Needs and Funding

This section outlines the future investments required to achieve the improvements identified in the Program Guidance Section and compares those needs with the available funding. An assessment of the investment required was conducted for branchline, economic development and rail/highway at-grade crossing projects in Iowa. Rail passenger service needs are being evaluated as part of the Midwest Regional Rail Initiative and are not yet available. Also, needs were not estimated for monitoring of rail activities since this action does not require capital investments.

Needs Assessment

The needs assessment is a technical analysis that serves to identify the extent, type and estimated cost of capital improvements needed to accomplish the rail actions identified in the Program Guidance Section. The needs have been developed from an engineering perspective. Needs study objectives are to determine the adequacy of Iowa's transportation system, compare it to acceptable levels of service, and identify necessary improvements. It involves developing specific design standards, comparing design standards to the current situation, and estimating the cost of needed improvements. The following discussion indicates the methods used for determining needs and the resulting dollar requirements.

• Branchlines

All branchlines in Iowa were evaluated to estimate the cost of upgrading to handle heavier rail cars. Even though Union Pacific plans to upgrade 500 miles of its branchlines by 2012, these lines were included in this evaluation. UP has already upgraded the Mason City line through Lake Mills to handle 286,000-pound loadings. There are approximately 2,130 miles of branchlines in Iowa that carry less than five million gross tons annually. For purposes of this assessment, Level 3 lines carry 1.0 to 5.0 million gross ton-miles annually, Level 4 lines carry 0.5 to 1.0 million annually, and Level 5 lines carry less than 0.5 million annually. Most of these lines have been upgraded in the past to handle cars with a weight limit of 263,000 pounds, generally with 90-pound rail. One major expense to upgrade these lines to carry the heavier loads is heavier rail. There are 290 miles that have less than 90-pound rail and another 960 miles that have less than 112-pound rail. Another critical need on these branchlines is the bridges that may require upgrading or possible replacement. The assumptions used to determine the cost of upgrading are as follows. This information was reviewed with the Iowa railroads and deemed reasonable.

Assumptions

Operating Speeds	All Level 3 and 4 lines would be operated at a minimum of 25 mph. Level 5 lines would be operated at 10 mph or less.
Rail	All rail on Level 3 and 4 lines would be upgraded to 112-pound or heavier continuous welded rail. Rail located on Level 5 lines would not be replaced. The existing welded or jointed rail was assumed to be sufficient for the immediate future to handle the low densities at lower speeds. All turnouts would be replaced with a number 10, 115-pound turnout.
Ties	Up to 1,000 cross ties per mile would be replaced to achieve a non-defective tie percentage of 75 percent after rehabilitation.
Ballast	1,000 cubic yards per mile necessary for six inches of clean ballast under the ties would be added to provide good drainage and stability for the welded rail.
Bridges	All bridges would remain in place and be strengthened.

Rehabilitation costs were based on actual costs for Class I railroads and on contractor costs for Class II and III railroads. Installed costs were determined for individual material items. The individual cost estimates for rail, ties, ballast and miscellaneous costs per mile are shown in Table 12. All projects would also include drainage, signal and crossing work, turnout repair or replacement, and bank stabilization.

Table 12
Rehabilitation Cost Estimates
for Level 3 and 4 Branchlines

Item	Cost per Mile
Rail and Turnout Replacement	$170,000
Tie Replacement	$ 60,000
Ballast Replacement	$ 25,000
Miscellaneous Renewal	$ 10,000
Total	$265,000

These costs per mile were used to determine rehabilitation amounts for each line based on current track conditions. Track conditions were based on knowledge of particular branchlines by the FRA track safety inspectors. Rehabilitation quantities were determined after assessing the current track conditions. The rehabilitation of Level 3 and 4 branchlines in Iowa to handle heavier loads is estimated to cost $250 million in 1998

dollars. The department's share of the total would be $125 million, assuming a 50 percent contribution. This would be about $6.3 million per year, assuming all lines would be upgraded by the year 2020.

• Economic Development

The proposed needs for economic development projects were estimated based on historical trends. Economic development projects are based on the immediate need to help maintain or create jobs. To determine the needs using the branchline approach discussed above would be very difficult, if not impossible.

Historically, the number of economic development project applications started off slow but has increased substantially over the last two years. The number of projects averaged about three per year for the first nine fiscal years. However, this trend changed dramatically the last two years with 10 projects approved in FY 1997 and eight in FY 1998. As a result, it was assumed that applications for funding would equal 10 per year. Based on a maximum of $100,000 in funding per project, annual needs would total $1.0 million.

