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Former owner warns about Dakota Southern’s late payments

CHAMBERLAIN — The checks from Dakota Southern Railway aren’t coming fast enough.

That sentiment was shared Thursday at the Mitchell Rapid City Regional Railroad Authority regular meeting in Chamberlain.

Alex Huff, former president/owner of Dakota Southern, said he has not been impressed with the way the company pays its bills.

Huff, who indicated that he was representing only himself at the meeting, said that it’s unacceptable that the company is taking its time to pay back the rail authority and others.

“There has been an ongoing issue with Dakota Southern paying its bills in a timely fashion,” he said. “We all need to be aware that it’s been an issue going back to day one with the current owners.”

The railroad authority decided to formally write a letter to the company, indicating the need to improve payments to those owed money.

The company was sold in 2009 and is now owned by Mike Williams and Stan Patterson. That’s when Huff parted ways with Dakota Southern.

Lester Thompson, who represented Dakota Southern at the meeting, said that the company’s headquarters in Missouri pays its bills on a 90-day cycle. Thompson said he visits with customers every three months to make sure they’re being paid.

“It’s something I go out of my way to take care of,” he said.

Huff reminded the board they have the ability to remove the railroad company with cause and notice.

“You’ve got a big hammer,” Huff said to the board. “You have the ability to replace the current operator with somebody else. I’m not going to advocate it today. But you as an MRC board have a fiduciary responsibility to see that you’re getting adequate documentation, so that the money flows through to repay the state loans and members need to be aware.”

Tom Greenway, of Mount Vernon, who is MRC board chairman, indicated there is concern about the way business is being handled, especially in small towns along the railroad that are growing impatient with the slow payment.

“People are used to being paid within 30 days,” he said. “There’s a lot of people who are unhappy because they don’t want to wait 90 days and it’s something that should be taken care of.”

The state Department of Legislative Audit is auditing all of the regional rail authorities as part of a Department of Transportation initiative to make sure finances are being handled properly, said Bruce Lindholm, railroad program manager for the Department of Transportation said.

The rail authority currently collects a $50 per rail car fee that originates on the rail line, meaning if a 10-car train uses the tracks that train pays $500 fee that will help repay the loan.

The rail authority then pays back the state for its loan that helped refurbish the line.

In 2013 the rail line from Mitchell to Chamberlain carried 3,049 cars, which brought in $152,450 in rail surcharge revenue that will help pay off the state loans. None of that money from last year’s surcharges has been paid.

Because the loan payment money is not coming in, the rail authority payments on their loan have stopped. The Mitchell Rapid City Regional Railroad Authority has paid $24,350 of its $2.7 million loan, taken out in 2011. The most recent payment on the loan was due Feb. 1.

State rail board member Sheldon Cotton, of Volga, told The Daily Republic during the meeting he understands the bill is in the process of being paid, based on conversations he had with company officials.

“Right now, it’s clear that the owners of Dakota Southern are not meeting their obligation to provide financial information to their customers in a timely manner,” Huff said. “As a board, you may have to consider other options.”