Will Rochester rail plan leave river cities in the dust?


(10/12/2015)

by CHRIS ROGERS

The latest plans for high-speed rail in Minnesota and the Upper Midwest would bypass Winona and other Mississippi River Valley communities in favor of Rochester.

In private discussions with top state officials this spring, a company called North American High Speed Rail Group (NAHSR) proposed the construction of an elevated high-speed rail line following Highway 52 from the Minneapolis-St. Paul (MSP) Airport area to Interstate 90 south of Rochester. According to the Minnesota Department of Transportation's (Mn/DOT) records obtained through a data request, the rail line would be situated on platforms above the ground, within the highway right-of-way. The trains would travel at 260-280 miles per hour, fast enough to deliver travelers from Rochester to the MSP Airport in 30 minutes. Ultimately, NAHSR officials have said they hope to extend the high-speed line to Chicago. If they succeed, Winona and other Mississippi River Valley communities would likely lose out on the high-speed rail development — and its potential economic benefits — they have been looking forward to.

Federal and state governments have been planning a high-speed rail line from the Twin Cities to Chicago for years. Right now, Mn/DOT's official plan is to constructed a publicly-funded high-speed rail line along the existing rail corridor on the Mississippi River's western shores, with stops in Winona, Red Wing, and La Crosse. However, the project requires buy-in from Wisconsin leaders — something that has been hard to come by lately — and it is unclear when the expensive project might receive public funding. NAHSR's proposed route has a serious advantage that might trump plans for high-speed rail in Winona: money.

Under the NAHSR's proposal, the $4 billion project would be funded entirely through private investment. NAHSR plans to raise a quarter of those funds from Chinese investors, and rely on Chinese firms with expertise in building high-speed rail lines, according to Mn/DOT documents. NAHSR CEO Joe Sperber is also one of the leaders of Liberty Minnesota Regional Center, a company that helps facilitate foreign investment and qualifies foreign investors for U.S. green cards. The company and others like it are based on a federal immigration program called EB-5 in which foreign investors receive a U.S. green card in exchange for spending at least $500,000 on American companies that produce at least 10 U.S. jobs. NAHSR business plans indicate that the firm is focused on serving the Mayo Clinic and the thousands of new employees it plans to hire as part of the multi-billion-dollar Destination Medical Center (DMC) project, which includes $455 million in state funding and $3.5 billion from the Mayo Clinic. Local officials speculated as to whether the Mayo Clinic might be an investor in NAHSR. Mayo Clinic officials did not respond to that question before the Winona Post went to press.

If NAHSR is able to pay for its own high-speed rail line to Chicago, it would likely be more politically feasible than the River Route. "It's hard to argue with people who want to fund their own rail line," Winona City Council member Michelle Alexander conceded. Alexander represents the city on the Minnesota High-Speed Rail Commission, a group that advocates for the River Route. While state and federal authorities have long planned on building high-speed rail to Chicago via the River Route, state officials indicated it may be a long time before Minnesotans are willing to help finance a public high-speed rail project. If it can fund a segment connecting Rochester and the Twin Cities, NAHSR may be able to develop the first section of a high-speed rail line headed for Chicago before the River Route gets off the ground.

In private emails in April, Sperber told Mn/DOT officials that if Mn/DOT gave him the approvals he needed, he could start breaking ground on train stations this fall. More recently, the company projected the Velos line could be up and running by 2023.

When asked if NAHSR's proposal might supplant the River Route as the interstate high-speed rail route connecting the Twin Cities to Rochester, Mn/DOT Passenger Rail Office Director Dan Krom and Communications Director Kevin Gutknecht said that they were not aware of any formal proposals to extend the Velos line to Chicago. "The River Route is the current one. It is the federally designated corridor. That's the one we've designated," he said. "If [NAHSR owners] get the leg between the Twin Cities and Rochester built and are looking to expand that; that's an issue we'll have to take up at that point." He added, "We're working with the Federal Rail Authority and our partners in other states to get high-speed rail built along the River Route." When asked if the NAHSR's plan to privately fund high-speed rail to Chicago was more feasible than publicly funded rail on the River Route, Krom said, "If there's a private network that existed out there, why would we want to duplicate that in our work?"

Sperber shared NAHSR's business plan with several Mn/DOT leaders. It includes plans to connect the Velos line to Chicago. Other business planning documents Sperber shared with Mn/DOT officials also indicate the company's interest in ultimately reaching Chicago.

Alexander said that while Rochester's growth during the Mayo Clinic's DMC project should create opportunities, it might also diminish Winona's standing in the region. NAHSR's project could play into that, she said. "I guess I have a fear that some of our rich culture might rotate to another location because they are developing it there," she stated. "You just don't want to see that a good thing for one community is a bad thing for yours, but if they're talking about moving that [high-speed rail line], I can see where there should be a concern." She said Winona should encourage its legislators to lobby hard for the River Route.

Will that make a difference? "I guess if they can find private funding and they get the land, they can do what they're going to do," Alexander said.

