Proposed Minnesota budget would greatly increase taxes on railroads, state railroad association says

Minnesota Gov. Mark Dayton's proposed $42 billion state budget for 2016-17 would triple the taxes and assessment that railroads now pay to the state and use about half of that for homeowner property tax relief, according to the Minnesota Regional Railroads Association (MRRA).

The governor is seeking a $32.5 million-per-year assessment for the next 10 years from the four Class Is that operate in Minnesota to pay for upgrades to grade crossings at more than 100 locations along crude-by-rail routes throughout the state, and is proposing to increase property taxes on all railroads by an estimated $31.4 million per year through a change in the way rail property would be assessed, MRRA officials said in a notice sent to board members. Railroads currently pay about $38.6 million per year in property taxes.

"If enacted, the governor’s proposals would mean a nearly tripling of the taxes and assessments that Minnesota railroad operators would be required to pay to do business in this state," MRRA officials said.

The $32.5 million annual assessment would fund the development, administration and construction of crossing improvements on rail corridors used to transport crude and other selected routes, including those used to haul hazardous materials. Improvements would include upgrades to existing protection systems, crossing closures and the reconstruction of crossings to grade separations. The program would be funded through an annual assessment on the four Class Is operating in Minnesota.

"The governor believes that blocked crossings is a problem created by railroad operators and that they should be obligated to pay the costs of making improvements, regardless of whether his proposal flies in the face of precedent or federal regulations," MRRA officials said. "And, as with some other business sectors, the governor believes that railroads do not pay their fair share of taxes and should be required to pay more, again regardless of federal law to the contrary."

Dayton also recommends expanding the taxable property of railroads to include such property as rolling stock and simplifying outdated rules for taxing railroads.

"This is the opening salvo in what will be an extended 'discussion' before the Minnesota State Legislature," MRRA officials said. "The association and Class I railroad government relations officials have already begun to develop a response plan and draw in the resources we will need to challenge these initiatives."