(The following story by Leo King appeared on the Jacksonville Business Examiner website on October 26, 2009.)
JACKSONVILLE, Fla. — Only Norfolk Southern is “revenue adequate,” the Surface Transportation Board reported today.
In a press release the STB stated, “Decision found that one Class I railroad (Norfolk Southern Railway Co.) is to be revenue adequate for the year 2008. All other Class I railroads are found to be revenue inadequate.”
The board made its decision on October 16, the STB stated.
Norfolk Southern is headquartered in Norfolk, Va. and is one of the largest rail carriers in the U.S.
CSX, based in Jacksonville, is another Class I railroad, and the STB reported the carrier‘s ROI came to 9.34 percent. Florida East Coast Ry., also based in Jacksonville, is a Class II railroad. In all, there are seven Class Is. The threshold is each railroad’s revenue – more than $600 million is a Class I.
The board explained that “A railroad is considered revenue adequate if it achieves a rate of return on net investment (ROI) equal to at least the current cost of capital for the railroad industry. We perform the annual revenue adequacy exercise because we have been directed to do so by Congress.”
In Railroad Cost of Capital for 2008, “We determined that the 2008 railroad industry cost of capital was 11.75 percent. By comparing this figure to the 2008 ROI data obtained from the carriers’ Annual Report R-1 Schedule 250 filings, we have made revenue adequacy calculations for each of the Class I freight railroads that were in operation as of December 31, 2008.”