Revenue Adequacy: The Good, the Bad and the Ugly
55 Pages Posted: 3 Jul 2014
Date Written: July 1, 2014
This paper examines the concept of revenue adequacy, a benchmark of United States railroad firms' financial performance calculated annually by regulatory oversight bodies. The paper addresses questions around the origins, measurement, informational provisions, value and policy benefits and costs of revenue adequacy. An examination of the historical origins, measurement, and informational provisions of revenue adequacy generates insights into the motivations for and limitations of this concept. A financial benchmarking exercise assesses revenue adequacy in the rail industry relative to both a narrowly defined set of comparable industries and a broader set of publicly-traded non-financial companies operating in the U.S, and indicates little differentiates railroads from these comparison sets over the past dozen years. A nonfinancial examination assesses whether the railroad industry has made continued rail transportation system improvements given its regulatory governance structure, and concludes that significant strides toward the goal of achieving a “safe, adequate, economical, efficient, and financially stable Rail transportation system” as established in the Staggers Rail Act have been made. The paper concludes with policy reflections that identify prospective good, bad and ugly applications of revenue adequacy.
Keywords: Railroads, Revenue Adequacy, Regulation, Deregulation
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