GEORGIA DOT RESEARCH PROJECT 16-08 FINAL REPORT ECONOMIC IMPACT ANALYSIS OF GDOT’S SHORT LINE RAILROADS OFFICE OF PERFORMANCE-BASED MANAGEMENT AND RESEARCH 15 KENNEDY DRIVE FOREST PARK, GA 30297-2534 1.Report No.: 2. Government Accession No.: 3. Recipient's Catalog No.: FHWA-GA-18-1608 4. Title and Subtitle: 5. Report Date: Economic Impact of GDOT’s Short Line April 2018 Railroads 6. Performing Organization Code: 7. Author(s): 8. Performing Organ. Report No.: Patrick McCarthy, Zhe Zhai 9. Performing Organization Name and Address: 10. Work Unit No.: Georgia Institute of Technology Atlanta, GA 30332 11. Contract or Grant No.: PI No. 0014918 12. Sponsoring Agency Name and Address: 13. Type of Report and Period Covered: Georgia Department of Transportation Final; April 2016 – April 2018 Office of Performance-Based Management and Research 14. Sponsoring Agency Code: 15 Kennedy Drive Forest Park, GA 30297-2534 15. Supplementary Notes: Prepared in cooperation with the U.S. Department of Transportation, Federal Highway Administration. 16. Abstract: Short line railroads are critical to Georgia’s transportation infrastructure and support the efficient movement of goods into and out of the State. Twenty-nine short line railroads operate in Georgia, six of which operate either partially or totally on 596 miles of rail track that the Georgia Department of Transportation (GDOT) owns. Based on the Bureau of Economic Analysis RIMS II backward-linkage model, this study estimates under different sets of assumptions the economic impacts associated with short line railroad revenues and with GDOT infrastructure spending on these six short line systems. Among the economic impacts, and depending on the assumptions, the study finds that the cumulative impact of the six systems increases annual output in the range of $2.8-$14.5 million, increases annual earnings in the range of $0.7-$4.1 million, and generates annual value-added in the range of $1.4-$7.5 million. Cumulatively, these systems annually add 10 - 93 jobs on average. 17. Key Words: 18. Distribution Statement: Short Line, Railroad, Economic Impact, Infrastructure, RIMS II 19. Security 20. Security 21. Number of 22. Price: Classification (of this Classification (of Pages: report): this page): 102 Unclassified Unclassified ii GDOT Research Project No. 16-08 ECONOMIC IMPACT ANALYSIS OF GDOT’S SHORT LINE RAILROADS Final Report By Patrick McCarthy Professor Zhe Zhai Assistant Professor Georgia Tech Research Institute Contract with Georgia Department of Transportation In cooperation with U.S. Department of Transportation Federal Highway Administration April 2018 The contents of this report reflect the views of the authors who are responsible for the facts and the accuracy of the data presented herein. The contents do not necessarily reflect the official views or policies of the Georgia Department of Transportation or the Federal Highway Administration. This report does not constitute a standard, specification, or regulation. iii TABLE OF CONTENTS LIST OF TABLES ......................................................................................................................... vi LIST OF FIGURES ...................................................................................................................... viii EXECUTIVE SUMMARY ............................................................................................................ ix ACKNOWLEDGEMENT .............................................................................................................. xi I INTRODUCTION ................................................................................................................... 1 II LITERATURE REVIEW ........................................................................................................ 6 A. Deregulation and the Rail Industry ...................................................................................... 6 B. Short Line Railroads ............................................................................................................ 8 C. Employment and Spending Impacts .................................................................................. 13 D. Operational and Shipping Impact ...................................................................................... 14 E. Mode Diversion Impact ..................................................................................................... 14 F. Community Effects ............................................................................................................ 15 III GEORGIA’S SHORT LINE RAIL SYSTEM .................................................................. 17 A. Industry Overview ............................................................................................................. 17 B. GDOT and Non-GDOT SLRs ........................................................................................... 20 C. GDOT SLR Operating Statistics ....................................................................................... 26 D. Financial Data .................................................................................................................... 30 IV RIMS II – ECONOMIC IMPACT METHODOLOGY .................................................... 32 A. Introduction ....................................................................................................................... 32 B. RIMS II Methodology ....................................................................................................... 32 C. Multiplier Effect ................................................................................................................ 34 D. RIMS II Application – Additional Considerations ............................................................ 37 E. Methods of Estimation of Impacts .................................................................................... 39 F. Final Comments ................................................................................................................ 46 V GDOT SHORT LINE RAIL ECONOMIC IMPACT ........................................................... 47 A. Introduction ....................................................................................................................... 47 B. GDOT SLR Track Infrastructure – Descriptive Statistics ................................................. 48 C. Statewide and Local Area Economic Impact Multipliers .................................................. 50 D. Economic Impact – Industry Contribution and Departure Approach ................................ 52 E. Economic Impact – Project Spending Approach ............................................................... 56 iv F. Economic Impact – Bill of Goods (BOG) Approach ........................................................ 58 G. Economic Impact of GDOT’s SLR System – A Consolidation ........................................ 63 H. GDOT Short Line Railroads and Tourism ........................................................................ 65 VI COMMUNITY IMPACT .................................................................................................. 67 A. Environmental Impact ....................................................................................................... 67 B. Safety Impact ..................................................................................................................... 69 C. Fiscal Impact ..................................................................................................................... 71 D. Business Development ...................................................................................................... 71 E. State Industry Support ....................................................................................................... 76 VII CONCLUSION ................................................................................................................. 78 VIII REFERENCES .................................................................................................................. 80 APPENDICES ............................................................................................................................... 86 APPENDIX A – Academic Literature Related to Short Line Railroad Systems .......................... 87 APPENDIX B – Short Line Rail State Department of Transportation (DOT) Reports ................ 92 APPENDIX C – Short Line Railroad Systems .............................................................................. 94 APPENDIX D – Statewide Economic Impact Multipliers ............................................................ 96 APPENDIX E – Local Area Economic Impact Multipliers .......................................................... 97 APPENDIX F – Statewide Detailed Impact, 2015 Project Spending with Leakage ..................... 99 APPENDIX G – Statewide Detailed Impact, 2015 Project Spending with Leakage .................. 100 APPENDIX H – Short Line Railroads and Business Development ............................................ 101 v LIST OF TABLES Table Page Table 1 U.S. Railroad System Characteristics ................................................................................. 2 Table 2 U.S. Class II and III Railroads ........................................................................................... 3 Table 3 U.S. SLR Ownership .......................................................................................................... 9 Table