NAHSR does not have the land, however. Mn/DOT does.

State considers deal for airspace rights

This spring and summer, Sperber exchanged numerous emails, held meetings, and teleconferences with top state officials, including the leaders of state agencies, the commissioner of transportation, the commissioner of revenue, the assistant commissioner of management and budget, key staff from Governor Mark Dayton's office, Mn/DOT legal experts, Mn/DOT assistant commissioners and department heads, and Olmsted County officials. Sperber and state leaders discussed the details of his project and how to move it forward. In particular, Sperber asked Mn/DOT to lease the rights to the airspace above the Highway 52 right-of-way in order to develop the elevated high-speed rail line within that airspace. Airspace development refers to building things suspended in the air above other properties. Mn/DOT officials talked in detail with Sperber about this lease agreement. In June, Sperber proposed a non-binding legal document in which Mn/DOT would pledge to lease NAHSR that airspace.

So far, Mn/DOT has not made any formal deals with NAHSR. In interviews last week, officials from Mn/DOT and Governor Mark Dayton's office stated that the governor, not Mn/DOT, would make the ultimate decision on whether to lease airspace above state highways to the rail firm. "Obviously we would want to talk with the impacted communities and legislators before a decision is made," added Dayton spokesman Linden Zakula. When asked whether the governor supports the project, Zakula said, "I think it's too early to make any judgments. We're just in the fact-finding stage."

Representative Steve Drazkowski and Minnesota Senator Matt Schmit expressed a similar overall view on NAHSR: if a private company wants to spend billions building infrastructure in Minnesota, the state should listen, but a lot of safeguards would be needed to make sure taxpayers are not left holding the bag for a half-finished project or an abandoned high-speed rail line and to protect landowners along the route.

Drazkowksi proposed a bill in the house that would restrict the use of eminent domain to seize land for a private high-speed rail project and require companies like NAHSR to provide financial assurances that would pay for the project to be finished or decommissioned in case the business failed. Drazkowski also said he was concerned that Mn/DOT's negotiations to offer NAHSR exclusive development rights were only made public as a result of investigative newspaper reports. "If there is going to be high-speed rail done, I think the private approach is the one most people want to see, and we don't want to have taxpayers on the hook for another boondoggle. So those parts [of NAHSR's proposal] are good but the way this proposal has been handled is very troubling as we look to trust our government to be forthright."

Drazkowski also raised concerns about the role of Chinese investment in the project. "Some people might look at it and say it's nice because somebody else is paying for it," he said. "The other thing is that when you pay for it, you control it. Do we want the Chinese government controlling Highway 52? I would think we don't." According to Mn/DOT documents, the company is seeking investment from Chinese individuals, not the Chinese government.

Mn/DOT negotiations to offer NAHSR exclusive development rights above Highway 52 is not a transparency issue, Schmit said. All that agreement would commit Mn/DOT to doing is not selling the airspace to another firm while NAHSR goes through an environmental impact statement (EIS), he explained. That environmental review is where the public would be involved in vetting the project and no rail lines would be built before the project went through that public approval process, he said.

Is this feasible?

If people want to spend billions of dollars in the state of Minnesota and create scores of jobs, Schmit and Drazkowski said they were all ears. But, they said, is this project really feasible?

Making sure the project is not doomed for failure is part of Mn/DOT criterion for supporting the project, as well.

In a risk analysis NAHSR shared with Mn/DOT, the company highlighted numerous potential problems. Some were financial, such as concerns that estimated costs might be too low, that the company might be penalized in an audit for rewarding "friends of the deal" with subsequent real estate developments, or that prices for consumers would be too high. "How many commuters are going to spend $15,000 a year to ride this debacle?" Others regarded real estate: what if "stingy property owners" along the route do not want to sell their land? Some were political: "HSR [high-speed rail] is seen as a scheme by which the average taxpayer has to pay for the convenience of a small number of privileged and wealthy city dwellers, give contracts to a small number of well-connected corporations, and pour money into the hand of unions and union workers. HSR represents political corruption, crony capitalism, costs to taxpayers," company representatives wrote.

"I don't know if it's that important to get from Rochester to the airport in a half-hour to invest $4 billion," former Winona Mayor and member of the Minnesota High Speed Rail COmmission Jerry Miller said. "I guess that's their call."

"I'm not somebody to get in the way of private developers if they're able to make something work with the taxpayers being protected," Drazkowski said. "However, I have a hard time believing that can happen." He added, "[High-speed rail] hasn't succeeded anywhere else in the country without massive, massive amounts of public subsidy."

"We'd be foolish if we didn't at least take seriously a firm that came to the state of Minnesota and said they wanted to invest billions of dollars in our state, create jobs, and potentially change our state for the better … but do they have the resources to get this done?" Schmit said, adding that if NAHSR is serious, the first thing it will do is start an EIS.

 

The Winona Post made multiple interview requests with NAHSR officials for this story. They were not available for comment before press time.

 

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