SURFACE TRANSPORTATION BOARD DECISION DOCUMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Docket Number: | EP_290_4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Case Title: | RAILROAD COST RECOVERY PROCEDURES-PRODUCTIVITY ADJUSTMENT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Type: | Decision | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deciding Body: | Entire Board | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Summary | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Notes: | DECISION PRESENTED THE BOARD'S CALCULATION FOR THE CHANGE IN RAILROAD PRODUCTIVITY FOR THE 2013-2017 AVERAGING PERIOD. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Full Text of Decision | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
46851 SERVICE DATE – LATE
RELEASE MARCH 11, 2019 EB SURFACE TRANSPORTATION BOARD DECISION Docket No. EP 290 (Sub-No. 4) RAILROAD COST RECOVERY PROCEDURES—PRODUCTIVITY ADJUSTMENT Digest:^{[1]} Each year the Board calculates the change, if any, in the rail industry’s productivity, i.e., how efficiently railroads move freight. The Board calculates this figure by comparing year-to-year the average cost of producing a unit of railroad output. Here, the Board presents its calculation for the change in railroad productivity for the 2013-2017 averaging period. Decided: March 11, 2019 The Board
proposes to adopt 1.005 (0.5% per year) as the
measure of average (geometric mean) change in railroad productivity for the 2013-2017 (five-year) period.
This represents an increase of 0.9% from the average for the 2012-2016 period. Since
1989, the cost recovery procedures have required that the quarterly rail cost
adjustment factor (RCAF)^{[2]}
be adjusted for long-run changes in railroad productivity. R.R. Cost Recovery Procedures—Productivity
Adjustment, 5 I.C.C.2d 434 (1989); see also 49 U.S.C.
§ 10708. This long-run measure of
productivity is computed using a five-year moving geometric average. Productivity Adjustment—Implementation,
9 I.C.C.2d 1072 (1993). The
productivity change for the year 2017 is 1.053, based on changes in input and
output levels from 2016 and represents an increase
of 3.8% from the rate of productivity growth in 2016 relative to 2015 (1.015). Incorporating the 2017 value with the values
for the 2013-2016 period produces a geometric average productivity growth of 1.005
for the five-year period 2013-2017, or 0.5%
per year. As the new geometric mean was
computed by replacing the 2012 figure of 1.008 with the larger figure of 1.053
for 2017, there was an increase of 0.9% in the geometric mean from last year’s
value. A detailed discussion of the
Board’s calculations is contained in the Appendix to this decision. Comments
may be filed addressing any perceived data and computational errors in the
Board’s calculation. Any party proposing
a different estimate of productivity growth must, at the time it files
comments, furnish the Board with one set of detailed workpapers and
documentation underlying its calculations.
The same information must be made available to other parties upon
request. It is
ordered: 1.
Comments are due by
March 26, 2019. 2. An original and 10 copies must be filed with: 395 E Street, S.W. 3. Comments must be served on all parties
appearing on the current service list. 4. Notice of this decision will be published in
the Federal Register. 5. Unless a further order is issued postponing
the effective date, this decision is effective on March 29, 2019. By the Board, Board Members Begeman, Fuchs, and Oberman. APPENDIX The
following is a description of the methodology currently used to calculate the
RCAF productivity adjustment.^{[3]} The annual rate of productivity change is
calculated by dividing an output index by an input index. The input
index uses constant dollar-adjusted expenses.
The inputs in this index—freight expenses, fixed charges and contingent
interest—are stated on a constant dollar basis using the most recent year available
as the base, and updating the base by the Series Rail Cost
Recovery (RCR) Index published by the Association of American Railroads. Freight expenses, fixed charges, and
contingent interest were obtained from railroad Annual Report (Form R-1)
data. The 2017 Total Expense Constant
Dollars for each of the six years was calculated by dividing a given year’s RCR
index value into the RCR index values for 2017 (515.9) and then multiplying
that ratio by the Total Expense Unadjusted.
The calculation of the input indices and values used are shown in Table A.
The 2017 output
index was developed from the costed waybill sample, a commonly used data
source. The costed waybill sample
excludes movements lacking sufficient information for
the application of unit costs. Using the
costed waybill sample as a base, each movement is assigned to one of the
189 segments or categories used to develop the output index. Segmentation is based on three mileage
blocks, seven car types, three weight brackets, and three shipment sizes. The output index is a composite of the
year-to-year change in ton-miles for each of the 189 segments weighted by each
segment’s base-year share of total revenues.
The
change in productivity is calculated by dividing the output index by the input
index. The multi-year average for the period
2013-2017 is calculated by taking a geometric
mean, which was found to be 1.005 (0.5% per year). The input index, the output index, the annual
productivity change, and the calculation of the 2013-2017 average are shown in Table B. In Railroad
Revenue Adequacy—2017 Determination, EP 552
(Sub-No. 22) et al. (STB served Dec. 6, 2018), the Board, after
seeking public comment, adopted its proposal to make one-time adjustments to its
2017 annual cost-of-capital determination, revenue adequacy determination, and
Uniform Railroad Costing System calculations to remove the accounting impacts
of the Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017), on
rail carriers’ deferred tax liability to more accurately reflect the rail
carriers’ financial state for 2017. In
that decision, the Board ordered the Class I carriers to file recalculated
figures with the accounting impacts removed for any R-1 reporting schedule,
including Schedule 410 (Railway Operating Expenses), affected by the Board’s
proposal. Railroad Revenue Adequacy,
EP 552 (Sub-No. 22) et al., slip op. at 10.
The carriers submitted their revised schedules, and, as relevant here,
two carriers submitted revisions to their Schedule 410 filings. The productivity adjustment presented
here reflects the recalculated figures submitted in those carriers’ Schedule
410 filings.
The five-year (2013-2017)
productivity trend calculated using a geometric average is 1.005 or 0.5%. Note
that there are changes in some of the individual numbers in Table A compared with corresponding years prior to the
Board’s 2013 Productivity Adjustment decision.
See Railroad Cost Recovery Procedures—Productivity
Adjustment, EP 290 (Sub-No. 4) (STB served Mar. 4, 2014). These changes represent the revisions to the
R-1 submitted by the railroads which were first incorporated into the Board’s 2008-2012
productivity study. None of the changes
are large enough to affect the five-year moving geometric average calculated in
previous decisions. ^{[1]} The digest constitutes no part of the
decision of the Board but has been prepared for the convenience of the
reader. It may not be cited to or relied
upon as precedent. Policy Statement
on Plain Language Digests in Decisions, EP 696 (STB served Sept. 2, 2010). ^{[2]} The RCAF is an index of railroad input prices
that is published by the Board on a quarterly basis. See, e.g., Quarterly Rail Cost
Adjustment Factor, EP 290 (Sub-No. 5) (2019-1) (STB served Dec. 19, 2018). ^{[3]} The development and application of the
productivity adjustment is explained in R.R. Cost Recovery Procedures, 5
I.C.C.2d at 434. ^{[4]}^{ }The values shown in
Column 3 are taken from the spreadsheet used to calculate productivity and, due
to rounding, may not equal numbers calculated using
the rounded numbers shown in Columns 1 and 2. ^{[5]}^{ }The 2015 output index was developed from
the costed Waybill Sample and then adjusted by a linking factor due to a change
in the miling methodology associated with the Waybill
Sample. See R.R. Cost Recovery Procedures—Productivity Adjustment, EP 290 (Sub-No. 4), slip op. at 2, 5 (STB
served Jan. 29, 2018). |