- between passenger and freight capacity is some- aged a coup. It gained an advantage over Norfolk what artificial. Southern, capturing the sizable Maersk contract, Kevin Page, DRPT’s chief operating officer, serviced in Hampton Roads at the APM terminal negotiated an agreement with Amtrak to cover in Portsmouth. Maersk is a large Danish container operating costs of the new Lynchburg train, and shipping line. Thus, some of the international its counterpart, one serving Richmond. Page, container traffic originally contemplated to move who is very knowledgeable and an astute nego- via the Heartland Corridor, and upon which that tiator, secured a remarkably favorable contract. project was justified, now moves via CSX Rich- But where would the state get the operating funds mond, the James River line, and beyond to the required to make Amtrak whole? To this day, the railroad’s new Northwest Ohio Intermodal Trans- author does not know and has purposely refrained fer Terminal. This change in shipping routes illus- from asking too many questions. Any state agency trates that transportation of cargo is a dynamic has some flexibility to move funds within its own business. Nothing remains the same for long. That bailiwick. Examination of DRPT’s Rail Enhance- becomes a challenge for both private and public ment Fund statements will illustrate that some investment in fixed infrastructure. authorized projects fall out, some fall behind, and some are not scheduled until the out-years. In any High Speed Rail Routes event, it all came together. The greater Hampton Roads area has since the The new Lynchburg train started October 1, early 1990s maintained a keen interest in the con- 2009, and the Richmond train began in mid-sum- cept of high-speed rail service to the Northeast mer 2010. Ridership and financial results have and in the enhancement of traditional intercity since surprised and pleased all concerned. In fact, Amtrak passenger rail as an interim step. The both Amtrak and DRPT point to the Lynchburg Department of Rail and Public Transportation, in train, which gets a big boost in ridership from the anticipation of someday receiving federal funding Charlottesville market, as being in the top two or to link Hampton Roads to the northeast/south- three performing trains in their system. Currently, east spine at Petersburg and Richmond, has spent planning is underway to extend the train to Roa- much time and money on the obligatory federal noke. Although earlier Trans Dominion Express environmental studies and assessments. This was proponents failed in their original objective to first undertaken almost two decades ago under inaugurate a train from Bristol, some of those the leadership of North Carolina Department of involved reinvented themselves and morphed Transportation in connection with the Southeast into the Piedmont Rail Coalition in support of Corridor. However, when Hampton Roads leaders the Lynchburg train. Meredith Richards, a former arranged to have their region added to the Fed- member of Charlottesville City Council, and oth- eral Railroad Administration HSR corridor map, ers led the coalition. the addition was general in nature and did not specify which corridor would be used, the Pen- insula (I-64) Corridor or the Southside (Route 14 460) Corridor. Regional elected officials finally Weldon Cooper Center for Public Service • June 2013

New Lynchburg Amtrak Regional train service was inaugurated in October 2009. Source: Photograph by Richard L. Beadles. reached a compromise verdict in 2009 under the well as for the Lynchburg train, plus four others, auspices of the Hampton Roads Transportation starting October 1, 2013 was problematical. Funds Planning Organization. The ultimate high-speed had previously been scraped together to start the rail link would be via the Southside route, when- first two of what will ultimately become a fleet of ever it is financially feasible to construct it, but six round-trip Amtrak Virginia regional trains. in the interim, both sides would be connected In 2011, the General Assembly created what is by enhancing existing rail passenger service via known as the Virginia Intercity Passenger Rail Williamsburg and Newport News (CSX) and by Capital and Operating Fund, (IPROC), but with restoring conventional intercity rail passenger ser- no dedicated source of money vice to Norfolk via the Southside Corridor. The 2013 General Assembly came to the By this time, Southside Hampton Roads citi- rescue, and with Governor McDonnell’s sup- zens, community leaders, businesspeople, and port, provided a dedicated source of funding for the military as well, were running out of patience regional intercity passenger rail in Virginia. The with mega-billion-dollar-cost estimates, and the state sales and use tax was increased from 4 per- requirement for years of federally-dictated envi- cent to 4.3 percent. The 0.300 percentage point ronmental studies, coupled with what seemed like increase was earmarked as follows: 0.050 percent- arbitrary grant-making decisions coming out of age points (one-sixth of the increase) for IPROC, Washington. After President Obama unveiled his 0.175 percentage points for the Highway Mainte- U.S. High-Speed Rail development program in nance and Operating Fund, and 0.075 percentage early 2009 as a centerpiece of his transportation points for the Mass Transit Fund. The far-reaching and economic stimulus agenda, Virginia did not legislation stated: fare well in the initial round of grants. Absent use of federal funding and the obligatory environmen- The Director of the Virginia Department tal study requirements that precede such funding, of Rail and Public Transportation or his DRPT and others were well aware that conven- designee shall administer and expend or tional rail passenger service could be brought to commit, subject to the approval of the Com- Norfolk in much less time and at much lower cost monwealth Transportation Board, the Inter- if no federal funds were involved. city Passenger Rail Operating and Capital In early December 2012 Amtrak started Fund to support the cost of operating inter- regional train service from Norfolk for Richmond, city passenger rail service; acquiring, leas- Washington, D.C. and Northeast Corridor points, ing, and/or improving railways or railroad to its final destination in Boston. This was a equipment, rolling stock, rights-of-way, or remarkable achievement by any measure. But how facilities; or assisting other appropriate enti- Virginia would pay for the new Norfolk service, as ties to acquire, lease, or improve railways or 15 The Virginia News Letter

