DM&E

DM&E

The failure of certain legislators, federal regulators, and Dakota, Minnesota & Eastern Railroad officers to adequately and fairly address the impact of the railroad expansion on the Rochester community and the Mayo Clinic is not just disheartening, it is undemocratic. Southern Minnesota's own Congressman is failing the district with his refusal to become an outspoken leader in the resolution process. Tim Walz has a different view of how our government should conduct itself. When elected, Tim Walz will ensure that the principles of transparency, equity and responsible government are reinstated.

Background:
The DM&E Railroad expansion is a project eight years in the making. CEO Kevin Schieffer seeks to expand and improve on existing DM&E rail lines in order to create a direct route between the coal-rich Powder River Basin in Wyoming and the Mississippi River. Schieffer believes his project will lower energy costs by supplying cheaper coal at lower transportation costs. He also claims the project will provide jobs for southern Minnesota and South Dakota. The project received approval from the Surface Transportation Board (STB) in December and is currently awaiting approval of a low interest federal loan. DM&E has two major hurdles remaining before it can begin construction: (1) securing the $2.5 billion loan it needs and (2) settling disagreements with Rochester, Minnesota, the largest city along the line. In May DM&E asked the STB to reverse itself and to allow officials to begin conducting an environmental impact statement (EIS) on the IC&E line that runs south of Rochester. This line is considered the "ultimate bypass" by many.

Benefits:
DM&E believes its project will create jobs in both Minnesota and South Dakota. Senator Thune recently told U.S. News and World Report the rail line would create "tens of thousands of jobs." In addition to the jobs, many in the agriculture sector believe that the railroad will also provide cheap transportation for locally grown crops, thus further benefiting the economies of Southern Minnesota and South Dakota.

Problems:

(1) Lack of leadership
Rochester's congressional Representative Gil Gutknecht has expressed his support for the DM&E project in the past and currently has little to no involvement in the dispute, despite the massive impact it will have on the district he represents. Gutknecht has met privately with Senator Coleman and DM&E CEO Kevin Schieffer, but refuses to discuss the content of those meetings.

(2) Fiscal Responsibility
DM&E was not initially eligible for the Railroad Rehabilitation and Improvement Financing (RRIF) program through which it hopes to receive its loan. However, DM&E became eligible when John Thune, its long-time lobbyist was elected to the U.S. Senate. Sen. Thune added a provision to the 2005 transportation bill that drastically expanded the scope of the federal loan program to include DM&E. Many, including the Bush Administration, disagree with the expansion of this program. The $2.5 billion loan DM&E applied for is more than 10 times larger than any other loan approved by the Federal Railroad Administration and is estimated to be worth 25 times the current value of DM&E. Additionally, the loan is structured in such a way that if the railroad defaults the federal government and implicitly the United States taxpayers will not be able to recover their loss by selling off the assets of the railroad.

(3) Local Impact
DM&E seeks to run 30-40 trains per day through Rochester. These trains are expected to decrease property values, increase noise, disrupt traffic flow and jeopardize local businesses such as the Mayo Clinic and the PEMSTAR chemical plant. Rochester is seeking to reroute DM&E trains to the IC&E line that runs south of the city. The STB initially banned DM&E from using the IC&E by preventing an environmental impact statement from being conducted. DM&E has asked the STB to reverse its decision and to allow for the EIS to begin. However, in the meantime, DM&E is offering only minimal cooperation in improving safety at railroad crossings in Rochester.

The Walz Alternative:
The DM&E negotiations with Rochester remain unresolved primarily because of the failure of key legislators to take leadership on this issue. As a congressman, Tim Walz will conduct business in a transparent and ethical manner.

(1) Leadership
When elected, Tim Walz will act as a catalyst for positive change, working to resolve issues between the citizens of southern Minnesota and other entities. Walz believes that both the Mayo Clinic and Rochester residents have valid concerns about the implications of DM&E running trains through the heart of the city. DM&E may well result in additional jobs for the First District, but if it jeopardizes the state's largest private employer, a company that has for years been a good neighbor to the Rochester community, those concerns must be taken with the utmost seriousness. Tim Walz will be transparent to citizens in his actions, and will encourage an open dialogue. When elected, Walz plans to work with Congressman Oberstar, the ranking member of the Transportation Committee, to resolve any lingering DM&E issues.

Representative Gutknecht has been derelict in his duty to pursue the best interests of his constituents. Gutknecht lent his tacit support to the project, but remains largely uninvolved in the dispute between the largest city in his district and the possible recipient of a $2.5 billion dollar federal loan. If the dispute is allowed to escalate it could result in the Mayo Clinic relocating to its existing facilities in other states, costing Minnesota its largest private employer. For a congressman to be so uninvolved with a project that promises both significant upset to and economic impact on his district is unacceptable.

(2) Fiscal Responsibility
Tim Walz does not oppose the total DM&E project. DM&E might be economically beneficial to many Minnesotans as well as the residents of South Dakota. However, giving DM&E the largest loan in the history of the Federal Railroad Administration is a highly questionable decision based on the financial exposure it places on taxpayers. The new provisions created by Thune allow the FRA to use the "going concern" value of the railroad rather than the net liquidation value. This is an extremely risky loan for the federal government and at such a low interest rate it is tantamount to a federal subsidy. DM&E's inability to obtain private funding is proof that the DM&E project has failed the most basic test of a free market.

(3) Transparency
When government is not transparent we often see a domino effect resulting in a sense of mistrust that ultimately makes it hard to negotiate. The provision in the transportation bill allowing for DM&E to receive a loan far above its value is the result of Senator Thune inserting the language into the 2005 transportation bill while it was in conference committee. Because of when the language was inserted, concerned legislators were never able to amend or remove the provision. Both the House and Senate were forced to vote for or against the transportation bill as a whole, leaving no room for negotiation on the expansion of the FRA loan program. Indeed, many legislators were not aware of the last minute changes made by Senator Thune. The public is rightfully outraged at the way in which DM&E has obtained its edge through Senator Thune's shrouded efforts to change the rules of RRFI loans and it is no surprise that actions like this corrode citizens' trust in government. Concerned citizens and legislators deserve to be involved in major shifts in public policies such as the FRA loan programs

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