State accepts proposal to sell Mitchell-Rapid City rail line
PIERRE — The South Dakota State Railroad Board accepted a proposal Wednesday for possible acquisition of the state-owned Mitchell to Rapid City Railroad Line.
Watco Companies, a Kansas-based privately-held company that owns more than 40 short-line railroads around North America, is in position to make the purchase, the South Dakota Department of Transportation said in a press release Wednesday.
A final agreement is subject to approval this winter, officials said.
“The proposal from Watco is very encouraging and shows that the MRC line continues to be a great asset for the private sector to invest in.” said SDDOT Secretary Darin Bergquist in a statement. “The board’s acceptance of the proposal today will allow the department to enter into negotiations with Watco for finalizing the terms of the purchase agreement.”
A specific purchase price was not disclosed in the state's announcement but said that the accepted proposal is double Watco's original purchase price offer. In August, the company offered $13 million for the line, sidings, property along the rail line and any property currently leased by the state to a third party.
Watco had also vowed to make at least $6 million in improvements over the first three years of a maintenence plan. That plan included new relay ties, ballast, and twice-a-year tamping.
The line has historically stretched 285 miles from Mitchell to Rapid City. Currently, 190 miles of that is considered active, going from Mitchell to Kadoka. Currently, the line is leased to the locally operated Mitchell-Rapid City Regional Railroad Authority through 2031. Dakota Southern Railway subleases the rail line.
Extensive upgrades have been made in the last decade, including nearly $30 million in upgrades for a 41-mile stretch from Chamberlain to Presho, bolstered by $12 million in federal grant money. Another 61 miles from Mitchell to Rapid City was upgraded for $29 million in 2010, with $16 million in federal grant money.
The SDDOT's announcement the continued maintenance and upgrades would help foster said additional capital investments into the line by placing it back in private hands.
If successful, the MRC line would be the second state-owned line to be sold in the last year. In June 2019, the South Dakota State Rail Board authorized receiving proposals for all state-owned rail assets. Six of the seven proposals were rejected, with the lone exception being eventually accepting LG Everist's offer to purchase the
The proposal stems from action the Board took in June 2019 when the Board authorized the Department to prepare packages for receiving proposals for all state-owned railroad assets. The results of that effort lead to rejection of six proposals but approval of a proposal from LG Everist, leading to continued negotiations on the acquisition of the Sioux Valley line located near Canton. In August, the State Rail Board accepted a $10 million offer for the Sioux Valley line. South Dakota acquired the railroad lines after the 1980 Milwaukee Road embargo, which resulted in bankruptcy filing and possible abandonment of the lines.