Applications of Engineering and Financial Analysis to the Valuation of Investments in Railroad Infrastructure

This record of study presents the findings of industry research projects performed duringa one-year doctoral internship with the Austin Rail Group of HNTB Corporation. Fourmain internship objectives were established that address infrastructure problems relatedto the railroad industry and required the integration of engineering and financial analysisto develop effective project evaluation tools. Completion of the objectives resulted in:1. Transformation of the Federal Railroad Administration methodologycurrently used to perform highway-railroad grade crossing analyses to asystem of equations that can easily be used to evaluate regional railinfrastructure investments. Transportation engineering equations based onqueuing theory were extended to new but equivalent formulations thataccommodate unlimited, discrete train performance data from computersimulations of rail networks.2. Application of risk assessment methods and railroad accident statistics torecommend a cost-effective alternative to legislative proposals to relocatehazardous materials transported by rail around metropolitan areas. A riskanalysis model was developed to predict the risk of exposure from the releaseof a hazardous material following a train derailment so that changes inexposure achieved by alternative risk mitigation strategies could be observed. 3. A new method of measuring the susceptibility of railroads to financialdistress following the catastrophic loss of a timber railroad bridge. Economicand finance principles were used to predict financial distress by determiningof the number of revenue periods required to offset economic loss.4. Demonstration of the use of financial market data in calculating the discountrate of public railroad companies for engineering analyses that involvenegotiations with the public agencies. Surface Transportation Board rulingson the determination of a railroad?s cost of equity were applied to acomparative assessment of costs of capital for Class I railroads. Ahypothetical example was used to demonstrate the interrelationship betweenengineering design strategies and their effects on the pricing of compensationto a railroad for right-of-way acquisition.These results, in fulfillment of the doctoral internship objectives, have provided HNTBwith economic decision analysis tools and a series of conclusions used to providerecommendations to the Illinois, Missouri, and Texas Departments of Transportation, theTexas Legislature, and the railroad industry.