The War on Waste:

Chronicles of Waste, Fraud and Abuse

The Federal Railroad Administration (FRA) is in the process of considering a record $2.3 billion federal loan to the Dakota, Minnesota, and Eastern Railroad (DM&E).  The special-interest loan would expand and improve a rail line that is used primarily to transport coal from Wyoming to Minnesota.  However, the deal has lacked transparency and public scrutiny and is poised to become one of the biggest taxpayer rip-offs in history. 

The unprecedented loan makes no sense from a fiscal, security, or commonsense standpoint:
 

• According to BearingPoint (a strategic consulting firm), the loan would require an annual payment of $246 million on top of a previous $15 million loan payment.  Even if the rail upgrade increases DM&E’s current annual revenue of $200 million, the deal presents a poor credit risk to taxpayers.

• DM&E ranked last in safety among the nation’s 43 largest railroads in 2004, and while DM&E’s president and CEO has argued that the loan will help improve the railroad’s safety record, its main track accident rate has escalated to eight times the national average since its last FRA loan of $233 million in 2003.

• The loan would allow accident-prone DM&E to haul hazardous materials in close proximity of healthcare facilities, such as the Mayo Clinic, that could not be evacuated quickly in the case of an emergency.

• Furthermore, the coal fields of Wyoming are already served by two railroads; a government loan could adversely impact the marketplace.

  The DM&E loan moved quietly through Congress thanks to behind-the-scenes lobbying and legislative maneuvers from Sen. John Thune (R-S.D.).

   

• Sen. Thune is a former lobbyist for DM&E and was paid $220,000 in 2003 and 2004 to lobby for the loan before his election to the Senate.

•  

• Sen. Thune was instrumental in increasing the FRA’s loan guarantee authority from $3.5 billion to $35 billion in the 2005 Safe, Accountable, Flexible, and Efficient Transportation Equity Act, in apparent anticipation of the loan.

•  

  DM&E has refused to disclose important financial information to the public that will be footing the bill if the company defaults on the loan.

   

• Freedom of Information Act (FOIA) requests were filed in April 2006 seeking information regarding the railroad’s finances and multiple loan applications.

•  

• DM&E and the FRA have refused to comply with the FOIA request despite passed deadlines and are now being sued by the Rochester Coalition and Mayo Clinic.

•  

  The FRA will issue a decision on the loan before April 30, but Congress still has a chance to block it.  Legislation has been introduced in both chambers that would require congressional approval of any Department of Transportation loan over $1 billion. 

   

  Before taxpayers are left on the hook for billions of dollars, Congress must derail this reckless corporate handout.