PIERRE | Lawmakers asked questions but appeared unwilling to reach a decision Wednesday on a senator’s request that legislative auditors participate in a financial review of South Dakota’s state-owned railroads.
Sen. Stace Nelson, R-Fulton, and other witnesses told the Senate Transportation Committee about financial and safety concerns they and others have regarding Dakota Southern operating the Mitchell-Rapid City and Napa-Platte lines.
The company, based in Kansas City, Mo., wasn’t directly represented at the hearing. No one was present from the state Department of Legislative Audit, either.
Nelson has filed a concurrent resolution, SCR 4, asking the Legislature to tell the state Department of Transportation to use legislative auditors in the review.
The state Railroad Board, an arm of the transportation department, decided in December to hire a New York firm to do the review.
The resolution says legislative auditors should “participate without limitation in the financial reviews of rail operators, with special emphasis on documenting revenue received from any and all sources.”
Transportation Secretary Darin Bergquist told senators Dakota Southern has been the subject of complaints for several years. Bergquist said the company holds long-term subleases through regional railroad authorities to operate the two lines.
State government owns lines in a variety of places throughout South Dakota. The Legislature approved their purchase more than 30 years ago when the Milwaukee Road went bankrupt.
Dick Huff of Oacoma told the committee “a cover-up” is under way. He and his brother, Alex Huff, sold Dakota Southern to its current owner, Mike Williams.
Since the sale, the federal government granted millions of dollars for reconstructing the MRC line from Mitchell to Chamberlain and from Chamberlain to Presho. State government, Dakota Southern and businesses along the route also invested millions of dollars. Two elevators for shipping grain from farms and ranches opened at Kimball and Kennebec and a third is planned at Presho.
Bergquist said his department has been consulting with the Department of Legislative Audit about how the consultant contract should be structured and what information should be requested from railroad companies.
"Legislative Audit has been very helpful in this process," Bergquist said.
Nelson, a former criminal investigator for U.S. armed forces, said the transportation department was directed several years ago to audit the railroad revenue.
Legislative Audit performed one review of the regional railroad authorities that have leases for state-owned lines. The local-appointed authorities in turn contract with railroad companies to run on the state lines.
“We heard no testimony about why they stopped,” Nelson said about the previous review.
Sen. Ernie Otten, R-Tea, asked Bergquist if there’s been a cover-up.
“If there is, I’m not aware of it,” Bergquist replied.
Sen. Jason Frerichs, D-Wilmot, served as the committee’s acting chairman Wednesday. None of the seven senators said a word for more than 10 seconds after he asked for a motion of some kind. Then Sen. Lance Russell, R-Hot Springs, spoke up.
“It seems like I have more questions than answers,” Russell said. “This board apparently is struggling because they have a long-term lease.”
He said one fatality in the future would mean the committee had been “remiss” if it killed Nelson’s resolution. But, Russell added, he wasn’t convinced a resolution was necessary. He eventually called for the matter to be deferred. He didn’t say how long.
Otten asked for a substitute that the resolution be killed. No one would second it.
“Am I troubled? Yes I am,” Otten said.
Sen. Alan Solano, R-Rapid City, said his concerns with Nelson’s resolution likely wouldn’t be alleviated if the matter were delayed.
“Obviously, it’s being taken very serious,” Frerichs said.
The only "no" came from Otten. No one said how long the wait might be.