Outlook 2018: Railroad Contractors feel better than hopeful

— By Pat Foran, Editor

A year ago, railroad contractors were looking ahead to 2017 with the requisite cautious optimism and a modicum of hope. Optimistic that the industry would be entering a less onerous regulatory era. And slightly hopeful that business would pick up.

As they prepare for 2018, they remain cautiously optimistic (as ever) about the year ahead. They continue to feel confident about the coming of a more palatable regulatory environment. And they seem to be more than slightly upbeat about the business prospects to come.

“From what we’re hearing, our members seem to be feeling pretty good right now,” said National Railroad Construction and Maintenance Association Inc. (NRC) President Chuck Baker on Nov. 21. “It’s a mixed bag, [but] people are very busy bidding, and there’s quite a bit of work to bid on.”

Particularly on the transit-rail side, Baker said. But there’s freight-rail work out there, too, he added.

“Railroads are in a very competitive world against trucks, so they’re very focused on making new investments — new plants, new yards — to provide high-quality services,” Baker said. “So I think contractors are feeling OK.”

Ultimately, the contractors who’ll end up feeling more than OK about 2018 and beyond are the ones that diversify.

“They’ve got a Class I yard project one day, a light-rail new build the next day, a subway renovation the day after that, and a couple of industrial projects after that,” Baker said.

And those that invest in technology and new services should be even better off.

“The customers we’ve spoken to continue to push very hard on the idea that contractors have to get better and better,” Baker said. “Track windows are narrower, budgets are always tight, railroads need contractors to do more, and to do more quickly.”

Meanwhile, railroaders wish members of Congress would do more, and more quickly.

“I would say that anything that has happened in D.C. this year has not been particularly meaningful for railroad contractors one way or another — yet,” Baker said.

Industry lobbyists remain confident that some of the regulatory roll-back issues they’ve been pushing for will be addressed soon, including FRA Part 243 Training Standards, which aim to ensure any person employed by a railroad or contractor is trained and qualified to comply with any relevant federal rail safety laws. Baker termed the standards “burdensome and unnecessary.”

Still some taxing situations

But they’re less sanguine about other issues, including the near-term fate of the expired Section 45G short-line tax credit, which as of press time wasn’t included in the proposed “Tax Cuts and Jobs Act” legislation.

“That is likely not going to be in the main tax reform bill, so we still have to look for another vehicle for it,” Baker said, adding that the legislation as of late last month stood to affect NRC members in “both good and bad ways.”

The good: the “dramatic lowering of the corporate tax rate from 35 percent to the low 20s, which would be a nice boost for corporate America,” Baker said.

The bad? “There’s the commuter benefit, the preferential tax treatment for companies paying for commuter benefits for employees — it is reduced in both versions of bill at the moment, and that would be a bad thing for rail transit agencies, in general,” Baker said.

In the weeks ahead, industry advocates will push to preserve and protect rail interests on the Hill, said Baker, adding that he thought some version of the tax reform legislation would pass before year’s end.

And what were railroad contractors thinking about as they prepared to turn the page on 2017? Last month, we queried a sampling of high-ranking officials of NRC member companies about the year ahead. We asked: “What’s your 2018 forecast for the railroad contracting segment and/or your business, and what’s your biggest concern?” Emailed responses from six executives follow.

Kevin Riddett, RailWorks Corp

Nate Bachman, Georgetown Rail Equipment Inc. (GREX)

Larry Laurello, Delta Railroad Construction Inc.

Ray Sipes, R.J. Corman Signaling LLC

Bill Dorris, J-Track LLC Central Division

Gary Kohnert, Loram Maintenance of Way Inc.

Email comments or questions to pat.foran@tradepress.com.