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Platform Chats
Platform Chats
The Importance of the American Short Line
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We are back after a brief hiatus with a question. What do you know about short lines and other regional railroads? There’s more to rail than the cross-country trek; short lines represent a crucial, somewhat unknown, part of North American infrastructure. This episode host Walt Bleser chats with American Short Line and Railroad Association (ASLRRA) President, Chuck Baker. Together they lift the veil on the regional railroads that represent nearly 30% of the American railroad network. They’ll also discuss the valuable and complementary roles that trade associations and associations like AREMA play in the rail industry. It’s an informative and pun-free episode we know you’ll enjoy.
There is a real public interest and a government interest in making sure that shortlines are able to keep these lines viable. Right. Because if they're not, you know, if a short line doesn't succeed and can't stay in business, it the line will be ripped up for scrap and gone. Right. And now you're moving, that's a disadvantage to the shippers that would be on that line. That's a killer for the local community. That's worse for the environment. That's worse for congestion. That's worse for wear and tear on the highway. That's worse for the, you know, it's more truck tires being shredded. It's, you know, much worse for safety, despite all the East Palestine hoop law over the last couple months. Um, you know, moving freight by rail is far, far like 20 times safer than moving it on the highway. So it's kind of worse for everybody if if shortlines don't survive. And so that's why I think there's been a lot of, you know, even among our regulators at the FRA who are, you know, on our case about safety stuff, wearing their other hat, they're very supportive of our infrastructure needs.
SPEAKER_00You may know the American Railway Engineering and Maintenance of Way Association, or AREMA, as the quote, keepers of the manuals. You may know them as the quote people behind the largest annual railroad conference in North America. Heck, you may not know about AREMA at all. This podcast is designed, no pun intended, to change your view of who AREMA is and how AREMA has changed the trajectory of many railway careers over its 100-plus year history. Welcome to Platform Chats with your host, Wolf Lesser, where he takes a moment to discuss the impacts AREMA has had on the very people who are proud to be called members. Are you ready to roll with AREMA?
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SPEAKER_02Hey everybody, welcome back to another edition of Platform Chats. I am your host, Walt Bletzer, and this is probably a voice you have not heard in a bit. We have had a bit of a hiatus uh here at Platform Chats, uh, unfortunately. The worldwide headquarters of Platform Chats, aka my house, had a water leak uh mid-March that decided to uh leak onto my kitchen and did a sizable amount of damage to the home and it has created plenty of uh anxiety for me, my wife, my uh littles. I have a three-year-old and a one-year-old. And uh as Chuck and I were chatting before this episode, uh, we're actually moving out in a couple days because we got a couple months' worth of work. So, yes, excuses, excuses. I get it, you want your content, um, but we have to work within the confines of the fact that this is not my only job, uh, contrary uh to popular uh belief. But uh we are back and we're going to attempt a new series of speaking with leaders of other associations that complement and or are associated with our REMA. And there's a whole host of them, and I'm gonna let Chuck talk about that here in a bit, but we're gonna start with Chuck Baker, uh longtime friend of mine, uh known him for like I said, known him for quite some time. Currently, he is the president of the American Short Line and Regional Railroad Association. He's got a really great story of how he uh got to this position, and uh I think you're gonna learn a lot along the way, not just about short lines, but just how someone can enter into such a tight-knit uh community and a tight-knit uh group of folks, a fraternity, if you will, sorority, if you will, of people that work together. So sorry for the long intro, but I just felt like I owed everybody uh explanation as to why there's such a gap in episodes. So, Chuck, my friend, welcome to the show.
SPEAKER_03Thank you very much for having me. I I would agree, longtime friend of yours. I would also say longtime friend of Arima, which we can get into. Um, and I would say before we do any rail stuff, just as an expression of public sympathy, as a fellow homeowner, a leak that necessitates having to move out of your house for some period of time is pretty brutal. The closest I've had is like a flooded basement that was only a couple days of hassle, and that just is rough. And so I commend you for managing to keep your day job plus your podcasting job, plus deal with all that.
SPEAKER_02Well, thank you. So talk to me about again, I know your story, but tell tell everybody else your story how a guy named Chuck Baker wandered his way through life and now he sits atop one of the larger organizations in our industry.
