Dayton calls for railroad tax changes, new fee in budget to pay for safety improvements

Gov. Mark Dayton laid out changes in his budget proposal Tuesday that would make railroad companies fork over more funds to ensure Minnesota communities can handle a dramatic influx of train traffic.

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The Democratic governor proposed changing how the state taxes railroads and assessing a new fee dedicated to safety improvements. Together, those new revenue streams would raise nearly $100 million over the next two years to help the state, counties and cities tackle some of the headaches stemming from increased traffic due to growing crop yields and North Dakota's oil production.

"It's a way of asking the rail industry, as they should be asked, to contribute more of their fair share to correcting the deficiencies in the system that are being accentuated by this additional rail traffic," the governor said.

Companies like BNSF Railway have combatted wear-and-tear on their rails by pouring millions of dollars in improvements to their track networks across the Midwest, adding capacity and increasing inspections.

But Minnesota has a long to-do list of its own, such as $240 million in underpasses to alleviate congestion at train-blocked intersections and other safety measures like arm gates at railroad crossings. And Dayton said the railroad companies should pay for most, if not all, of those upgrades.

"It impacts more than the railways. It impacts whole communities," Department of Transportation Commissioner Charlie Zelle said of heavy train traffic.

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The tax change — primarily achieved by making railcars and other railroad property taxable — would put Minnesota in line with standard practices in other states, Zelle said. The four major freight railroads that run in Minnesota also would be charged an annual fee based on their track mileage.

In a statement, BNSF spokeswoman Amy McBeth said the company had not been consulted on the governor's proposals and had not yet fully reviewed them.

"Railroads already pay taxes in Minnesota and are currently treated like other commercial and industrial properties, and federal law precludes any different treatment for railroads," McBeth said.