TheTide , Norfolk’s new light rail transit system. Source: Photograph by Richard L. Beadles

railroad equipment, rolling stock, rights-of- Light Rail Transit way, or facilities for intercity passenger rail At the other end of the Virginia rail inter- transportation purposes whenever the Board nal improvement spectrum, is light rail transit shall have determined that such acquisi- (LRT), currently represented by Norfolk’s Tide, tion, lease, and/or improvement is for the a 7.4-mile-long operation that opened to rave common good of a region of the Common- reviews in August 2011 and has since exceeded wealth or the Commonwealth as a whole. everyone’s expectations. The cost of construction Funds provided in this section may also be was $338.3 million. 14 LRT is a modern-day rein- used as matching funds for federal grants to carnation of the old electric streetcars and inter- support intercity passenger rail projects. 13 urban railways of the first half of the 20th century. Current LRT technology evolved from German In fiscal year 2014 IPROC is forecast to receive designs and practices, coming to the U. S. by way $44.3 million and by 2018 the forecast amount is of several Canadian cities. However, today’s LRT $56 million. bears little resemblance to the past, other than its electric propulsion and the steel rail guideway. High Performance Rail Freight Federal funding was crucial to development of the State funding for high-performance rail freight Tide, representing about 60 percent of the initial is about as uncertain as money for high-speed capital cost. The city of Norfolk and the state pro- passenger rail. Much of the near-term revenue vided the rest. While the Tide project encountered associated with the Rail Enhancement Fund has construction cost overruns and project manage- apparently already been committed. The REF ment problems, it is nevertheless considered to be generates only about half of the roughly $50 mil- one of the more cost-effective and promising LRT lion annual stream of revenue soon to start flow- new-starts in the country. A major extension into ing into the IPROC account. While the REF, Virginia Beach is currently under consideration; as it exists, is probably adequate for what might initially it would use part of a 10.6-mile former be termed a status-quo approach to freight rail, Norfolk Southern rail corridor that the city of Vir- much larger commitments of public capital will ginia Beach previously acquired. The Tide is likely be required if Virginia aspires to promote and to be a forerunner of LRTs elsewhere in the state. support high-performance rail freight services. Such services would necessarily require highway- Conclusions and Observations competitive frequencies, performance quality, and The newly passed state transportation bill and market-reach beyond anything available today. other related laws have strengthened Virginia’s Rail-highway intermodal service would undoubt- role in preserving and developing rail transport. edly be at the core of such a radical transforma- This process has been going on since the mid- 16 tion of rail freight 1970s and to some extent the rail renaissance Weldon Cooper Center for Public Service • June 2013 has been outpacing strategy and policy. Rail is federal government, Maryland and the District of efficient and environmentally friendly and offers Columbia, in construction of the Metrorail system. many transportation advantages for the public. Then in 1987, Virginia made its initial grant out of The history of rail policy in Virginia has now the newly established Rail Industrial Access pro- come full circle from its beginnings, with strong gram to assist with provision of rail freight service state support in the earliest days emerging from to the new Coors Brewing Company plant near the canal era to a disengagement and fire sale of Elkton in the Shenandoah Valley. 15 There being state rail holdings following the Civil War. If rail- no dedicated state source of rail funds except for roads are to continue to play a key role in meet- transit anything done by the state for intercity rail ing Virginia’s transportation needs, policymakers prior to the 2000 General Assembly undoubtedly have many issues they need to clarify. Key among came from special allocations from general funds these is the vulnerability of state railroad funding or from highway transportation funding sources. to a charge that this violates the state constitution. The reemergence of public support of inter- The General Assembly should be requested to city freight and passenger rail development in initiate the obligatory process to amend the state Virginia reflects an enlightened and progressive constitution to eliminate Article X, Section 10, turn in political leadership, as well as some out- which has become inappropriate and inconsistent standing staff work at the Department of Rail and based upon more than four decades of actions by Public Transportation. Virginia’s rail program, as the legislature and governors that render the pro- shown in the map, is currently viewed elsewhere hibition on internal improvements unnecessary as a leader among states, generating considerable and a potential litigation nuisance standing in the favorable national recognition. That said, based way of 21st century transportation needs of the on my observation of rail policy and practices for people of Virginia. over fifty years, I recommend further consider- Moreover, no Virginia judicial interpreta- ation of the following: tion of which I am aware has yet defined “rail” • Since the mid-1970s, Virginia has gradu- or “railroads.” For example, rail transit, which is ally become a major funder and developer heavy-rail in the case of Metrorail, light rail in of rail freight and passenger infrastructure the case of Norfolk Tide, commuter rail in the through capital investment grants and, more case of VRE, intercity-passenger rail in the case of recently, of rail passenger services by means Amtrak, or freight rail in the case of CSX and Nor- of contingent contractual operational sup- folk Southern. If rail transit constitutes an internal port, if required. Much of this has evolved on improvement, then the first major rail funding a responsive, as needed, project-specific basis, commitment of the 20th century was the state’s rather than in accordance with a long-term 1966 agreement to participate, along with the strategic plan. Unless such a plan appears in