• Crossings

The needs assessment for the rail/highway at-grade crossings was accomplished using a three-step process--identification of deficiencies, selection of improvements, and estimation of improvement costs. Deficiencies were identified by comparing existing control techniques at the crossing to a set of criteria. Exposure factor, highway system (functional classification), type of area (urban or rural), and degree of access control were the principal variables used to judge the sufficiency of existing protective devices and to select an improvement category. Exposure factor is defined as the product of AADT (average annual daily traffic) and the number of trains per day at the crossing. Four types of improvements were considered including:

• Type 4, Grade Separation. This is the highest type of control considered. It implies elimination of the grade crossing by vertically separating the railroad and highway.

• Type 3, Flashing Lights with Gates. This control criteria includes flashing lights and gates which are automatically actuated by an approaching train.

• Type 2, Flashing Lights. This control criteria includes flashing lights which are automatically actuated by an approaching train.

• Type 1, Reflectorized Signs and Crossbucks. This is considered to be the minimum control strategy for at-grade railroad crossings. It includes signs on the approach and crossbucks at the grade crossing to warn motorists of the presence of the crossing.

Exposure factors (AADT x number of train movements per day) used for each type of improvement are presented in Table 13.

Table 13
Exposure Factors*
for Rail/Highway At-grade Crossing Improvements

Highway Classification	Grade Separation (Type 4)	Flashing Lights with Gates (Type 3)	Flashing Lights (Type 2)	Reflectorized Signs and Crossbucks (Type 1)
Urban
Interstate/Freeway- Expressway (State Highway)	Greater than 50,000 and all full-access routes	10,000 to 50,000	1,500 to 10,000	0 to 1,500
Arterial Connector/ Trunk/Trunk Collector (Major City Street)		Greater than 15,000	1,500 to 15,000	0 to 1,500
Area Service (Minor City Street)		Greater than 20,000	1,500 to 20,000	0 to 1,500
Rural
Interstate/Freeway- Expressway (State Highway)	Greater than 75,000 and all full-access routes	10,000 to 75,000	2,000 to 10,000	0 to 2,000
Arterial Connector/ Trunk/Trunk Collector (Major County Road)	Greater than 75,000	30,000 to 75,000	2,000 to 30,000	0 to 2,000
Area Service (Major County Road)		Greater than 30,000	2,000 to 30,000	0 to 2,000

*Exposure Factor = (AADT) X (Number of Train Movements per Day)

For crossing surfaces, design guides were based on the AADT and crossing surface types. Criteria used to develop the deficiencies and the recommended improvements are contained in Table 14.

Table 14
Crossing Surface Criteria
for Rail/Highway At-grade Crossing Improvements

AADT Range	Minimum Surface Type Required	Surface Types Meeting or Exceeding Required Condition
0 to 500	1	1, 2, 3, 4, 5, 6, 7
500 to 1,000	3	3, 4, 5, 6, 7
1,000 to 5,000	4	4, 6
Over 5,000	6	6

Crossing Surface Type Codes:
1. Sectional Timber	5. Concrete Pavement
2. Full Wood Plank	6. Rubber
3. Asphalt	7. Metal Sections
4. Concrete Slab

Average costs for the installation of rail/highway at-grade crossing protection devices and crossing surfaces were obtained from the department's records for completed projects. The unit cost of the various crossing controls and surface improvements are included in Tables 15 and 16.

Table 15
Cost of Crossing Controls

Type of Improvement	Cost per Unit
	Urban	Rural
Grade Separation	$1,370,000	$1,300,000
Flashing Lights w/gates--Upgrade	$ 60,000	$ 48,000
Flashing Lights w/gates--Install	$ 80,000	$ 70,000
Flashing Lights	$ 46,000	$ 41,000
Reflectorized Signs and Crossbucks	$ 200	$ 200

Table 16
Cost of Crossing Surfaces

Surface Type	Cost per Lane per Track
	Urban	Rural
Rubber	$18,000	$16,000
Concrete Slab	$18,000	$16,000
Sectional Timber	$11,500	$ 8,700
Asphalt	$11,500	$ 8,700

These costs were applied uniformly to improvements on all railroad crossings in the state. The calculated value of crossing needs for Iowa is projected to total $312.0 million during the next 20 years, or approximately $15.6 million per year. The cost to upgrade deficient crossing protection to meet current design standards is estimated at $172.0 million, or about $8.6 million per year. Approximately $140.0 million is needed to repair the crossing surfaces during the next 20 years, or about $7.0 million per year.

• Total Needs

Costs to improve branchlines, spur tracks, and rail/highway at-grade crossings, excluding economic development projects, are estimated to be $562.0 million, or approximately $28.1 million per year. Based on the match ratios presented in the Program Guidance Section, the department's share would total $383.8 million during the next 20 years, or about $19.2 million per year. These costs, represented in 1998 constant dollars, are summarized in Table 17. The needs study is only a technical analysis of system needs. It does not include recommendations for the prioritization of needs or the most appropriate source or use of available funds. Project priorities were discussed in the preceding section, and available funding is discussed later in this section.