SPEAKER_03Yeah, well, it's a um, I appreciate the question. It's always a I like to tell sort of my origin story. It's kind of a fun one, I guess, or at least fun for me. Um the, you know, my I graduated Rice University, which is school down in Houston, uh 2001. And my first job out of college, maybe because I didn't have any better ideas, was investment banking. Uh, and I so I went out to San Francisco and I did like corporate finance and tech, MA and equity and debt raises. And um, you know, I don't I don't have any regrets. The job pays quite well for a first job out of college, and it's fast-paced and interesting enough and good people, but I pretty quickly realized that was not it didn't kind of get my engine humming, you know, it just it wasn't something I loved. I was talking about like network architect infrastructure and you know, online storage and stuff, and I just didn't know what I'm talking about, and I'm moving other people's money around and like you know, I was just like, this is not what I want to do with my career. I should find something that I actually am interested in. You know, what do I want to go spend? Uh well at the time I thought 80 hours a week was a normal amount of time to spend because that's what you do as an investment banking analyst, but you know, what do I want to go spend my waking hours doing? Um, and so um I I thought about it and you know, I was always been interested in kind of like very broadly speaking, like urban planning, land use, transportation, just sort of something in that world. And so actually, I was in, I left investment banking after two years, I took my bonus, and I was traveling South America uh with a friend, uh, with a couple friends actually, but uh one friend in this part, and we were hiking the Inca Trail. And so we were sleeping uh within a few miles of Machu Picchu, and he was asking me the same question. He's like, Well, so what are you gonna do? And I repeated the same thing about interested in land use, urban planning, blah, blah. And I had already decided I was gonna move to DC because I thought there are a lot of those kinds of jobs in DC, and I'm from Baltimore. And so he listened to all that, and he's like, So you want to be a railroad lobbyist? And I was like, Well, that's kind of specific, but like, yeah, like that that would be great. And he's like, you know, I happen to have a great friend from high school in Topeka, Kansas, uh, who works at what is the premier boutique rail lobbying firm in Washington, D.C. Do you want to talk to him? And I was like, boy, I'd love to. Um, and so eventually I moved to DC. Uh, this is like beginning of 2004, and I ended up getting an internship with somebody else working for free that I met at like a transportation research board conference. But I eventually met this guy, Adam Nordstrom, who was my friend from San Francisco's buddy from high school in Topeka, Kansas. And I go into interview with Adam, uh, and his and he worked at Chambers Conland and Hartwell at the time. And Adam was like just a few years older than me. So I interviewed with him and then Keith Hartwell and Ray Chambers, who were his bosses and partners at the time at CCNH. And we had a long conversation, and it was sort of about one job at first, and then it transitioned to about another job, but it became, they were like, Well, we manage this association here called the NRC, the National Railroad Construction and Maintenance Association. And we need somebody to help manage it. It was, it's like, it was like a two-person staff association at the time. It's grown now, but you know, obviously way smaller than AREMA is by comparison, um, at the time at least. They said, we need somebody to manage it. And they said, you don't meet any of the criteria we were looking for. You said you don't have any construction experience, you don't have any rail experience, you don't have any association experience, and you don't have any Capitol Hill experience. But we needed somebody two months ago, and if you're willing to take a 60% pay cut from your last job at investment banking, like you can have the job and you start tomorrow. And so I was like, I'll start tomorrow. And so that that is how I that is how I started at the NRC, and that was basically like March 2004. Um and it was it was very, very obvious to me very quickly that I loved it. Um, I mean, look, it's still a job. I don't want to pretend like every day was like bounding through flower fields, but I I immediately liked it and they gave me a lot of responsibility. And I the NRC is has a ton of overlap with AREMA. NRC is a trade association, so it's representing companies, not individuals, but obviously a huge amount of overlap with uh the people that participate in AREMAs, you know, so is Herzog and Railworks and Delta Railroad Construction and Railroad Construction of South Jersey and LB Foster and AK and all these companies. And uh and so we, you know, we have an annual conference, and it was like, Chuck, plan the annual conference, like sign the FB contracts with the hotel, pick the hotel, find the speakers. And so the speakers are like the VPs of engineering from all the class ones and some of the shortline holding companies and some of the commuters and inner city, and so I got to know all those people, and then it was like we care about legislative and regulatory outcomes, so go lobby Congress on grant funding, on shortline railroad tax credits, on definition of who's a railroad carrier and who's not, and go sit on the RSAC at the FRA. And so I did all that, and I was just immersed in it from kind of all day, every day. And you know, over time the association grew and grew, and eventually I went from manager to vice president to executive vice president, and and then eventually president when Ray Chambers um, you know, was stepping down and doing kind of other things and was no longer wanting to be president of the association. And so I um, you know, it was a couple years of like fake it till you make it, and then eventually I sort of figured out what I was doing, and then I had a very nice, like pretty long run as pres, you know, president of the NRC and doing some other clients at CCNH, but uh that's what I did for a long time through all the 2000s and you know well into the 2010s.
