STB determines cost of capital for 2015

The Surface Transportation Board (STB) has determined the railroad industry's after-tax cost of capital for 2015 was 9.6 percent.

The cost was lower than the 10.65 percent after-tax cost that the board determined in 2014, according to an STB press release issued Aug. 5.

The STB's cost-of-capital figure represents the board's estimate of the average rate of return to persuade investors to provide capital to the freight-rail industry.

The STB uses the annual calculation in evaluating the adequacy of a railroad's revenue each year. The board also uses the figure when determining the reasonableness of a challenged rail rate, considering a proposal to abandon a rail line or valuing a particular railroad operation.

Meanwhile, the STB also announced that its three board members will testify at an Aug. 11 hearing of the Senate Committee on Commerce, Science and Transportation on the topic of freight-rail reform and implementation of the STB Reauthorization Act of 2015.

To be held in Sioux Falls, S.D., the hearing will examine the STB's implementation of the law's reforms and their impact on dispute resolution, proactive problem-solving, transparency and decision-making.

The hearing also will review emerging rail issues.