Watco sells Mitchell-Rapid City rail authority on a bright future under its ownership

·6 min read

Jun. 25—OACOMA — The new owners of the railroad that runs from Mitchell to Rapid City say they're eager to grow the strength of the line in any way possible.

Steve Coomes, Watco's senior vice president of rail operations, said during the Mitchell-Rapid City Authority's annual meeting on Thursday that the Kansas-based company that purchased the rail line for $13 million from the state of South Dakota last month is not content to maintain the line's status quo. He also said he is excited about the MRC's role in the future of helping facilitate growth on the line, which has been rebranded as Ringneck and Western Railroad.

"We are not a company that is here to buy this and set it down," said Coomes, as he introduced other Watco and Ringneck and Western leaders. "If we're still doing 12,000 (rail) cars a year five years from now, this whole row of people sitting here will have failed."

The meeting was held at Cedar Shore Resort in Oacoma.

Coomes also addressed one of the main sticking points in recent weeks about the MRC Authority and its liability that participating county taxpayers would have to pay off debts if the railroad operator fails. Watco took on the outstanding debts that still need to be paid over coming years, including MRC's payback of a FEMA flood repair loan, which has payments of about $13,000 a year.

In the future, Coomes said he couldn't foresee a situation where counties would be liable for funding on a project that Watco would want to take on. And if that was the case, he said Watco wants to write that out of any potential deal.

"We're not expecting any county to hold our liability," Coomes said.

Lyman leaves, bringing MRC member count to four

Nevertheless, the MRC Authority lost another county on Thursday, with Lyman County now departing. That leaves the authority with four member counties — Aurora, Brule, Davison and Jones — as Lyman was the first county with active railroad service on the line to leave.

Zane Reis, Lyman County's representative on the MRC Authority and a Lyman County Commissioner, said the commission felt it was a good time to get out of the authority, voting on Tuesday to leave.

When he was questioned by Jack Dokken, the South Dakota Department of Transportation's Air, Rail and Transit Program Manager about whether Lyman County had consulted with the two major shippers using the line in the county — Agtegra and Dakota Mill and Grain — about leaving, Reis said they hadn't.

The rest of the MRC Board wasn't pleased but didn't vote against the wishes of Lyman County's commission.

"It disappoints me to see that Lyman County wants out. It's one of the counties where this is running active and it's a big deal when we're working together," said MRC Authority Board Chairman Brad Carson, of Chamberlain.

Monte Anker, the board's vice chairman from Murdo, noted that his home Jones County sends much of its grain to Lyman County to then be shipped out, as do part of nearby Jackson and Mellette counties.

"The counties haven't had to put a dime into it," Anker said, citing the MRC's creation in 1993, "Sometimes you're working a little big on faith but it's worked out for many years."

Past owners of the line, brothers Alex and Dick Huff, of Oacoma, have been meeting with the county commissions in the MRC counties — including Lyman County on May 25 — warning them that taxpayers could be liable for any debts if Watco fails, and advising them to leave the authority. Watco and the state of South Dakota want the MRC to remain because rail authorities are needed to help facilitate state and federal grants for future improvements and economic development.

Lyman County has arguably benefitted from the rail improvements more than any other county in the state. The MRC and the state of South Dakota received two federal grants totaling about $29 million to improve the line from Chamberlain to Presho to connect to Mitchell and the improved rail terminals from Agtegra in Kennebec and Dakota Mill and Grain in Presho have followed in the last five years.

An SDDOT grant application from Lyman County in 2019 for road improvements near Presho noted that the MRC Line has helped spur $115 million in new grain facilities, fertilizer storage and agronomy centers and created up to 80 jobs and improved area farmers' basis on grains by 20 cents per bushel on average.

The municipalities and county government in Lyman County could create a rail authority of their own if they wanted to fund a future rail project, but the county is now landlocked on both sides by MRC participants, meaning the MRC could complicate a Lyman County-focused project if it didn't want to participate.

"It seems unlikely that the (MRC) board would approve something for another county," Carson said.

A projection of the MRC's income and cash flow in future years was also presented on Thursday. The authority expects to have about $260,000 remaining in cash on hand when 2021 comes to an end. From 2022 and into the near future, the MRC won't have any major sources of revenue, with only a couple of hundred dollars expected to come in from bank account interest, with the authority expected to lose about $7,700 per year. At that pace, the MRC expects to have enough cash to cover the next three decades of operations, only paying for its bookkeeping, attorney and insurance costs. Going forward, the MRC authority said it will likely only have an annual meeting each year in June in Mitchell to try to cut down on costs.

Dokken spoke about the MRC, saying there's an exciting future for it because one of the "premier short-line companies in the world bought it."

"There are exciting things happening on the railroad and this is just the beginning," Dokken said. "Quite frankly, public ownership stifled development on the line."

As for the railroad's new owners, Coomes made a hard pitch for his boss at Watco, CEO Rick Webb. He said the company has a very solid foundation and is a growing company, one that went from doing $400 million in business a few years ago to $1 billion now. He said Webb and his family retain 98% ownership.

"If there is business out here that we can get going and has been stifled in the past, let's knock the cobwebs off it and talk about it because I want to help make it happen," Coomes said.

Speed limit to increase along rail line

Watco, the new owner of the newly named Ringneck and Western Railroad, said this week that they're upping the speed limit for trains on the line between Mitchell and Presho. The limit will go from 10 mph to 25 mph, effective July 1.

The company said improvements along the track will allow for the faster speeds and that drivers and landowners in the area should be aware of the change in speeds.

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