SPEAKER_02And NRC grew quite a bit, right? Underneath your leadership?
SPEAKER_03It it it did, it grew pretty nicely. It um, you know, when I started the annual conference was probably about four or five hundred people, and then it went 600, 700, 825, 950,000, 1100, 1200. Um, and I think by my last one, the conference was like about 1100 or 1200 people. So, you know, about tripled in size over the course of you know, 15 years. And I I don't take a lot of credit for that, right? Like I got to be there at a very good time for rail contractors and rail construction, um, capex and maintenance spending from the class ones grew very meaningfully over like a 10-year window plus short lines were growing nicely, and shortlines are a, you know, they're obviously far, far, far, far smaller than class ones, and we'll get into that. But they are, they have more than their fair share of creating business for contractors because they're so lean, they rely on contractors and engineering firms much more heavily than class ones do, which do a lot of in-house work. Uh, and then also the commuter rail and light rail and rail transit and heavy rail and even streetcar, God help me, uh, parts of the world were growing pretty nicely in that kind of 10 or 15 year window. And and if you're a rail contractor or engineering, and you know, obviously I think all of your listeners would know this, but if you can provide service, you know, if you can fix rail or install ties or fix ballast or inspect track or whatever, you can do it for anyone who runs on track. So if you can do it for BNSF, you can also do it for the KO Shortline, you can also do it for Amtrak, you can also do it for the MARC commuter rail, you can also do it for Phoenix Light Rail, right? You can also do it for San Francisco Bart. So all the kind of the end use markets of NRC contractors were growing pretty nicely in that time. And so the association grew quite a bit.
SPEAKER_02So when did you switch from uh NRC to the ASLRA?
SPEAKER_03Right. So um, so for you know a long time, probably I don't know, call it eight or nine, ten years, when I was at CCNH, I was really primarily doing NRC. Uh as I started to get older and sort of more experienced, I in addition to doing NRC, I was also spending more and more time doing lobbying for the Short Line Association because they were also a client of Chamber of Scotland and Hartwell. I was also doing lobbying for Norfolk Southern, for Canadian National, for the OneRail Coalition, for the American Railway Development Association. So I was spreading my wings a little bit, as they say. Um, but I really I got to spend more and more time with the Shortline Association as a client. Um, and my colleagues Keith Hartwell and Adam Nordstrom were both senior to me and doing kind of leading it, but I was there and you know more and more involved by the by the day and by the year. And then eventually uh those they both you know moved on to be doing other focusing on other things, and they're both still very good friends and very busy in the real world, both of them. Um, but I it became where I got to be the lead uh government affairs person for the shortline association, and so I was doing that at CCNH, and that was all fine. And then in 2020, getting my calendar right, mid-2018, Linda Darr, who was the president of the Shortline Association at the time, um, called and said, uh, I'm leaving. And she said, I got a new job at the American Council of Engineering companies, and I love my shortline friends, but ACEC is twice as big and it's a new challenge, and I'm out of here. Uh, and so I was like, Oh, well, that's interesting. Um, and then my next call was from Judy Petrie, who was chairwoman of the board at the time and the president of Farm Rail, which is a you know kind of a sizable regional railroad in Oklahoma. And she called and she said, Well, Chuck, we're uh we're gonna have to run a process to find the next president, but my first choice is you. Would you be interested? And I was like, Well, you know, caveat, caveat, I gotta see a contract. But yes, obviously I'd be very, very interested. Um, and so they ran a process, it took, you know, eight months. They, you know, can recruiting firm and the whole deal, and you know, the very serious, kind of thorough process. But at the end of the end of the day, they I feel very lucky, but they chose me to run it and they asked me to run it and offered me the job. And so I said yes. And so I left CCNH and I went in-house at the Shortline Association. So the office is like a mile on the other side of the Capitol. Um, and so I have a slightly further walk from home now. Um, and so, but I'm so now I'm in-house, I'm an employee of the Shortline and American Shortline and Regional Railroad Association as president, and we've got like a 15 or 16-person staff, and I now do shortline railroad all day, every day.
SPEAKER_02Oh, well, that's an excellent transition. So, I mean, that was a good long run, though. 15 years uh at the same place, you know, this day and age, that's almost unheard of. So, you know, hats off to UNCCH. I've I've met several folks over there, and that's a good group of people. I know they have been they merged into another company, is that correct?
