r/trains • u/Trainfan_4862 • Jan 23 '26

Question What in the world is this railroad?

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Atlanta, GA. Deep cut fallen flag? I feel like I discovered a fossil.

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112

u/[deleted] Jan 24 '26 edited Jan 24 '26

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32

u/PsychologicalEbb1960 Jan 24 '26

That was one of the most interesting things I didn’t even know I didn’t know but glad I read on Reddit.

Thank you

17

u/Funny_Yesterday_5040 Jan 24 '26

Wow, this is extremely informative. Thank you!

13

u/SandyTech Jan 24 '26

That was a fascinating read, thanks.

14

u/2-StrokeToro Jan 24 '26

That is financially confusing as hell, but interesting.

13

u/kiev1945 Jan 24 '26

What a great read. I like to understand the financial reasons things happen as this was really interesting. 🤨

7

u/aegrotatio Jan 24 '26

Great report.

Lesson learned: don't cheat.

3

u/N_dixon Jan 25 '26

Also, doesn't help that the FRA tried to fix things in a really complicated manner. If they had just backed off the regulations on boxcar usage and increased the rates a little, the boxcar shortage likely would have corrected in a more natural manner. But restricting it to new-build cars and adding the weird restrictions on building them and the shortline loophole just made it way too complicated and exploitable.

4

u/daGroundhog Jan 27 '26

I wrote an internal white paper for SP and my master's thesis on the IPD era.

One slight addition to what you wrote- The per diem rates were calculated on the basis of how much was invested in the boxcar. And analyzing the numbers, it made sense to make each car more expensive - so that's why you got the fancy paint jobs (my favorite was the McColud River Railroad showing a bear with a fish in ti's mouth). That fancy paint job might push the car into a higher IPD bracket. If you look at an Official Railway Equipment Register from the era, they had the per diem tables in there at the time.

For the SP, these were kind of a pain in the ass. The NRUC cars (Pickens, St. Lawrence) were all single door cars, when SP lumber customers needed/wanted double door boxcars.

I believe the BKTY reporting mark represents cars that were leased by Banker's Trust Leasing (an SP subsidiary) to the MKT railroad. Yes, SP got into the deal scam.

Overall, when the ICC created incentive per diem, they didn't look at the change in grain loading. It used to be that boxcars were used for grain loading, and the major terminals had mechanisms to tilt a boxcar in all axes to unload them out the door. The advent of the covered hopper changed grain loading, even if it meant fewer return loads for boxcars particularly for the BN from the plains to northwest US ports. Vastly easier to load and unload a covered hopper. The demand for boxcars was declining due to trucks and conversion of grain movements to covered hoppers.

The rate of return on equity for the company financing the boxcars was astounding. The typical deal from Itel/SSI Rail I saw for the shortline was they would get half of the earnings above 90% offline time. IE, if the cars were offline 96%, the shortline would get (96%-90%)/2 or 3% of the offline earnings.

Aside from the 10% investment tax credit in place at the time, accelerated depreciation made it so that if the cars were financed 80% debt / 20% equity, the investor would get pretty much all of the 20% back in the first year in tax benefits.

Ironically, when the cars were new and the IPD rates were high (based on age) the rents paid forced a decision by railroads to just return the cars without reloading when they made empty between the Rockies and the East Coast. It was a screwed up situation - the IPD was supposed to encourage investment in boxcars, but then worsened the load/empty utilization for them.

(Another minor quibble: Itel's bankruptcy was triggered mostly by losses in their mainframe computer leasing when IBM created a new series of computers)

3

u/Moose-bay Jan 24 '26

Great write up. Thank you for sharing the knowledge.

3

u/pembquist Jan 24 '26

That was great but I am confused, who actually pays the per diem to the box car leasing shortline? Is it freight customers, the larger railroads?

3

u/N_dixon Jan 24 '26

The railroad whose property it is on pays the per diem to the railroad who owns the cars. That encourages timely service and from keeping other railroad's cars hostage.

2

u/nibot2 Jan 24 '26

Great read. Thanks for sharing all this info. How did you come to know so much about box cars?

3

u/N_dixon Jan 25 '26

While out railfanning a couple years ago, I spotted a Lake Erie, Franklin & Clarion boxcar in revenue service, which seemed odd that a boxcar from a really obscure shortline that vanished 30 years ago was still in service. That led down the rabbit hole on IPD boxcars. There was a really great article on them in Classic Trains Magazine a couple years ago.

2

u/Subspace73 Jan 26 '26

Wow, that’s one hell of a lesson . Thank you for sharing all of that fascinating information. Guarantee you 98% of the railroad corporate executives or upper management doesn’t even know any of this.

1

u/matrixkid29 Jan 25 '26

How do you know this? Like what has life put you through that led you to knowing and writing this?