Mitchell-Rapid City Rail Authority expected to stay after impending sale
Members of the authority, who held a regular meeting by teleconference, wondered what the role of the organization might be if a $ 13 million purchase plan from the national railway company Watco was approved by state of South Dakota and was adopted. State officials have said the authority should remain, if only to help serve as an economic development arm for any upgrades Watco wants to make that may require state funding.
“The need is quite widespread,” said Jack Dokken, rail program director for the South Dakota Department of Transportation. “Really, the authority would serve as a vehicle for an operator or a shipper or any group in the rail industry to access low-interest loans that are available through a council of state railways. It would really serve as economic development.
The South Dakota Rail Board, he said, does not provide direct loans to the rail industry, so the MRC Authority would act as an intermediary.
“While you might not be the backer for the railroad, there would still be a great need for your guys to exist,” Dokken said.
The authority includes a representative from five counties – Aurora, Brule, Davison, Lyman and Jones – and currently sublets the operation of the railway line to the Dakota Southern Railway Company on the state-owned line.
If the sale of Watco goes through, this lease is no longer in effect and the authority’s current outstanding loans would no longer be in place.
Watco’s plan calls for a down payment of $ 5 million and payment of the remaining $ 8 million over the next five years with annual payments. The Pittsburg, Kansas-based company has also pledged to invest more than $ 2 million in the line once its purchase is complete.
“We are working on finalizing a purchase agreement and we will work on it fairly quickly,” said Joel Jundt, acting secretary of transport for SDDOT, adding that he said it would likely be before the South Dakota Rail Board in January.
Jundt said Watco had no discussions about extending the line further west than Presho. There are 190 miles of rail line between Mitchell and Kadoka, while the section from Kadoka to Rapid City is cashed in or abandoned but retained with the right to restore rail service.
“I don’t see any expansion, at least in the near future, but Watco should answer for that,” Jundt said.
For Watco’s sale to be finalized, the MRC authority would have to hold a special meeting to sign, but primary power rests with the State Rail Board and Governor Kristi Noem, who would also be required to approve the sale. .
The State Rail Board mainly rejected a first round of proposals in late 2019, including two for the MRC – Rapid City, Pierre and Eastern and Watco. Both were rejected due to the net cost to the state and lack of return on investment, but Watco improved its offer in October and the State Rail Board agreed in principle to a deal with Watco.
Until Wednesday, Jackson County was the most westerly county under MRC authority, but the group approved a county request to leave the MRC because the railway line does not operate in Jackson County.
The authority will not have much source of income after the sale. It currently collects an additional $ 50 per car on behalf of the state and shares lease payments with the state. The MRC expects to have around $ 232,000 at the end of 2020, which the authority said would be enough to support the organization for at least 15 years without a new source of revenue.
The sale of the rail line comes as current operator Dakota Southern reported record activity this fall.
Heath Haden, vice president of operators for Dakota Southern, told the MRC Authority that Dakota Southern has been “extremely busy,” including a record in October with 1,800 full cars.
“Right now we’re on track for between 12,000 and 13,000 loads this year,” said Haden.
Haden said Dakota Southern was on track for 1,300 to 1,400 car loads in November and 1,000 to 1,200 car loads in December.
“It was really good,” he said. “And there is still a lot of grain to move.”