SPEAKER_03They they did. They merged into Blank Rome, which is like a global law firm with a DC lobbying presence. And Eve, some of the same folks, probably some of the same ones you still knew there, Don Norton and Katie Catchell, they're still there and they're still cranking away. They've got uh they've got Alaska Railroad as a big client, for instance, which is one of my biggest uh regional railroad members of the association, and so I still interact with those folks every day, and it's a great place.
SPEAKER_02So let's jump into what is the definition of a shortline. I think a lot of people, uh, when they think of the railroads, they think of uh I know you and I discussed this earlier. There's there's seven. Now that I believe there is six because it's a PKC. Yeah. Uh that's official. Their matrimony has been is official. So we have six class ones. Um, but is it defined by I'm just gonna lobby a softball here. Uh you know, is it what what is it defined by and how do we understand what a short line is versus a class one?
SPEAKER_03Yeah, it's it's a great question, and you could argue a meaningful portion of my job is essentially explaining the answer to this question. So you can tell me if I do it well, that's good, and if I don't do it well, like God knows what I'm doing here. Um, but but so technically, the difference between a class one railroad and a shortline railroad is a revenue distinction, right? So it's set by the folks over the Surface Transportation Board, and the six biggest railroads in the country are the Class One railroads, the ones everyone knows, Norfolk, Southern, CSX, BNSF, UP, CN, and now CPKC. Uh, technically, that means any railroad that's over $900 million in revenue, those actually are all far, far, far north of that. I think the smallest of those is like $8 billion in revenue. Um, and so technically, class two and three railroads are what we call shortline or shortline and regional railroads. And so that's anything under 900 million. Now, in reality, even the biggest of them is like 400 million range, and most of them are more like 10 million or 20 million dollar range. Most of them are quite small companies. So technically it's a revenue distinction, but practically what it means is like short lines play a very, very different role in the network than class ones. I think the easiest way to think about it is class ones are your long haul line haul, and short lines are your like first and last mile and your branch lines. So, not for this audience, because these are all rail experts, but when I'm explaining this to folks on the hill, a lot of times I'll use an airline um analogy, like the class ones are your American and your United, and your short lines are your uh American Eagle and United Express and stuff like that. So kind of the first mile, first mile, last mile, the feeder lines. And without boring people with a history lesson, um a lot of what are now short lines, if you go back a couple generations to around the Stagger's Act and the 80s, a lot of them used to be class one branch lines, and they were, I think everyone would acknowledge, so I'm not throwing any shade here, everyone would acknowledge that they were sort of the unloved, unwanted, unsuccessful, really marginally viable branch lines, right? The class ones couldn't make any money running them, they didn't fit with the operating model. It doesn't make sense to buy five million dollar locomotives and go serve two customers 40 miles down some dingy branch line. You can't justify spending all this private money to maintain the track, you can't justify paying the full kind of class one wage scale to people to go serve like two small customers. And so, blessedly, instead of abandoning those lines and ripping up the track and literally selling it for scrap, what they did in many, many cases was say, well, instead of having this be the unloved, unwanted branch line of the Union Pacific, why don't we sell this 70 mile section to some guy who lives by it and ask him if he wants to turn it into a shortline railroad? So instead of being like the Las Cruces branch line, it now becomes the Las Cruces and Santa Fe shortline. Railroad, right? And it's run by the guy who lives on that line. His whole life becomes get one more customer on that line. Do anything that I can possibly do to serve the four customers who are on that line. If they need to be switched twice on Sunday morning, like here's my cell phone, I'm the president of the railroad. I will come out and switch your darn cars myself. Um, and then there's other differences too that we can get into depending on how much time we have here. Short lines have you know different regulatory structures. We have tax credits that we can use that class ones can't. We can get grant money that class ones don't want or need and don't ask for. And so it really, you know, the economics and the whole the operational profile, the culture, the size, everything is really very, very different than kind of the big class one railroads that you know most people are most familiar with.
SPEAKER_02And to pile on there, it it sounds very much like the government recognizes how important these lines are. So even though, to your point earlier about gripping up for scrap, they're willing to step in and say, okay, shortline owner, I'm also willing to give you grant money. We're gonna be partners in that. Is that correct? Is that a good take?