Table 17
Summary of Total Estimated Rail Improvement Needs
(in Millions)

Improvement Type	Total Needs		Department's Share of Total Needs
	20-Year Total	Annual	20-Year Total	Annual
Branchline Assistance	$250.0	$12.5	$125.0	$ 6.3
Economic Development	NA	NA	$ 20.0	$ 1.0
Crossing Protection	$172.0	$ 8.6	$154.8	$ 7.7
Crossing Surface	$140.0	$ 7.0	$ 84.0	$ 4.2
Total	$562.0	$28.1	$383.8	$19.2

NA = Not Available

Available Funds

Railroad improvements have been and continue to be financed from federal, state, local and railroad funding sources. During 1998, railroads operating in Iowa spent about $232 million to maintain and improve their track structures in Iowa. In 1998 Iowa railroads spent $121.5 million, or an average of $28,400 per mile, to maintain the rail system in Iowa (See Figure 25). Class II and III railroads spent another $7.1 million in 1998 to rehabilitate 196 miles of track on their systems. In addition, the Class I railroads spent $103.5 million in 1998 to rehabilitate their tracks in Iowa.

Figure 25
Railroad Track Maintenance Expenditures in Iowa
1988-1998

Most of the funds for maintaining and upgrading rail lines come from railroad operating revenues. As federal, state and local transportation priorities change, so do funding allocations. Variations in the rate of inflation and changes in transportation program emphasis at all levels of government have made it difficult to estimate the availability of financial resources during the next 20 to 25 years. The following financial projections by funding source are based on the extrapolation of past funding allocation patterns.

• Rail Assistance and IRFA Funding

During the last 11 years, the Rail Assistance and IRFA funding programs have provided more than $23 million in public assistance for railroad service preservation and improvement. However, in recent years both the state legislature and the federal government have been reducing their levels of funding for these programs. At the federal level, no appropriations have been made since FY 1995. Similarly, the Iowa General Assembly has cut back on funding. Since FY 1992, state general fund appropriations, based on the amount of loan repayments to the state General Fund, have declined by 40 percent. State and federal funding levels are shown in Table 18.

Table 18
Rail Assistance and IRFA Funding
FY 1988-1998

Fiscal Year	Source of Funds
	State General Fund	Federal Funds		Total
		Appropriations	Loan Repayments
1988	$ 866,300	$ 913,000	$ 0	$ 1,779,300
1989	$ 65,200	$ 0	$1,112,100	$ 1,177,300
1990	$ 79,500	$ 424,700	$ 420,700	$ 924,900
1991	$ 14,500	$ 422,600	$ 704,300	$ 1,141,400
1992	$ 2,370,700	$ 486,000	$ 231,600	$ 3,088,300
1993	$ 2,005,000	$ 250,000	$ 516,900	$ 2,771,900
1994	$ 1,410,600	$ 861,000	$ 594,100	$ 2,865,700
1995	$ 2,110,600	$ 696,000	$ 494,300	$ 3,300,900
1996	$ 1,497,000	$ 0	$ 401,600	$ 1,898,600
1997	$ 1,229,000	$ 0	$ 721,800	$ 1,950,800
1998	$ 1,415,000	$ 0	$ 737,500	$ 2,152,500
Total	$13,063,400	$4,053,300	$5,934,900	$23,051,600

• Crossings

Funding to improve rail/highway crossings comes from both federal and state sources. For FY 1998 Iowa received a federal authorization of $3.2 million for crossing safety improvements from the federal Highway Trust Fund. For the same period, the Iowa General Assembly authorized $700,000 for warning signal maintenance and $900,000 for the reconstruction of rail/highway at-grade crossing surfaces from the state Road Use Tax Fund. Funding for all three of these rail/highway at-grade crossing programs have remained relatively stable during the last 10 years (See Table 19).

