From Small Towns to Global Markets: How Freight Rail Drives Economic Growth

Nearly 150 years after the Golden Spike in Promontory Summit, Utah, completed this nation’s first transcontinental railroad, America’s freight railroad industry remains an emblem of innovation and a foundation for economic growth.

In fact, a recent study by Towson University’s Regional Economic Studies Institute found that U.S. freight railroads helped spur nearly $274 billion of economic activity and supported almost 1.5 million American jobs in 2014. This included $88 billion in wages and close to $33 billion in tax revenue—more than the annual tax receipts of 30 states.

Within the United States, freight rail’s consistent and strategic spending buoys once-stagnant desert towns like Santa Teresa, New Mexico, and quietly and efficiently serves the millions of people in a metropolis like Chicago. Meanwhile, Southern Florida has become a buzzing gateway to the global economy in part because of freight rail’s unique capabilities.

An infusion of cash, jobs in New Mexico

When Union Pacific Railroad decided to build a $400 million terminal in Santa Teresa, freight rail brought its first delivery: Jobs. About 1,600 of them. Today the terminal is complete, and more than 600 newly created permanent jobs remain a windfall for this town of 4,200. Additionally, nearly a dozen new businesses have sprung up near the terminal—from Penny’s Diner serving hungry rail workers, to ERO Resources, which maintains and repairs trucks chassis and containers. State officials estimate that the Santa Teresa rail terminal added more than $470 million to the New Mexico economy during the construction period alone.

“Private rail investment was a critical and vital selling point for many businesses,” says Jon Barela, the former economic development secretary of New Mexico. “It signaled to the world that Santa Teresa was a strategic place to do business with the potential to be a vital part of the border and cross-border trade.”

Santa Teresa’s story is a familiar one, as freight rail investments lift towns and cities from coast to coast. But sometimes the industry’s economic imprint shows up in surprising ways—such as helping the Windy City’s commuters get to work on time.

More than freight: Chicagoans on the move

Chicago and freight rail share a long and rich history, but when most Chicago commuters hear “rail,” they probably think of Metra. The city’s prompt and efficient commuter rail system powers 300,000 riders per weekday. Given Chicago’s role as a hub in America’s freight rail network, the cooperation of freight and commuter trains can determine whether hundreds of thousands of people have a good, productive workday.

Every week, Metra makes more than 750 trips across the Chicago Switching District’s 980-mile rail network, the majority of which is owned by freight rail. In addition to Metra’s traffic, the rail network hosts an additional 500 freight trains and dozens of Amtrak trains each day. In the face of so much traffic, freight rail executes a well-choreographed dance and helps facilitate open communications between all the railroads. This comprehensive proactive approach to managing the rail network in Chicago helped Metra achieve a 95 percent on-time performance for 23 consecutive months.

“The efficiency and effectiveness of freight rail transport in the Chicago region is critical to the economic development of Chicago,” says Jeffrey Sriver, director of Transportation Planning and Programming for Chicago’s Department of Transportation. “Likewise, the efficient and effective delivery of commuters to and from the city every day is also extremely important for the economic vitality of our city.”

This fine-tuning of the ebb and flow of rail traffic in Chicago is yet another example of railroads’ positive effect on American cities. Not only can rail rev a city’s economic engine with jobs, it can also keep its people and products moving efficiently. These efficiencies save time and money wherever the rails run, whether through our finest cities or into our most productive ports.

Go rail and go global

In southern Florida, PortMiami serves as a vital link between U.S. businesses, consumers and the global economy. Like its sister Port of the Everglades in Fort Lauderdale, PortMiami counts on the productivity gains that arrive by partnering with freight rail. PortMiami has worked with the Florida East Coast Railway to install three 3,000-feet rail tracks directly onto the docks. This investment allows the port to handle 225,000 containers per year, up from the 45,000 container maximum capacity before the tracks were installed. Thanks to the integrated freight rail network, the goods arriving at PortMiami are able to reach nearly 70 percent of the U.S. population within four days. This swift delivery benefits businesses in the U.S. and abroad.

A global marketplace facilitated by freight rail also serves American consumers.

“The freight railroads’ extensive and improved network enables connectivity between buyers and sellers and facilitates trade both within the U.S. and between the United States and other countries,” says Clifford Winston, a senior fellow at The Brookings Institution in Washington, D.C. “Without an efficient rail network, U.S. industries would incur higher costs, and those costs would raise the prices of a large share of consumer goods.”

A global marketplace and strong domestic economy are possible, in part, because of decades of private spending by American freight rail. And as Towson University’s recent study shows, the beneficiaries are not merely shippers or businesses or the freight rail industry itself. Every American–whether taxpayer, consumer or business owner–benefits from the incredible economic ripple effect of our freight rail network.

Further Reading

Jobs, Output & Taxes: Freight Rail’s Economic Impact

A new study captures for the first time freight rail’s impact on the U.S. economy, and it is nothing short of significant.

Continue Reading on AAR.org 

How One Industry Drives Billions in Economic Activity

Freight rail’s private investments keep America’s economy moving. In 2014 alone, the industry generated almost $274 billion in economic activity.

Continue Reading on POLITICO 

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