WASHINGTON — Citizens Against Government Waste (CAGW) has named Sen. John Thune, R-S.D., the Porker of the Month for helping a railroad company secure a record $2.3 billion federal loan guarantee.
The Dakota, Minnesota and Eastern Railroad (DM&E) is seeking the largest federal loan to a private company in American history — a $2.3 billion in tax money from to finance a major rail expansion project through the Midwest.
The loan guarantee from the Federal Railroad Administration (FRA) would allow the DM&E to expand and improve a rail line that is used primarily to transport coal from Wyoming to Minnesota. In apparent anticipation of the loan, 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.
DM&E paid Thune $220,000 in 2003 and 2004 to lobby for the loan before his election to the Senate, according to CAGW.
According to strategic consulting firm BearingPoint, the loan would require an annual payment of $246 million on top of the $15 million from another loan. Even if the rail upgrade increases DM&E’s current annual revenue of $200 million, the deal presents a poor credit risk to taxpayers, who will be forced to foot the bill if the company defaults.
“This loan finances a project with many financial uncertainties, ultimately calling into question whether or not DM&E can repay the loan,” a senior manager at BearingPoint stated, according to CAGW.
According to the FRA’s Railroad Safety Statistics Annual Report 2004, DM&E ranked last in safety among the nation’s 43 largest railroads. DM&E’s CEO pointed to safety as a reason to support the railroad’s “rehabilitation.”
However, government handouts have failed to solve DM&E’s safety problems; its main track accident rate has escalated to eight times the national rate since its last FRA loan of $233 million in 2003, CAGW contends.
Meanwhile, the Rochester Coalition has released a report it filed with the FRA. The coalition says the report details coalition’s numerous attempts to discuss mitigation with the railroad.
The report contradicts DM&E’s claims that Rochester has refused to discuss mitigation and calls into question whether the railroad’s misrepresentations violate federal standards for receiving government loans, the coalition contends.
The report provides the FRA with additional evidence supporting an Aug. 25 Rochester Coalition filing that argued, “DM&E has consistently failed to meet the standard for honesty, integrity, and candor required for public officials to rely on its representations, and, therefore, has failed on a key qualification to receive an RRIF loan, and has failed to provide adequate assurance that the taxpayers’ massive investment is protected and the loan will be repaid.”
“To the best of our knowledge, DM&E has provided no information to challenge the factual basis of our conclusion,” said Stephen Ryan, Manatt, Phelps & Phillips LLP and legal counsel for the Rochester Coalition. “To the contrary, the DM&E continues to make completely false statements in an attempt to secure the largest loan to a private company in U.S. history.”
— Wire Reports