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Dayton presses railroads to pay more taxes to offset improvements

ST. PAUL - Gov. Mark Dayton wants railroads to pay significantly higher property taxes to help offset the cost of improvements throughout the state.

Dayton's plan, which is part of his larger two-year budget proposal, would generate more than $20 million a year for the state and $45 million for local governments. It would expand the taxable property of railroads to include train cars, locomotives, bridges and other structures, and update the method for determining the value of railroad property.

Officials didn't have specifics on how much railroads pay now in property taxes. The $20 million, however, would be a new revenue stream coming to the state.

Not surprisingly, railroad officials don't like it.

Local government officials throughout the state have been complaining loudly about increased train traffic and the delays for vehicles trying to cross busy tracks. State officials identified $240 million in rail crossing improvements that are needed statewide. Dayton told reporters again last week that he thinks railroads should pick up most of the tab.

"They've imposed these burdens on other taxpayers in Minnesota, as well as the risks involved with transporting flammable oil in increasing volumes through our communities, delaying crossings," Dayton said. "They have a responsibility as good corporate citizens to pay their share, and in my view that's most of the cost that they're imposing."

Much of the new tax money collected from railroads would go to cities, counties and townships along rail lines, said Minnesota Revenue Commissioner Cynthia Bauerly.

"They could either choose to provide additional property tax relief to other payers or to use those resources as they see fit to deal with the needs in their community, particularly as those needs increase by having that additional rail traffic," she said.

Railroads are pushing back.

"I don't think any of us saw a property tax being used as a lever," said Mark Wegner, president of the Minnesota Regional Railroads Association. "We understand what we're all after is safety, and we all need to work together to get it paid for. But it takes a collaboration to figure that out."

There are also questions about the legality of the proposal. It appears to be a violation of a federal law that precludes different treatment of railroads, BNSF Railway spokeswoman Amy McBeth said in a statement.

GOP House Tax Committee chair Greg Davids of Preston said Dayton's rail safety goal is laudable, but his approach is wrong. He called the proposed tax regressive, punitive and a non-starter.

"If you increase the cost to the railroads you're increasing the cost of many goods and services that will hit the poor and the lower middle class hardest," he said. "I don't think you'll see that moving forward."

Davids' counterpart in the Senate is keeping an open mind. DFLer Rod Skoe of Clearbrook, the chair of the Senate tax committee, said he wants to learn more. His panel will take a close look at the proposal later this month.

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