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VEHLE: Railroad project a straight line to success

I'm writing this the night before Veto Day. It appears there will be no vetoes to consider, however, we must make sure we have a quorum present to adjourn. Since it did not become subject to a veto, I want to write a little bit about my legislation, SB 137, to provide $6 million to continue rehabilitation of the rail line west of Chamberlain. This investment represents both a vision and an opportunity.

If the Legislature did not have this same type of vision in 1980, the most grain-productive part of our state, the southeast quadrant, would be devoid of any rail service. Except for a stub line coming into Sioux Falls from Minnesota, there basically would be nothing south of the rail line from Rapid City through Pierre to Brookings, and there would not be any through north-south rail route.

A quick history: In 1980, the Milwaukee Railroad ran into financial difficulties and embargoed its rail lines in South Dakota. In 1980, Gov. Bill Janklow and the Legislature temporarily raised the sales tax to buy the S.D. Milwaukee rail lines. Some were designated "core lines" -- those were Aberdeen to Mitchell, with one route going through Yankton to Sioux City, and one route branching from Mitchell going through Parker to Canton and up to Sioux Falls. In 1981, a deal was cut with the Burlington Northern Railroad to operate these core lines. Three lines were designated local option lines. Those were Canton to Elk Point, Napa Junction (north of Yankton) to Platte and the MRC -- Mitchell to Rapid City -- rail line.

In 2005, South Dakota sold the core lines to the BN for $40,377,295. That money was placed in the Railroad Trust Fund to be used for rail projects. In 2006, the Legislature, after much consternation and promises that if good rail investments were found they would be funded, voted to pull $38 million out of the Railroad Trust Fund and place it into the Property Tax Relief Fund to be used for the Dusel in the old Homestake Mine and other projects. Fast forward. The line has been operated by Dakota Southern, and in 2010 South Dakota was awarded a TIGER grant for $16 million, which was matched and the line was upgraded from Mitchell to Chamberlain and a new 110-car unit train shuttle facility was built near Kimball.

This year in his budget speech, the governor proposed funds to rehabilitate the Missouri River Bridge at Chamberlain for $1.2 million. My proposed bill, SB 137, provided $6 million to go west from the bridge toward Presho. My bill passed the Senate 35-0, and then passed the House 66-3. Then this $6 million bill was combined with the governor's $1.2 million bill for total of $7.2 million, and it passed both houses.

Why do I say this is a real opportunity? First, one of the core line sale provisions with Burlington Northern was that the state-owned lines, like the Mitchell to Rapid City line, retain trackage rights on those core lines. This is huge as it gives us access to three major lines -- the Union Pacific, Canadian Pacific and the Canadian National, besides the BNSF. So this competition will help assure we don't become a captive shipper with unfair rates.

Secondly, the productivity in this area has grown from 13 million bushels in 1960 to 53 million bushels in 2013.

Third, rail rates on longer hauls are always better than truck rates. Thus, farmers will receive better prices. (A barge equals 576 miles per ton, per diesel gallon; rail equals 413 miles per ton, per diesel gallon; and truck equals 155 miles per ton per diesel gallon.)

Fourth, it saves wear and tear on our highways.

Fifth, steel prices are down about 25 percent, which probably will not last for long.

Sixth, this is a one-time government investment that pays off in long-term dividends; excise and use tax on the rail line reconstruction and a terminal facility will return approximately 30 percent back to state coffers the first couple years; a similar facility at Kimball also employs 22 people and pays $196,000 in property taxes.

Although these types of investments are relatively rare, it's important the Legislature always looks at opportunities that provide long-term benefits.

In my next report, I'll give a summary of the 2014 session. Thank you.