Note:Rail InvestmentThis map is based Priorities on projects for Virginia. rather than services. For example, the U.S. 29, U.S. 460, I-81 passenger service project includes the Lynchburg-Charlottesville-Washington, D.C. Amtrak regional train service. Source: Virginia Department of Rail and Public Transportation (2013). 17 The Virginia News Letter

the Department of Rail and Public Transpor- • Virginia has a material interest in the future tation’s soon-to-be released State Rail Plan, I of the Northeast Corridor and should be bet- have yet to see a vision for the future. Ideally, ter represented in matters relating to NEC. such a vision would define the optimal role There are inherent inequities. Contrast for rail among all other modes of transporta- Maryland, which directly pays nothing for tion in Virginia and would lay out the steps NEC service because Amtrak operates all necessary for achievement. Rail planning of its intercity trains, to Virginia that now cannot be adequately encapsulated in the tra- is to assume full financial responsibility for ditional VDOT Six-Year Plan. Amtrak regional trains. Virginia governors, • Earlier efforts to explore creation of a state their administrations, and the state’s congres- rail authority were dismissed as being inap- sional delegation should address this inequity. propriate because the state did not then own • Currently, the Southeast Rail Corridors— any rail infrastructure; it only made grants. both freight and passenger—are accorded That may be changing. A current review lower priority by Virginia than is the NEC, would be appropriate. but that could change in 20 to 50 years. A • Key terms of Department of Rail and Public longer-term assessment, including Hamp- Transportation contracts with private rail- ton Roads passenger and cargo access to the roads are often redacted (withheld) osten- Southeast, would be appropriate. sibly for legal purposes and thus shielded • Virginia will eventually need something from public scrutiny on the basis of shel- much closer to true high-speed passenger tering proprietary information. This even rail than is now apparently contemplated. To extends to quasi-public companies, such as accomplish this will require more dedicated Amtrak. While honoring and protecting tracks in existing rail corridors, and possibly legitimate privacy concerns that might prove construction of some entirely new rail corri- injurious to the other party, the tax-paying dors, all to permit operation of intercity rail public deserves as much daylight as is pos- passengers services that are aviation-compet- sible. Present practices have not yet struck the itive, portal to portal, for travel in a range of right balance. 100-to-300 miles or more. Opportunities for • Protection of public investment in rail infra- entirely new rail corridor development are structure on private railroad property remains limited, but they do exist, especially in con- open to question. Formal contracts notwith- junction with new highway corridor develop- standing, such questions and concerns often ment, e.g., a future western bypass around the depend upon the good faith of the principals Washington, D.C. area. on both sides. Private, for-profit, railroad • The former Intermodal Transportation Effi- companies drive a tough bargain and are cau- ciency Act (ISTEA) mandate for major tious in structuring terms and conditions in investment studies should be incorporated their dealings with one-another. The public into and made a part of Virginia trans- sector