Class I Railroad - History

History

The classification of railroads in the U.S. as Class I, II or III was started by the Interstate Commerce Commission with its report for the year ending 30 June 1911. Initially Class I railroads were defined as railroads with annual operating revenue of at least $1 million while Class III railroads had less than $100,000. (If a railroad slipped below the threshold for one year it wouldn't necessarily be immediately demoted.) In 1925 the ICC showed 174 Class I, 282 Class II and 348 Class III railroads.

The $1 million criterion was used until 1 January 1956 when it increased to $3 million (equal to $25,645,043 today). In 1956 the ICC counted 113 Class I line-haul operating railroads (excluding "3 class I companies in systems") and 309 Class II (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; by 1965 the cut-off had increased to $5 million (equal to $36,874,340 today), to $10 million in 1976 (equal to $40,842,105 today) and to $50 million in 1978 (equal to $178,163,265 today), at which point only 41 railroads were still Class I. In 1979 all switching and terminal railroads, even those with Class I or Class II revenues, were re-designated as Class III.

The 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 are non-regional railroads that 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.

In the United States the Surface Transportation Board continues to use the designations of Class II and Class III since there are different labor regulations for the two classes.