SPEAKER_03That is a fair take. Um, and that is that is mostly true most of the time. You know, it doesn't mean that, you know, so almost all short lines are privately owned, and they're, you know, the private owner has the responsibility to maintain them. Although some of them actually literally are owned by like a public utility or a state DOT, but you know, probably 500 of the 550 of the 600 or so are privately owned. But yeah, we get we are not shy about asking for both federal and state help. And blessedly, to your point, those folks have been pretty willing to support us. There is, um, I say famously, at least famously in my world, there is the 45G tax credit, which is like for probably 15 years was our number one legislative priority in the shortline association. Um, and the only reason it's not now is because the credit is permanent, uh, or at least it's in there until a future Congress takes it out. So blessedly, I get to spend less of my time talking about it. But that's a um there's a tax credit that essentially matches the first $7,000 that we invest in our any any track mile in a given year, matches that at 50%. So provides a $3,500, um $3,500 tax credit. So that's a huge help for maintaining shortline infrastructure. And then there's also grant money available. The there's a couple of federal grant programs out there, raise infra PIDP, but the big one is Chrissy, um, and that has hundreds of millions of dollars available every year. And shortlines are a directly eligible applicant. They don't even need to find a public partner to ask, they can apply directly, and we've done frankly pretty well. Um in Chrissy, you know, you know, typically about half of the Chrissy program every year has been going to shortlines, which over the last few years has meant about 150 million bucks a year going into shortline infrastructure out of the federal, out of the FRA. And then this year, Chrissy is now way bigger because it's the first year of the big infrastructure bill. Uh, and so that could mean like five, six, seven hundred million dollars going into shortline infrastructure this year, which is, you know, now you're talking real money. Um, so we'll we'll see those those awards will be decided in probably July or August. So we're probably you know still a few months away. But um there's real support, and like you, I would agree that it it stems from the philosophy that there is a real public interest and a government interest in making sure that shortlines are able to keep these lines viable, right? Because if they're not, you know, if a short line doesn't succeed and can't stay in business, it the line will be ripped up for scrap and gone, right? And now you're moving, that's a disadvantage to the shippers that would be on that line, that's a killer for the local community, that's worse for the environment, that's worse for congestion, that's worse for wear and tear on the highway, that's worse for the, you know, it's more truck tires being shredded, it's you know, much worse for safety, despite all the East Palestine hoop law over the last couple months. Um, you know, moving freight by rail is far, far like 20 times safer than moving it on the highway. So it's kind of worse for everybody if if shortlines don't survive. And so that's why I think there's been a lot of, you know, even among our regulators at the FRA who are you know on our case about safety stuff, wearing their other hat, they're very supportive of our infrastructure needs.
SPEAKER_02And so a couple, there's so much to unpack here. I'm really enjoying this, by the way. Uh it's just an it's it's a nice, it's a look under the hood, I think, too, on a very specific area in our industry. Um a couple things. So you just talked about a lot of navigation of grants and and working through the government, and you yourself are a lobbyist, and I don't need to go down the path of how do you become a lobbyist. But it sounds like this this organization that you're running is there really to assist these owners navigate those waters. Is that a fair take?
SPEAKER_03Largely. Um, you know, and uh obviously this is very different than a REMA, but for a trade association, you know, representing companies based in DC, I would say the way we operate and focus is pretty normal. Like we do a lot of things. We have an annual conference, we have a weekly newsletter that goes to 10,000 people, we have safety compliance templates, we have webinars to learn about all sorts of stuff. But really, at the end of the day, what we exist, the reason we exist is to help the shortline industry with legislative and regulatory issues, right? So that is absolutely where I spend the majority of my time. It's where the majority of our staff lives. Um, and so we spend most of our time focused on legislation and whether we're talking about grants or tax credits or safety legislation, um, and then time with the FRA on safety regulatory stuff and time with the STB on economic regulatory stuff. And so, you know, we that's largely why we exist to kind of help the industry deal with that. I I would say we don't, the only thing I would sort of quibble about, maybe the way you said it, is we don't really exist to help individual railroads navigate an individual grant program, right? Like if the KO Railroad is applying for a Chrissy grant, I I'm not involved in the application and I don't get to have a say on whether they win the grant. My my role was really like the making sure Chrissy existed, making sure there's a big pie, making sure the rules are fair, and then trying to provide as much air cover as I can to short lines, you know, telling folks at the FRA and Congress that, like, hey, every short line application is great and you should spend all your money on short lines. But I, you know, uh when they they do have still have to go fight for pieces of the pie, and my there are limits to my magic powers. And so I, you know, we kind of help industry as a whole.