might learn from them. portation policy, regardless of whether or • As the public digs deeper in its pockets not it is required by the Federal Highway to fund a wide variety of rail projects, the Administration. need for greater public accountability by the • Integration of intercity passenger rail and Department of Rail and Public Transporta- urban transit is essential. The Norfolk Tide- tion grows. There has not yet been a public Amtrak intermodal connection at Harbor report rendered by DRPT on the effective- Park should be a model for consideration ness of the initial round of Rail Enhance- elsewhere in Virginia. ment Fund grants made in 2005. • The risk of loss of rail freight lines in South- • The Department of Rail and Public Trans- west Virginia is increasing and should be portation must find the means and make the promptly analyzed, given the diminishing effort to actively oversee the operation, mar- volumes of coal being transported over some keting and financial aspects of the October 1, of those lines. The recent emergence of rail as 2013 state takeover of financial responsibility a transporter of North Dakota Bakken crude for the six Amtrak Virginia regional trains. oil is a case study for why rail rights-of-way This is a huge potential change in policy, should be preserved for yet-unknown trans- but it remains to be seen if DRPT will have portation requirements in the future. the manpower and experience to monitor • Consideration should be given to modify- the operation. ing the charter of Virginia Railway Express 18 to permit and facilitate future expansion Weldon Cooper Center for Public Service • June 2013

of its commuter rail operations when such as well as an enhanced web page, would be an service can be justified. Alternatively, the effective way of demonstrating the value of Department of Rail and Public Transporta- current and future DRPT rail programs. This tion should be given approval jurisdiction would improve the likelihood of continuing over new commuter rail starts elsewhere availability of resources and ensure continu- in Virginia. ity. With Virginia’s system of one-term gov- • Local jurisdictions and transportation ernors, maintaining continuity in policy and authorities should assume greater respon- staffing is a potential weakness in our system. sibility for rail passenger transit centers and The public must be kept better informed in should be given some measure of state finan- order to minimize the risk of abrupt changes cial incentive to do so. in course. • A Department of Rail and Public Transpor- • Virginia has witnessed a remarkable cycle tation annual report on the status of rail in of public policy on railroad transportation the commonwealth would be beneficial to ranging from early embrace, later a famous policymakers and citizens alike. The report constitutional prohibition, and finally, rec- could include cumulative public investment, onciliation. The next 50 years promise to be appropriately classified by categories (freight, equally challenging, but prudent steps taken passenger, short-line, etc.), together with now can smooth the way. Some of them quantitative measures of results (freight car- wouldn’t even cost a lot of money. Virginians loads, containers diverted from highways to appear to strongly favor rail development. rail as result of public funding for rail, passen- Rail is not a partisan political issue. With gers handled, etc.). The information provided, good planning, we can be optimistic about the future of rail in Virginia.

