Short-line railroads are small businesses, delivering large benefits to the economy
Bigger is not always better. In 2024, small businesses across all industries generated many new jobs, drove local economic activity, and increased revenues throughout the US despite some of the broader economic challenges that may have had a greater impact on larger or more mature companies.
Similarly, America’s short-line railroads, approximately 600 small businesses, have remained stable during a time of volatility among many modes of transportation and significant supply chain disruptions.
Like other small businesses, short-line railroads are achieving stable growth because they are nimble and have fewer layers of bureaucracy. They also tend to become ingrained in the communities they serve and are open to new opportunities for revenue, either through incremental business with existing customers or by offering a wide range of services.
“Short-line railroads are considered the scrappy, entrepreneurial players in the rail industry,” said Baker. “They are also necessary.”
Crucial to the Overall US Freight Network
They are also crucial to the U. S. freight network. Operating 50,000 miles of track, or 29% of freight rail in the U.S., short-line railroads play a key part in the hub-and-spoke transportation networks of most the nation’s Class 1 railroads.
“First and foremost, we need to remember that the entire North American freight-rail network is one ecosystem. Fluidity issues on the West Coast can end up impacting customers in the Northeast,” said Tom Ciuba, vice president of communications for Genesee & Wyoming, a company that owns or leases over 100 freight railyards in North America. “By strengthening our Class 1 and short-line relationships, we can create a better service product that meets the growing needs of our customers.”
In some rural areas and small towns, short-line railroads are the only freight connection between shippers and customers. Baker said, ““They often serve as the first-mile/last-mile connection between farmers, manufacturers, and the end-consumer.”
Short-Line Railroads Are Nimble
The Livonia, Avon & Lakeville Railroad Corporation (LA&L) is a family-owned business that has been operating since 1965.
Bob Babcock, president and CEO of LA&L says the railroads are lean operations. He explained, “There is not a lot of bureaucracy in short-line railroads. This allows us to be nimble, either adding new cars to our existing networks to accommodate economic changes or providing unique services that help area businesses.”
One example he offers is a request for a new switch for a potential customer. While this request might take a long time to make its way through the bureaucracy of a larger organization, Babcock said, “We take care of the problem. If a customer needs a new switch at a plant location, they get a new switch at their location.”
Another aspect of lean short-line railroad operations is the lack of resources for large marketing or sales teams so growth is the shared responsibility of all employees of a short-line railroad.
“Our growth is incremental,” said Babcock. “We add one or two carloads at a time. A customer adding five rail cars a week is significant for us. The smaller base ensures we provide excellent service to all customers, whether they are mature companies achieving new growth or businesses that are new to our service area.”
Understanding the Communities They Serve
Like other short-line railroads, LA&L builds positive relationships with local economic development groups. “We are the eyes and ears on the ground, and we become ingrained in the communities we serve,” he noted.
These connections allow LA&L to understand trends as they are evolving. Babcock offers this example, “The western New York-Pennsylvania region is experiencing an increase of major manufacturing and logistics companies locating there to take advantage of the proximity to major markets across the Northeast and Central U.S.”
He noted that LA&L’s positive relationships with economic development agencies position the railroad to serve new businesses or expanded operations early in the process, and partner with the communities to support the needs of these companies while working to keep source materials and jobs local.
Industrial Development is Part of Doing Business
G&W has more than 4,000 employees serving 2,000 customers over more than 13,000 track miles. Through its subsidiaries and joint ventures, G & W provides a wide range of services, including a team devoted to Industrial Development.
When a business decides to add a rail component to its operations, G&W is available to assist at every point in the process. According to G&W, they offer a four-step solution. It begins with communication.
A company contacts G&W to discuss their requirements and define their rail and business needs. From that point, the Industrial Development team reviews potential properties and sites including ones with port access and/or transload options. G&W’s designers develop conceptual track designs for potential properties.
Together, the client and G&W review sites to select the best option. At that point, G&W’s operations team and the client finalize track plans, also offering the names of rail construction contractors. G&W is also prepared to work with clients to optimize the efficiency of the new site as it is being built.
Entrepreneurial Approach Benefits Customers
“We offer a one-stop-shop solution for many of our customers,” said LA&L’s Babcock. “We provide rail-truck transfer, bulk transfer options, and warehousing capabilities.”
Other short-line railroads like G&W offer railcar repair, railcar storage, port operations, and assistance with credit, dimensional, and claims forms. However, the benefits of short-line railroad growth are much broader.
In testimony to the Surface Transportation Board, the ASLRRA states that short-line railroads are vital to the economy by connecting small towns and rural areas to manufacturing or retail locations. They haul a wide range of goods including chemicals, food products, aggregates, and intermodal rail.
Short-line railroads are also good stewards of the tracks they operate and the surrounding areas. “Most short-line railroads invest a minimum of 25% of their annual revenues in rehabilitation and maintenance, which is far more than almost any industry in the country,” said ASLRRA’s Baker. “Their ingenuity and investment have created a vibrant industry, serving a critical role in freight movement.”