SPEAKER_02But you're really helping to create that pie, like the Chrissy that you mentioned earlier. I mean, I'm familiar with that, the company I currently uh work with, work for, um, we help railroads to uh short lines, we do a lot of short line work, and we do quite a bit of Chrissy Grant work. Um but it's really what you guys have done on the hill to make that available for us to even apply and to help these owners do so. And another interesting thing I was thinking about as you were talking about class ones versus shortlines and regionals. Um, when you stand back, uh the 20,000-foot view of the pedestrian, uh, if you will, not in the in the organization or in the industry that we are in, would say, ah, you know, not much has really happened since 1996 or so, back when it was the Santa Fe and the Burlington Northern coming together and making big headlines. Now CPKC was a big one, but that's you know, that's been many, many, many years since 1996. Uh but if you're in the know, it does seem like holding companies, which I would like you to just briefly touch on, are very active right now. And it seems like in the shortline industry, there is a lot of purchasing and acquiring and slowly building these holding companies that are are sizable industry, sizable businesses.
SPEAKER_03Yeah, I I would agree with that. It it is that is definitely something like you're now kind of getting into specialized knowledge that like even not everyone in the rail industry knows, and certainly like most people in the broader world would have no idea what we're talking about here, but that's okay. We've got a podcast with uh rail geeks, hopefully, hopefully listening to this. So there are there are 600-ish individual short lines in the country. And you know, most of them, like we said earlier, they're first mile, last mile, they don't connect to other short lines, they connect to class ones. But over time, uh there is built up quite a bit of common ownership of many of these. And so Genesee in Wyoming is the biggest short line holding company. Uh, Watco is probably the second biggest. Uh there's Patriot Rail, Omnitrax, RJ Corman, Regional Rail. Um, and so there's starting to be some groups that own quite a few of these. GNW is the biggest, they own about a hundred short lines. Um, and you know, if you think about it, it makes a ton of sense, right? Now, they there's no network effects of like if you own a short line in Georgia and you own a short line in Arizona, it's not like they can interchange traffic with each other or you can get a longer haul. And so, in a sense, it doesn't matter that much, right? Like, it's not like the railroad looks different the day before it was owned by GNW versus the day after it was owned by GNW, but there are efficiencies to be had, right? If you if you own a hundred short lines, you don't need a hundred different CFOs. You don't need a hundred different website guys, you don't need a hundred different lawyers, you don't need a hundred different procurement people, right? So you get to centralize some of that and you get to achieve some real efficiencies. Um, and so you know, I think the growth of the holding company model it makes a ton of sense. You can see why it's grown. There are far more short lines owned by holding companies now than there were decades ago. And frankly, that probably continues. Now, there are also, by the same token, still hundreds of like purely independent, or maybe like somebody owns two short lines. And a lot of those folks are proudly and fiercely independent, and they're family-owned, and they don't, you know, they haven't wanted to sell to a holding company. And um, and they some of those are like our most colorful and like legendary short lines, and ones we love to talk about and show off the most. And so it's all fun. You know, one of the fun parts about my job is like both of those same, you know, G and W to like the smallest individual mom and pop shortline are members of the association. Um, and so, you know, at the regul at the federal level, like at the regulatory FRA and STB and congressional level, blessedly, and I would say appropriately, they still treat an individual shortline as an individual shortline. It doesn't really matter who owns it, but it is, you know, you can if you're into like MA and private equity and valuation conversations, there's a lot of very interesting stuff with short lines being kind of bought and sold and acquired and merged and unmerged over the years, and that's a pretty active little part of our world.
SPEAKER_02And there was a pretty big splash, what, a year or two ago? Uh, was it was it GNW that sold to a major, major, major asset holding company?
SPEAKER_03Yeah, well, I think more than more than a year or two ago at this point, it probably goes back, oh boy, I think it's probably three or four, even five years now. But yeah, GNW uh was sold to Brookfield, which is a which is a huge private equity uh player. Um that really made very and continues to make kind of very little difference on the ground. Like a GNW Railroad still looks like a GNW railroad, and Brookfield blessedly is kind of like a Berkshire Hathaway style owner. Like they own quite a few infrastructure assets and they seem to want to hold them forever, right? So there's no like flipping or anything like that. Um, and so you know, I don't I don't know anyone at Brookfield, and I probably don't have any need to know anyone at Brookfield. Like I work with GNW's management, but yeah, that was that was interesting. And you know, just more recently, like uh Patriot Rail, which had about 15 short lines, bought Pioneer lines, which had about 15 short lines, and that created a larger Patriot Rail. So now they have about 30 short lines. So there's always kind of stuff happening on that front. Um, you know, it like I said earlier, if you went out and looked at the railroad, it doesn't tend to matter that much. Like they still got the same locomotives and the same staff and the same customers, but uh behind the scenes on the corporate side, that is there's some interesting uh gymnastics.