Major Developments in the History of Virginia Railroads

1816 Virginia established a Fund for Internal Improvements and the Board of Public Works (BPW) to administer such public investment, initially for roads and canals. 1830-1861 In 1830 the state made its first railroad investment, purchase of Petersburg Railroad Com- pany stock. Over the 1830-61 period the state purchased stock, made loans and guaranteed debt of most of the railroads that were constructed. 1861-1865 The Civil War took its toll on Virginia railroads, both in terms of damage sustained as result of military action as well as degradation resulting from lack of steel, machinery and skilled manpower and absence of coordination. 1865-1870 There arose a huge political debate in Virginia about state debt, much (but certainly not all) resulting from pre-war investment in railroads. Should the state undertake to pay its debt or walk away (Funders versus Adjusters)? 1869 A new Virginia constitution was approved as the price of readmission to the Union. The document prohibited new state investment in works of internal improvement. However, it did not require divestiture of existing holdings. 1871 Virginia decided to liquidate all of its railroad securities and did so at fire sale prices. 1887-1888 The federal government’s Interstate Commerce Commission (ICC) began to regulate railroads pursuant to the Interstate Commerce Act. 1902 A new state constitution exempted roads from the internal improvements investment prohibition. 1903 A new Virginia regulator, the State Corporation Commission (SCC), replaced the Board of Public Works (BPW). 1910 With completion of the former Virginian Railroad, rail route development in Virginia reached its peak. 1918-1920 President Woodrow Wilson ordered federal control of most U.S. railroads in 1920. The railroads were returned to private owners in 1920. 1926-1930 Harry Byrd, Sr., long-associated with highway improvement interests, but rabidly against public debt (the “pay-as-you-go-governor”), established a reputation for his work improving—often just paving—Virginia roads. World War I and the 1920s marked the beginning of the end of rail transportation dominance in Virginia. 1956 The Interstate Highway System was begun. The system was a game changer as the new road system became a competitive threat to passenger and freight rail. 19 The Virginia News Letter

1966 Virginia joined with the federal government, Maryland and the District of Columbia to assist with construction of the Washington Metrorail system. 1970 The National Railroad Passenger Corporation, better known as Amtrak, came into existence. Most Virginia rail passenger service was taken over by Amtrak. 1975 Accomack and Northampton counties, with General Assembly approval, formed a regional public entity to save the so-called Eastern Shore Railroad. State financial assistance was provided by VDOT. This represented the first public funding of a Virginia freight Line since 1861 and was to be the precursor of the Virginia “Short Line Rail Preservation Program.” 1976 The Washington, D.C.-New York-Boston rail corridor was assigned to Amtrak. Federally funded improvements in infrastructure and service followed. 1980 Substantial federal rail deregulation occurred under the so-called Staggers Act. 1980-1982 CSX and Norfolk Southern mergers resulted in rail consolidation in Virginia and elsewhere. 1987 The Virginia Rail Industrial Access program was used for the first time to provide rail freight access to Coors Brewery at Elkton. 1991 Virginia sold its interest in the RF&P Railroad in 1991. 1991-1992 The Virginia Department of Rail and Public Transportation (DRPT) was created as a sepa- rate agency. 1992 Virginia Railway Express (VRE) began operation of commuter rail service in Northern Virginia. 1999 Governor Jim Gilmore and Amtrak’s president jointly announced their mutual objective of improving Richmond-Washington, D.C. service. 2000 Virginia’s Transportation Act of 2000 appropriated $66 million of state funds for rail infrastructure improvements in the Washington, D.C.-Richmond corridor. Additional funds also were appropriated for VRE and the Trans-Dominion Express. 2005 The Virginia Rail Enhancement Fund was created. The proceeds from a 3 percent state tax on motor vehicle rentals are dedicated to the fund. The fund was the first ongoing, dedicated, state funding for intercity rail infrastructure. 2008-2010 In the Kaine Administration two additional Amtrak regional trains were added. Pursuant to an agreement, the state assumed operating deficit responsibility. The new Lynchburg train started in 2009, and its companion Richmond train began a year later. 2008 Under the George W. Bush administration the so-called Passenger Rail Investment and Improve- ment Act (PRIIA) was passed. Section 209 made states financially responsible for their regional (as opposed to long-distance) Amtrak trains beginning October 1, 2013. 2012 The new Norfolk regional passenger train started December 12, 2012. 2013 As a part of a major transportation finance act, funding was provided for the previously unfunded Intercity Passenger Rail Capital and Operating Fund (IPROC). The dedicated money will be provided from a portion of a 0.3 percentage point increase in the state sales and use tax.

