DM&E loan: Odds are taxpayers will end up footing the bill

Regardless of how the Federal Railroad Administration (FRA) rules, the evidence has now become overwhelming that the DM&E Railroad will never be in a position to pay back the proposed $2.3 billion loan it is requesting from the federal government. This was pointed out in a Bearing Point study of the railroad’s finances earlier in 2006. Granted, the study was funded by the Mayo Clinic, a loan opponent, but Bearing Point’s arguments are compelling. Meanwhile, the DM&E has done little, if anything, to counter the study’s conclusions. Instead, it has continually asked states, cities and communities that would be affected by the railroad’s plan to “trust us.”

more insideMarshall Damgaard is a prime researcher on the DM&E expansion project, and his work, while not widely disseminated, bolsters the Bearing Point conclusions, especially in light of developments that have occurred since the Bearing Point report was released. Below, reprinted by permission, is the text of a letter that he recently sent to ranchers affected by the proposed expansion. It is worthwhile for everyone who has an interest in this issue to read it. (NOTE: For those unfamiliar with the acronyms, a listing follows the article.)

Will the DM&E be able to repay the loan?

by Marshall Damgaard

On December 11, 2006, USDOT and BNSF filed comments in STB’s IMRL docket (F.D. No. 34177). What does that alphabet soup mean, and why is this development a problem for DM&E?

DM&E filed its PRB expansion project with STB on February 20, 1998. STB granted final approval to the project on January 30, 2002. A few weeks later, DM&E announced that it had purchased I&M Rail Link (IMRL, today known as IC&E) in a reported $150 million deal. The timing was not coincidental. In an August 19, 2002, news release, the financial advisor for the transaction called it “a difficult and complicated two-year process to negotiate the deal, finance the acquisition, and obtain regulatory approval….