Washington, D.C. – The Council for Citizens Against Government Waste (CCAGW) today proclaimed a big win for taxpayers after the Federal Railroad Administration (FRA) announced that Administrator Joseph H. Boardman concluded there was an “unacceptably high risk to taxpayers” and denied a $2.3 billion federal loan to the Dakota, Minnesota, and Eastern Railroad (DM&E).

“Today’s announcement marks a huge victory in the battle against wasteful spending,” CCAGW President Tom Schatz said.  “The DM&E loan coasted under the radar until activists expressed outrage over its financial, economic, and safety risks.  The FRA heard the public’s concerns and made the right decision.”

The loan would have been used to expand and improve a rail line used primarily to transport coal from Wyoming to Minnesota – a route that is already served by two railroads.  Taxpayers would be forced to foot the bill if the company were to default on the loan.

The FRA stated that Administrator Boardman “found that … there remained too high a risk concerning the railroad’s ability to repay the loan even with an appropriate combination of credit risk premiums and collateral.”  He was concerned by “DM&E’s current highly leveraged financial position; the size of the loan relative to the limited scale of existing DM&E operations; and the possibility that the railroad may not be able to ship the projected amounts of coal needed to generate enough revenue to pay back the loan.”  Boardman also questioned how DM&E would handle potential cost overruns and schedule delays.

Between February 7 and February 14, CCAGW members and supporters sent 10,258 letters to their representatives in Congress in opposition to the loan.

“The FRA’s statement mirrors the concerns raised by CCAGW,” Schatz continued.  “Rather than seeking capital from private sources, DM&E was trying to use the taxpayers as its bank.  Fortunately, the FRA derailed this sweetheart deal.”

The DM&E loan quietly moved through Congress thanks to behind-the-scenes legislative maneuvers by Sen. John Thune (R-S.D.), a former lobbyist for DM&E.  Sen. Thune was instrumental in slipping in an increase in the FRA’s loan guarantee authority from $3.5 billion to $35 billion into the 2005 Safe, Accountable, Flexible, and Efficient Transportation Equity Act, in apparent anticipation of the loan.  Sen. Thune’s actions earned him CAGW’s Porker of the Month award in November 2006.

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.