ABOUT THE AUTHOR: Dick Beadles was actively engaged, on behalf Dick Beadles is a fellow, board member and of RF&P, in the mid-1960s, in the early location immediate past president of the Virginia Rail studies preceding the development of the Metro- Policy Institute. Beadles was one of the found- rail system. He was also involved in the feasibility ers of what is now known as Virginians for High studies and operational planning which ultimately Speed Rail (VHSR). In 2001, he served as the led to the 1992 inauguration of the Virginia Rail- principal architect of VHSR’s comprehensive rail way Express commuter rail service. Beadles plan for Virginia. Beadles served as president and served as a member of Governor Mark Warner’s chief executive officer of the former Richmond, 2004 Rail Study Commission, which promoted Fredericksburg & Potomac Railroad (RF&P) and the establishment of the Virginia Rail Enhance later of CSX Realty. After leaving CSX, Beadles Fund. He also served on the Rail Advisory Board established a Richmond-based real estate advi- from 2005 to 2011 when it was abolished. sory firm then known as MGT Realty Advisors, An alumnus of Virginia Commonwealth Uni- serving corporate and institutional clients. Since versity, Beadles and his wife reside in Richmond, retiring in 2000, he has been active in writing and where he researches, writes and produces his bi- advocacy associated with rail and related trans- monthly commentary on rail policy issues. The portation topics. commentary is available on the Virginia Rail Pol- icy Institute web site: http://www.varpi.org/ 20 Weldon Cooper Center for Public Service • June 2013

8 The author is indebted to Denton U. Kent for his explanation of the 1Endnotes Library of Virginia, Board of Public Works Inventory--Records in public funding of the four-mile track relocation. Kent was president of the Library of Virginia, Introduction. n.d. http://www.lva.virginia.gov/ RF&P Corporation during the time it was owned and controlled by the public/guides/bpw_intro.pdf Virginia Retirement System. 2 Twenty is the author’s best estimate. Due to authorizations that never 9 U.S. Department of Transportation, Federal Railroad materialized, reorganizations, and name changes, others may come up Administration, High-speed Ground Transportation for America with a slightly different number. (Washington, D.C., 1997). http://www.fra.dot.gov/eLib/details/L02519 3 Allen W. Moger, Virginia: Bourbonism to Byrd, 1870-1925. 10 Secretary of Transportation, The Potential for Shifting Virginia’s (Charlottesville: University Press of Virginia, 1968), pp. 21-75. Also, Highway Traffic to Railroads. Senate Document No. 30 (2001). http:// see Moger’s article “Railroad Practices and Policies in Virginia after the www.drpt.virginia.gov/studies/files/SJR-55FinalReport.pdf Civil War,” Virginia Magazine of History and Biography, Vol. 59 (1951), 11 The organization’s website is: http://www.vhsr.com / p. 425. 12 Dollar amounts based on unpublished information from the 4 Opinion rendered by the Virginia Supreme Court in the case of Department of Rail and Public Transportation and an analysis by the Montgomery County, ET AL. v. Virginia Department of Rail and author. Public Transportation, ET AL., Record No. 100350 (November 4, 13 Department of Planning and Budget 2013 Impact Statement for 2011) pp. 17-18. HB 2313 as Enacted, p. 6. http://lis.virginia.gov/cgi-bin/legp604. 5 William D. Middleton, Gorge M. Smerk, and Robert L. Diehl, edi- exe?131+oth+HB2313FCHP122+PDF tors. Encyclopedia of North American Railroads (Bloomington, IN: 14 Philip A. Shucet, “Presentation on The Tide, Norfolk’s Light Rail,” Indiana University Press, 2007), pp. 919-35. Commonwealth Transportation Board (July 20, 2011). http://www.ctb. 6 Encyclopedia of North American Railroads, p.1132. virginia.gov/resources/2011/july/pres/Agenda_Item_1_Shucet_presen- 7 Virginia Department of Transportation, Average Daily Traffic tation_to_CTB_7-13-11-_revised.pdf Volumes with Vehicle Classification Data on Interstate, Arterial and 15 Information provided by Kevin Page, Chief Operating Officer, Primary Routes (Richmond, 2011). http://www.virginiadot.org/info/ Department of Rail and Public Transportation. resources/Traffic_2011/AADT_PrimaryInterstate_2011.pdf

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VOL. 89 NO. 3 JUNE 2013 Editor: John L. Knapp Consulting Editor: Robert Brickhouse The Virginia News Letter (ISSN 0042-0271) is published by the Weldon Cooper Center for Public Service, University of Virginia, P.O. Box 400206, Charlottesville, Virginia 22904-4206; (434) 982-5704, TDD: (434) 982-HEAR. Copyright ©2013 by the Rector and Visitors of the University of Virginia. The views expressed are those of the author and not the official position of the Cooper Center or the University.