Initially, the ICC defined a classification system by annual gross revenue taken in by each entity. Class I railroads had an annual operating revenue of at least $1 million, while Class III railroad incomes were under $100,000 per annum. All such corporations were subject to reporting requirements on a quarterly or annual schedule. If a railroad slipped below its class qualification threshold for a period, it was not necessarily demoted immediately.
As an example consider that in 1925, the ICC reported:
• 174 Class I railroads, • 282 Class II railroads, and • 348 Class III railroads.
Since dissolution of the ICC in 1996, the Surface Transportation Board (STB) has become responsible for defining criteria for each railroad class. The bounds are typically redefined every several years to adjust for inflation and other factors.
Classification history
The initial $1 million criterion for a Class I railroad was used until January 1, 1956, when the figure was increased to $3 million (equal to $33,620,563 today). In 1956, the ICC counted 113 Class I line-haul operating railroads (excluding "3 class I companies in systems") and 309 Class II railroads (excluding "3 class II companies in systems"). The Class III category was dropped in 1956 but reinstated in 1978. By 1963, the number of Class I railroads had dropped to 102; cutoffs were increased to $5 million by 1965 (equal to $48,342,133 today), to $10 million in 1976 (equal to $53,543,860 today), and to $50 million in 1978 (equal to $233,571,429 today), at which point only 41 railroads qualified as Class I.
In a special move in 1979, all switching and terminal railroads were re-designated Class III, including those with Class I or Class II revenues.
Class II and Class III designations are now rarely used outside the rail transport industry. The Association of American Railroads typically divides non–Class I companies into three categories:
Regional railroads: operate at least 350 miles or make at least $40 million per year.
Local railroads: non-regional but engage in line-haul service.
Switching and terminal railroads: mainly switch cars between other railroads or provide service from other lines to a common terminal.
Classes
Any large freight railroad company in the United States, Mexico, or Canada is classified based on operating revenue. Railroads are classified as Class I, Class II, or Class III. The exact revenues required to be in each class have varied over time and are now continuously adjusted for inflation.
Class I
Class I criteria
In the United States, the Surface Transportation Board defines a Class I railroad as "having annual carrier operating revenues of $250 million or more" after adjusting for inflation using the Railroad Freight Price Index developed by the Bureau of Labor Statistics.[1] According to the Association of American Railroads, Class I railroads had a minimum carrier operating revenue of $346.8 million (USD) in 2006,[2] $359 million in 2007,[3] $401.4 million in 2008,[4] $378.8 million in 2009,[5] $398.7 million in 2010[6]: 1 and $433.2 million in 2011.[7]
In early 1991, two Class II railroads, Montana Rail Link and Wisconsin Central, asked the Interstate Commerce Commission (ICC) to increase the minimum annual operating revenue criteria (then established at US$93.5 million) to avoid being redesignated as Class I, which would have resulted in increased administrative and legal costs.[8] The Class II maximum criterion was increased in 1992 to $250 million annually, which resulted in the Florida East Coast Railway having its status changed to Class II. Rail carriers with less than $20 million in revenue are designated as Class III.[9]
In Canada, a Class I rail carrier is defined (as of 2004) as a company that has earned gross revenues exceeding $250 million (CAD) for each of the previous two years.[10]
Currently, eleven railroads in North America are designated as Class I. In the United States, Amtrak and seven freight railroads are designated Class I based on 2011 measurements released in 2013.[7]: 1
A Class II railroad hauls freight and is mid-sized in terms of operating revenue. As of 2011[update], a railroad with revenues greater than $37.4 million but less than $433.2 million for at least three consecutive years is considered Class II.[11] Switching and terminal railroads are excluded from Class II status.
The last major change of the upper bound for a Class II railroad was in 1992, when the Florida East Coast Railway was changed from a Class I railroad to Class II.[12] A previous change in 1991, which prevented two railroads-- Montana Rail Link and Wisconsin Central—from becoming Class I, was made at the request of the two railroads, as they did not wish to take on the extra cost and paperwork associated with Class I status.[13] Changes since then have been adjustments for inflation.
A Class III or short-line railroad has an annual operating revenue of less than $20 million (1991 dollars).[14] Class III railroads are typically local short-line railroads serving a small number of towns and industries or hauling cars for one or more larger railroads. Many Class III railroads were once branch lines of larger railroads or abandoned portions of main lines. Most Class III railroads are owned by railroad holding companies such as Genesee & Wyoming and Iowa Pacific Holdings.
List of Class III railroads by state
As of April 2013, Class III railroads in operation are as follows:
The Surface Transportation Board continues to use designations of Class II and Class III since there are different labor regulations for the two classes.
Railroads in italics meet the revenue specifications for Class I status, but are not technically Class I railroads due to being passenger-only railroads with no freight component.