Table 19
Historic Rail/Highway At-grade Crossing Funds
FY 1988-1998

Fiscal Year	Source of Funding
	Federal	State		Total
	Safety Funds	Surface Repair Funds	Safety Funds
1988	$ 3,900,000	$ 900,000	$ 700,000	$ 5,500,000
1989	$ 3,800,000	$ 900,000	$ 700,000	$ 5,400,000
1990	$ 3,900,000	$ 900,000	$ 700,000	$ 5,500,000
1991	$ 3,500,000	$ 900,000	$ 700,000	$ 5,100,000
1992	$ 3,500,000	$ 900,000	$ 700,000	$ 5,100,000
1993	$ 3,200,000	$ 900,000	$ 700,000	$ 4,800,000
1994	$ 3,400,000	$ 900,000	$ 700,000	$ 5,000,000
1995	$ 3,500,000	$ 900,000	$ 700,000	$ 5,100,000
1996	$ 3,500,000	$ 900,000	$ 700,000	$ 5,100,000
1997	$ 3,200,000	$ 900,000	$ 700,000	$ 4,800,000
1998	$ 3,200,000	$ 900,000	$ 700,000	$ 4,800,000
Total	$38,600,000	$9,900,000	$7,700,000	$56,200,000

• Summary of Available Funds

Available funds from federal and state sources to cover the rail investments are estimated to total $35.3 million during the next five years, averaging about $7.1 million per year. Funding is expected to increase from $6.7 million in FY 1999 to $7.2 million in FY 2003 as a result of an increase in the rail assistance/IRFA program funding (See Table 20). The federal and state crossing funds are expected to remain at the same levels.

Table 20
Projected Revenue
for the Railroad Improvement Program
FY 1999-2003
(in Millions)

Program	FY 1999	FY 2000	FY 2001	FY 2002	FY 2003
Rail Assistance and IRFA	$1.1	$1.4	$1.5	$1.7	$1.6
Federal Crossing Safety	$4.0	$4.0	$4.0	$4.0	$4.0
State Crossing Surface Repair	$0.9	$0.9	$0.9	$0.9	$0.9
State Crossing Safety	$0.7	$0.7	$0.7	$0.7	$0.7
Total	$6.7	$7.0	$7.1	$7.3	$7.2

While the constant source of funding for rail improvements has provided a base to help improve rail service in Iowa, the costs of railroad labor and materials have continued to increase. The available funding has not kept pace with these cost increases, resulting in a loss of buying power and fewer projects being accomplished.

For example, the Railroad Cost Recovery (RCR) Index measures the changes in the price levels of inputs to railroad operations including wages, fuel, material and supplies, and other expenses. The RCR Index measures inflation in much the same manner as the Producer and Consumer Price Indices. Overall, the RCR Index has grown 39.8 percent during the last 10 years, or about 4.0 percent per year (See Figure 26), while available funds for rail improvements have remained basically at the same levels during the last 10 years and do not reflect the increasing costs of doing business.

Figure 26
Railroad Cost Recovery Index
1987-1997

Needs versus Funding

As noted above, implementation of the investments to support rail improvements is estimated to total $383.8 million, or $19.2 million per year in constant 1998 dollars. However, available funds from federal and state sources to cover the rail investment actions are estimated to total $128.0 million, or $6.4 million annually. The anticipated federal and state funds to invest in rail will cover 33 percent of the estimated investment costs, leaving a shortfall of $255.8 million, or $12.8 million per year. A comparison of the total plan costs and available funds is shown in Table 21.

Table 21
Comparison of Needs and Funding
2000-2020
(in Millions)

Improvement Type	Department's Share of Needs		Available Funding		Difference
	Total	Annual	Total	Annual	Total	Annual
Branchline Assistance	$125.0	$ 6.3	$ 30.0	$1.5	($ 95.0)	($ 4.8)
Economic Development	$ 20.0	$ 1.0	(a)	(a)	($ 20.0)	($ 1.0)
Crossing Protection	$154.8	$ 7.7	$ 80.0	$4.0	($ 74.8)	($ 3.7)
Crossing Surface	$ 84.0	$ 4.2	$ 18.0	$0.9	($ 66.0)	($ 3.3)
Total	$383.8	$19.2	$128.0	$6.4	($255.8)	($12.8)

(a) Funding for economic development projects included in branchline assistance.

A significant shortfall appears between available funds and the financial resources needed to develop the desired state rail system. If the plan is implemented in its entirety, additional funds will have to be made available to cover the shortfall and keep pace with the cost of the improvements. Otherwise, a number of the improvements envisioned earlier would not be accomplished unless the railroads and shippers contribute a larger share of the expenditures.

The funding shortfall is also illustrated by the additional crossing projects requested that are not addressed by the current program. Federal funding has been requested for an additional 200 signal projects estimated to cost $13.7 million not addressed by the 1998 program. Based on the $4.0 million annual funding level, there is a 3.5-year backlog of projects. Applications have been received for an additional 180 surface repair projects estimated to cost $6.9 million. This translates into a 7.5-year backlog based on the $0.9 million annual funding level.

The funding shortfalls, both for branchlines and crossings, establish the need to develop an investment strategy and to focus available financial resources on projects which have the greatest potential for long-term benefits to the state.

Funding Recommendations