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Twin Cities Business - Short Lines, Big Problems http://tcbmag.com/news/articles/2017/June/short-lines,-big-problems Tied Up in Hugo ROTTING TIES COULD DRIVE MAJOR EMPLOYERS TO RELOCATE OUT OF TOWN. The Minnesota Commercial is what's known as a "terminal short -line," providing connections between railroads in a major metro area. Its line from St. Paul to Hugo is a remnant of the Northern Pacific's old main line to Duluth, now a bike trail north of Hugo. According to owner John Gohmann, the bridges and abutments on the line are 100 years old, while the ties predate his railroad's lease of the line in 1990 and are beyond their usable life. Unlike the Minnesota Prairie Line [see "A Railroad Town,"], which owns its track, Gohmann leases the Hugo line from BNSF, which does not believe it can economically operate it. The Commercial is forbidden by lease to borrow against the line, says Gohmann. This means state or federal loan/tax credit programs are no help. Because Gohmann is eager to be transparent in his quest for public funding, he explains the Hugo Line generated barely $10,500 in income for the Commercial last year on revenue of $779,000, a paltry 1.3 percent return. Even if the railroad could borrow against the line, it's not clear that any bank would make the million -plus loan, or that the railroad could pay it back out of income, he says. "This is our last year of operations to Hugo unless these ties are replaced," says railroad COO Wayne Hall. Yet the line serves an industrial park there whose tenants were attracted with an inducement of rail access, according to city manager Bryan Bear. Bad ties south of Hugo along the MN Commercial "We are in agreement," says Bear, "that trains could tip over due to the state of the railbed. I'm actually surprised their `ask' is as modest as it is. A million is doing this very economically." Conversely, loss of the line will have devastating effects for employers along it, they say: IN OAKDALE, POLAR PLASTICS INC. produces plastic sheeting and wrap from pellets shipped in from the Gulf Coast. It pays employees more than $15 an hour, has 30 employees with more than 25 years of seniority, provides health insurance and paid vacation. Owner Andy Ave'Lallemant lacks a direct rail spur and has to truck plastic pellets a mile or so through the suburbs from the Commercial. If the Hugo Line went away and Polar had to truck its pellets from a distant railhead, it would be unprofitable. "Raw materials are 73 percent of my overhead," Ave'Lallemant explains. "I take 6 to 8 cents a pound penalty shipping by truck. That shipping penalty is my margin." He sees few options. "I can't relocate locally. It's too costly." IN HUGO, JL SCHWIETERS BUILDING SUPPLY INC. sells and engineers building materials for large construction projects. It is one of the 10 largK1b?p1ployers in the county, employs 500 workers, pays north of $15 an hour and some senior factory employees earn more than $60,000 a year. It brings its raw materials into Hugo by rail and came to its industrial park in 1999. 6 of 9 6/16/17, 11:35 AM