SPEAKER_02And I I think that just is a validation to uh you know when Wall Street sniffs around and says this is a good investment, right? It's just yet more validation that this industry is still, no pun intended, chugging along in a in a in more ways than one, right? If you're if if P can come in and say, I see an ROI here that I like, even if I'm gonna hold it for 20 years or three, uh, versus any other industry that they could go purchase or acquire or touch. That I mean I think that speaks highly of what these holding companies have done and are continuing to do, and how much of an intricate and important piece they play into the national rail system, which I keep coming back to how intricate, how important shortlines are to the class ones. And they live they need each other, right? I I think that's kind of where I was going.
SPEAKER_03Um Yeah, I would go ahead. Yeah, I mean, I I would agree with that, and you know, I I appreciated the chugging along analogy, by the way. And I do think we should probably be commended for our lack of rail puns. And we haven't used try hard, you know, we haven't used derailed, we haven't used off the off the track, like there's a lot. Um, but I do I do think it's you know, and look, I'm a biased observer here, but I do think it's sort of widely acknowledged that this shortline story has been an incredible success story over the last couple decades, and that they've really taken, you know, these hundreds of like kind of unloved redheaded stepchildren and turned them into like, you know, you're not gonna get you're generally not getting rich owning a short line, but they've turned them into like thriving, successful, viable businesses, and really not only have you know maintained the lines like they've originally set out to do, but they've in many cases grown them substantially and provided, you know, I think world-class service to customers that desperately want and need it and enable these small towns that are moving ag and metals and minerals and those types of products, you know, allow those kind those communities to thrive. And yeah, the fact that private equity and Wall Street, quote unquote, like recognizes that is I I think a nice validation. Um, nobody we don't we don't want the financialization of short lines, and you know, we don't primarily exist to like make investors money, we exist to serve our customers. But um, hey, if people can make some money buying and selling them and owning them, then that's good.
SPEAKER_02Yeah, that's good for all of us. I guess uh where I kind of want to close out this one, um, is looking just at membership over the last, you know, say five plus years, both at Arima, what we're seeing, um, and and maybe what you're seeing, um are you guys seeing a rise or a drop or or is your membership staying uh about is it plateauing? It just seems like professional organizations, whether they're trade or professional organization like Arima, um recently are kind of they're kind of tiltering. They're not they're not taking off. And I was just curious if you're seeing that on your side, or I'd love to hear your take.
SPEAKER_03Yeah, it's an interesting question. Um, you know, you'd have to sort of break our membership into two halves to have a conversation about it. On the railroad side, we are blessed, and maybe cursed, but mostly blessed with a very, very stable membership. Like we have about 500 shortlines who are members. There are about 600 in the country. Almost every short line renews that's a member, almost everyone renews every year. Um, the people who are members find the association to be kind of invaluable for what they do on many fronts. There, you know, there's still like maybe these couple dozen or maybe up to a hundred, like smaller ones out there that have just never been a member of the association. And we it's tough to get them, but but the so there's really not much turnover growth or decreasing on the on the railroad side of the membership. On the supplier side of the membership, um, it's actually grown a little bit over the last few years. Um and I I think that's because short lines continue to grow, and with the grant programs, especially, you know, supplier companies look and see like an opportunity to sell, you know, sell services and sell products to shortlines. And joining the association is a pretty cost-effective way to kind of market and get to know those people. Um, you know, but it's um, you know, so it's a different business model than the professional associations, which are, I think, are much more aimed at education. Um uh but you know, I would say to express sort of sympathy perhaps with Arima and the challenge in getting individuals to join, it does feel like the world gets busier and busier and people get more and more stretched. And so it's not like there's less people out there who would benefit from coming to conferences and joining webinars and being educated, but people just have seem like they have less and less time, right? So it you gotta, and we're able to do this for the railroads for sure, but you gotta be able to provide something that is not just a nice to have, right? It's gotta be like essentially essential to to mangle the English language a little bit there. It's gotta be something that they just need to be a part of, and so that's you know, that's what we try to do.
SPEAKER_02But you also do have individual members, right? Just like Arima, where if I was excited or interested to be a part of the Shortline Association, can I join? No, how does that work?
SPEAKER_03It would it would have to be the company has to join. Correct. Now, it in in practice, it's the individual that participates, but it it is it is the there would be no way for Walt to join the ASLRA. It would have to be ARE.
SPEAKER_02Perfect.
SPEAKER_03That would have to be the company that would join, but then the person can join the committees and come to the events and be on the webinars and that kind of stuff.
