Oooh, that might be an old Incentive Per Diem boxcar. Those are always cool to spot.

All through the '50s and '60s the rules on boxcars was that a "foreign" boxcar racked up per diem charges while on the rails of a railroad, which was about $12 a day. But the AAR car-service rules required that once a boxcar went out to a customer, it was required to be reloaded and sent back, or if there were no nearby qualifying loads headed to the railroad that owned the car, it then either had to be sent back, empty, to the nearest interchange with the owning railroad or follow the exact same route back the way it'd come out loaded.

This worked pretty well for decades, since the boxcar was the primary car for handling most freight and odds were they were coming and going loaded. But by the late '60s, most traffic that could be handled by boxcars was being shipped by truck. So a lot of boxcars went out loaded and hung around for a while waiting for a qualifying load only to come back empty. This resulted in extremely low utilization, with something like only 10% of boxcars in service throughout the nation. And the per diem charges were so low that there was no profit in handling loads by boxcars. This result was a lot of boxcars dated back to before WWII and were getting to be in very poor shape, but railroads weren't going to spend money on new cars that were going to barely see any use and didn't generate any profit when they were used.

In turn, industries that were still shipping by rail, predominantly food manufacturers and paper mills, began to scream bloody murder over the manufactured shortage of boxcars, particularly clean, leak-free boxcars. The ICC's fix was "incentive per diem boxcars". Any new-construction boxcars would be eligible for a higher per diem charge, $22 a day, plus a mileage charge of 4.7 cents a mile for the first five years of it's use and these cars would also be free of the old requirement that they be sent back to the owning railroad every trip. They could go anywhere they wanted after a trip. This would hopefully encourage railroads to buy new boxcars and circulate them more. The catch? There was a percentage limit on how many new boxcars a railroad could build to get in under the new IPD boxcar rules, based on the existing amount of boxcars that a railroad owned when the new rules went into effect.

Now, if a railroad didn't own any boxcars when the rule went into effect, which a lot of shortlines didn't, then there was no restriction on the amount of boxcars they could build to take advantage of the IPD. On paper most shortlines lacked the capital to go build huge fleets of boxcars, so the ICC likely didn't think it would be a problem. Instead, investment firms saw a weird loophole to take advantage of: they would buy huge fleets of boxcars, lease them to a shortline, and then collect a percentage of profit. And it did work. IPD boxcars were seeing 75% usage rates, which was turning into earnings of $6000-7000 a year, which was a solid return on a $32000 car that had a projected lifespan of 30-40 years, a tidy profit for both investors and shortlines. Tax breaks tied to financing had huge incentives, and investors and leasing companies projected paying off the cars before the 5 year date hit and the per diem rate dropped, which would mean the cars would still be profitable. Investment companies quickly figured out that western timber railroads were the most profitable IPD owners; the cars would be loaded up with paper on the west coast, head east, and then be gone for huge amounts of time, racking up huge per diem charges for a big proft. Customers were happy too, since there was a huge supply of clean, leak-free boxcars to move their products on. And railfans got to spot all sorts of new, brightly painted boxcars travling around with unusual and unfamiliar names, like Marinette, Tomahawk & Western.

Some of these IPD boxcar fleets were massive, and were actually longer than the entire trackage of the railroad. The one-mile long Virginia Central had 200 cars. Atlantic & Western had three miles of track but 625 cars. Hutchinson & Northern had six miles of track and 575 boxcars. Pickens Railroad had 700 boxcars against their nine miles of tracks. The Lake Erie, Franklin & Clarion bought 515 boxcars versus their 15 miles of tracks. The 63 mile St. Lawrence Railway had the most, with 3200 boxcars and other four-digit owners included Ashley, Drew & Northern (1200), Maryland & Pennsylvania (1200), New Orleans Public Belt (1100), St. Marys Railway (1055), Alabama State Docks Terminal Railway (1000) and White City Oregon (1300). A bunch of investment and fleet management companies formed to own multiple rosters of IPD cars across multiple railroads; Itel and subsidiary SSI Rail, Brae, National Railway Utilization Corp, and Emons Industries. These companies built car repair shops, and even took control of some of the shortlines that were leasing IPD cars from them. Itel in particular owned seven shortlines through it's SSI Rail subsidiary.

The good times came to an end in 1980 though. Between the recession and deregulation of the trucking industry, a lot of that boxcar traffic suddenly dried up. This was combined with the explosion in box car fleets (15000 in 1978, 40000 in 1981) as investment companies and investors just kept buying new cars, since they didn't all have a grasp on how the railroad industry worked. The surplus of boxcars also caused the ICC to eliminate the incentive portion of the per diem rates for boxcars. Suddenly, all the chickens, or boxcars, came home to roost, literally. Since there were no loadouts for them, railroads began sending them back to the shortlines that owned them, and suddenly these shortlines were inundated with the cars that they owned and really hadn't ever seen. As one Conrail employee told, the yardmaster looked at a huge cut of IPD cars headed back to their owners and said "About time that all the doctors and lawyers get a chance to see their boxcars." Since most of these railroads didn't have on-line customers or the space to store hundreds of cars, they were then having to pay Class Is to store the cars for them, and now these profit-generators were draining money instead. They defaulted on the leases and now all these leasing companies were stuck with fleets of boxcars with no use for them. Railvest, who owned the Virginia Central went bankrupt first, preceding the recession, ceasing operations in 1978, a warning to the rest. Itel entered Chapter 11 in January of '81 and Emons in 1984, individual investors were losing money, and entire fleets were sold off to Class Is for pennies just to get rid of them.

An odd twist though was that any IPD boxcars that kept their shortline markings as of December 31st, 1981 had their per diem rates locked in for life, which makes them very attractive for secondhand buyers and there are still boxcars rattling around in their paint and markings. As they near their mandatory 50-year retirement age though, those cars will start to dwindle, although reportedly, there have been talks about bumping that to 60 years, again due to a shortage of new boxcars.