Walz asks Congress to investigate proposed DM&E loan

In a letter released today but dated Dec. 11, Rep.-elect Tim Walz (MN) and Rep. Carolyn B. Maloney (NY) have asked the House Committee on Government Reform to look into the proposed taxpayer-subsidized $2.3 billion loan for the DM&E Railroad.

The proposed loan — the largest in U.S. history to a private company — was inserted into last year's Transportation Bill at the last minute and never debated in Congress.

Though the Transportation Bill was signed into law in August of 2005 and dubbed by the Washington Post a prime example of "the power of pork," and despite concerted opposition to the loan from taxpayer groups, community organizations, environmental groups and the Mayo Clinic, this is the first request in Congress for an investigation.

The text of the letter is as follows:

House Committee on Government Reform
C/O 2204 Rayburn House Building
Washington, D.C. 20515

Dear Mr. Chairman:

We are writing to you about a pending taxpayer-financed loan, the largest ever by the federal government to a private company and one of the worst examples that we have seen of government waste, with our hope that you will decide to investigate further as you prepare to assume the Chairman's Gavel of the House Committee on Government Reform. The $2.3 billion loan application package in question is being sought by the Dakota, Minnesota & Eastern Railroad (DM&E) to publicly fund the construction of a coal rail line into the Powder River Basin and a total re-building of DM&E's infrastructure. The loan is currently pending before the Federal Railroad Administration (FRA).

Aside from the issue of whether at a time of squeezed national priorities this loan warrants such a large expenditure of taxpayer monies, there are a series of additional concerns we believe deserve oversight:

1. Based on a number of critical evaluations by third parties, the company appears to be a poor credit risk and the project appears unlikely to be able to cover its debt service. It is fair to ask: Will the taxpayers end up footing the bill for default by a private company whose shareholders are not known publicly?

2. The government's own statistics indicate that the DM&E is one of only two U.S. railroads under a formal FRA Safety Compliance Agreement, and has one of the worst safety records -- if not the worst safety record -- in the nation. This concern is magnified by the fact that the DM&E plans to run hazardous materials trains at high speeds through the heart of downtown Rochester, within a few hundred feet of the Mayo Clinic, whose large and vulnerable patient population would be virtually impossible to evacuate in the event of a hazardous materials spill.

3. The FRA is proposing to adopt an almost 5-year-old environmental impact analysis, completed by a different agency, which does not take into account DM&E's acquisition of an additional 1,100 miles of rail line, all in apparent violation of the FRA's own National Environmental Policy Act procedures.

4. The public knows very little about the DM&E, its ownership, and this application, given that they are being asked to support this railroad with $2.3 billion in taxpayer funds. Much more information needs to be made public about the ownership and structure of this business. The question needs to be asked: If the U.S. taxpayers make the loan, will it simply benefit the shareholders and management of the railroad, who can then turn around and sell it as soon as they obtain the loan money?

5. There are potential ethical implications. As we understand it, a U.S. Senator in his first year in office took public credit for the legislative provisions that made this recordbreaking loan application possible, but in the preceding two years he was paid $220,000 as a lobbyist for the DM&E, including $160,000 in the year he was running for the Senate. In fact, the Senator's lobbying termination report was filed during the same year he pushed the amendments that the DM&E in its public release claimed helped the Railroad. What kind of signal does this kind of reverse revolving door action send?

Therefore, we respectfully request that you consider sending a letter to the Secretary of Transportation to alert the Department and the FRA that the incoming Committee leadership believes that this record-breaking loan warrants careful congressional oversight. Additionally, the Secretary should provide to you the full set of documents and information concerning this loan so that these issues can be examined in the full light of the public that is being asked to bankroll this loan.

Thank you for your consideration of our request.

Sincerely,

Carolyn B. Maloney
Member of Congress

Tim Walz
Member-elect of Congress