ALBANYHeavy property taxes on railroads in New York, with costs up to 26 times those in neighboring states, have helped drain high-paying railroad jobs from the state and impose higher transportation costs on manufacturers and other shippers, a new study by The Public Policy Institute says.
Railroad property taxes on one major railroad, CSX Transportation Systems, are more than seven times as high as those the company pays in Massachusetts, and 26 times those in New Jersey, on the basis of tax paid per mile of track, according to the study, On The Wrong Track.
Property taxes go up when companies invest in new rail or other improvements, and go down when tracks are removed. The heavy tax burden is one reason trackage in New York has been cut in half and the state has lost more than 11,000 high-paying railroad jobs since 1981, according to the Institute.
"Promoting and preserving rail-based freight and passenger traffic has been official New York State policy for half a century - and with good reason," the report says. "But while the state promotes railroads with some policies, it maintains a discriminatory, anti-competitive property tax system that drives up costs for railroads as well as their customers."
The problem originated decades ago when local tax assessors viewed rail property "as a cash cow to be milked as much as possible," the report says. Longstanding state law makes the problem worse in several ways. For instance, railroad property must be assessed based on "reproduction" value - the amount it would cost to rebuild or reinstall each improvement the same way as when it was new. Most states assess rail property on the basis of what it would take to replace lost buildings or other assets with today's more cost-efficient technology. A previous study by a New York University expert said "excessive taxation" on railroads in New York "can be uniquely damaging to carriers and to the state's economy."
For manufacturers, many of whom rely on rail freight, the heavy tax burden "constitutes another uncompetitive cost of doing business," the report says. Rail taxes also drive up costs for electricity consumers, because coal is a primary part of the state's fuel mix for generation, and for local taxpayers because municipalities in New York spend millions of dollars each year on road salt.
Lack of new rail investment, partly because of property tax considerations, has hurt the state's economy from Western New York to New York City, according to the Institute. It has also prevented improvements in Amtrak service; the Empire State Passenger Association calls railroad tax reform a "vital issue" for passenger service.
The study calls for "a new, fairer approach" that would make New York's railroad property taxes more competitive with those in other states. Governor Pataki and the Legislature have considered such reform in recent years, it says. Meanwhile, railroads are suing more than 700 school districts and municipalities statewide under a 1976 federal law that prohibits discriminatory taxes on railroads compared to other businesses. School districts and local governments acknowledged that current assessments violate the law in a 1997 settlement of a similar case.