SPEAKER_02And that's exactly what I'm so glad you that's what I wanted you to define. To just so people understand, it's different when you apply to REMA, you can be an individual, you can join a technical committee. Uh, this is a trade organization, so that that aspect of it is different. And NRC is similar to ASL RRA.
SPEAKER_03Yeah, that's exactly right. I think most associated, I mean, every association that I almost every association that I can think of in the industry other than AREMA is a trade association, right? So ASLRA, AAR, NRC, REMSA, RSI, RSSI, RTA, it really AREMA has a pretty unique place as a kind of the professional association where individuals can join. And it's really not about, I mean, you don't need me to speak about what AREMA is, but it's not about lobbying and regulatory stuff. It's really about education and and learning and kind of individual networking. So I think I, you know, at ASLRA, we certainly don't view AREMA as a competitor. We there's tons of employees of shortlines who are members of AREMA as individuals. And frankly, there should probably be more. Um, I think AREMA is a great, great association. And I, you know, I've been to, boy, I think I've been to 18 of the last 20 AREMA annual conferences. Um, certainly all the ones that are a part of Railway Interchange and all the standalone ones. I think I missed like one time you guys scheduled one in late August, and I had kids on vacation, and that was tough. But pretty much I'm there every year. Um and I think it's a great event.
SPEAKER_02Excellent. Well, we hope to see you uh in Indianapolis this fall. And it sounds like you guys, just for our all the listeners' knowledge, you host a uh conference yourselves once a year, in my understanding, is recently. This one was in was in New Orleans. I unfortunately, uh, as I started at the beginning of this uh podcast, was unable to make that. But how many people, how many vendors did you have there? Uh was it a success?
SPEAKER_03It it was a big success. Um you know, I personally I think our annual conferences are always a success, but I will tell you that holding it in New Orleans um was pretty nice this year. People really flocked to it. We had we came in over 1,800 people, which is actually the second biggest annual conference we've ever had, only behind our 100th anniversary party, like uh a decade ago in Atlanta. Um, so that was that was really gratifying. Um, of those 1800, you know, I would a majority are actually vendors. Um there are, you know, there's probably five, six hundred shortline railroaders there, which is pretty good. And it's a really very, very high-level group of shortline railroaders. It's a lot of owners, presidents, vice presidents, chief commercial officers, you know, uh those types of folks. Uh, but then there's quite a few, you know, vendors, right? Like suppliers, contractors, associate members uh who are there to network and talk to all those people and try to sell them stuff and try to learn. And we have tons that we have a bunch of general session presentations. We had Joe Henriks, who's the CSX CEO, was one of our key notables this year, plus a TSA Transportation Security Administration um deputy director there talking about cybersecurity issues. And then we have dozens of breakout sessions on everything from locomotive inspection issues to how to apply for CRISI grants to insurance troubles, to um RIF loans and tax credits and state legislation and um you know track engineering issues, um, you know, so a little bit of overlap with the kind of stuff that they get into at AREMA. But yeah, we do a big annual conference every year. We have a couple much smaller regional conferences in the fall. Um and those are our babies, and we we love those. They're they're fun for people, they're a great time for people to get together, network. They're also a big part of how we pay for the whole operation over here, you know, like pretty normal in trade association world, but your annual conference really funds a lot of the rest of the year's activities. Um so it's very important to us. And our next one is like about 11 months from now, and we'll be in uh late March 2024 in Kansas City. Kansas City. Yeah, not as famously fun as New Orleans, but nevertheless a great rail town and good food and good fun.
SPEAKER_02Yeah, easy to get to. They got a new airport out there. I got to visit that about a month or so ago. That was pretty cool. So they are they've caught up to the rest of the country in airports, which is good, which will make for a great conference, I think. And I think there's probably no better way to end this one. I just looked at the clock, and hey, you know what? We had a we had a heck of a gap there from the last episode. So why not give the user, the listeners what they want, Chuck? More content. More content. I love it. That's right. Well, thank you, Chuck, for being on the show. We really appreciate it. We appreciate you being continuing to be a friend of Arima. I look forward to seeing you in Indianapolis this fall, and then I will see you in Kansas City uh next spring.
SPEAKER_03Well, I was thrilled to do this. I really appreciated being invited. Um, I love Arima. I will definitely see you at the next AREMA event and hopefully, like you said, also see people at future shortline association events.
SPEAKER_02Perfect. Thank you.
SPEAKER_00Thank you for rolling with Arima on today's episode of Platform Chats. For further information about Arima, please visit arema.org or contact us at info at arema.org.
