The party in charge of Congress has changed, but the sinking sensation you get when your tax dollars are thrown down a rathole is exactly the same. The latest taxpayer screw job is taking place in South Dakota at the behest of Republican John Thune,
Here’s Freedom Works on the DM&E boondoggle:
“Currently the Federal Railroad Administration (FRA) is considering a $2.3 billion loan to ‘Dakota Minnesota and Eastern (DM&E) Railroad’ through the Railroad Rehabilitation and Improvement Financing Program.
This would represent the largest federal loan in history and put federal funds into competition with private capital. Furthermore, sweetheart provisions of the loan such as delayed repayment are suspect. The proposed loan is indicative of the significant expansion of the federal government’s role in the rail industry that was highlighted by an earmark in the 2005 Transportation Bill that expanded the FRA’s loan authority to $35 billion under this program–a tenfold increase.”
Now the, “largest federal loan in history and put federal funds into competition with private capital,” line probably jumped out at you, but you haven’t heard anything yet. Wait until you see some of the details from this September, 2006 column over at Townhall:
“What makes the DM&E expansion so special, and worthy of such a huge loan? Absolutely nothing. Two railroads already service the coalfields. DM&E itself is among the worst-run railroads in the country, with the worst safety record of the major railroads. It is financially overextended already, and if the feds approve this loan, they will have a debt-to-equity ratio almost twice the industry average.
In fact, after years of seeking private financing for the project, and getting no takers, DM&E gave up and turned to the federal government because no private investors would touch their project.
So again, what makes DM&E so special? Well, it turns out that they are politically well-connected. Sen. John Thune, who turned Senate Minority Leader Tom Daschle out of office in 2004, made a living lobbying for DM&E before running for Senate. Thune, along with Sen. Trent Lott, managed to earmark money for the loan in the 2005 Transportation Bill.
To add insult to injury, taxpayers aren’t even allowed to access the application for the loan, and DM&E is a privately-held company that withholds its financial records from scrutiny. There is almost no publicly-available information about who owns the company and how likely it is to be able to repay the loan. Independent studies – done with admittedly too little information because the real numbers are withheld by the company – make it clear that DM&E is unlikely to be able to make its loan payments.”
So we have a poorly run railroad going to their former lobbyist, John Thune, and getting him to use taxpayer money to give them a loan that no one in private industry would ever make. But, it gets worse, much worse. Did you notice that last line?
“Independent studies – done with admittedly too little information because the real numbers are withheld by the company – make it clear that DM&E is unlikely to be able to make its loan payments.”
Tell you what: you take a quick look at the numbers and decide how likely they are to ever pay this loan back:
DM&E currently makes less than $200 million in annual revenue; the loan repayments will start at $246 million in six years, and that’s on top of a $15 million annual payment for their current $233 million loan.
Deals like this one help you understand how taxpayers get taken advantage of over and over and over again in Washington. Look at what you have: A company with juice in South Dakota and a Senator’s ear in Washington. They get the Senator to get them an outrageous loan that they couldn’t possibly get from the private sector. The Senator moves on it, the money rolls in, and then, even if the whole enterprise goes belly-up, who loses?
Not the company. Their keep getting paychecks for another few years, courtesy of the taxpayers. Not the Senator because back home, he’ll get credit for bringing home pork and helping to create jobs in South Dakota. Now the taxpayers? We’re the big losers here because we’ll be out 2.3 billion dollars of our hard earned money. But, how many people will even realize it, much less do anything about it? Few, if any. That’s why the taxpayers always get the short end of the stick in DC.
That being said, there is some good news: this loan HAS NOT been approved yet and if the choo-choo to nowhere gets enough attention, it may scuttle the whole thing. So, cross your fingers and hope the word gets out.