State Railroad Board approves nearly $13 million loan for Mitchell soybean facility
Marcus Traxler, The Daily Republic, Mitchell, S.D.
5 min read
Nov. 20—PIERRE — The South Dakota State Railroad Board on Wednesday afternoon approved a nearly $13 million loan for railroad facilities at the High Plains Processing soybean plant south of Mitchell.
The official loan amount is for $12.6 million to be paid over 15 years at an interest rate of 2.95%. It carries a balloon payment after seven years. The seven-member Rail Board voted 6-0 to approve the terms during its regular meeting in Pierre, while board member Gregory Carmon recused himself because he's an investor in High Plains Processing.
The board's approval was never much of a question during the nearly 40-minute discussion but the board was not in agreement with HPP's request of $16 million for the loan amount, concerned about loaning away nearly half of the $35 million the board has in the state's Railroad Trust Fund. Even with the decrease in the loan size, it's still the largest loan approved by the State Railroad Board in its documented history, surpassing the previous high of $7 million.
South Dakota Secretary of Transportation Joel Jundt advised the board that is expects to have about $14 million in other requests and needs from the Railroad Trust Fund, which would have left the board with only $6 million to work with if it approved the full HPP request.
"I'm trying to help you see at least the financial end," Jundt told the board. "I would recommend that we keep some money in this account. We own state rail lines and we have seen those emergencies and floods that we then need this account to help with repairs. I would caution you to not loan out everything."
HPP whittled down its loan request over the past few months. In July, costs for its rail loop and other rail needs on the property were estimated at about $26.2 million and in August, the company and Davison County Railroad Authority put forward a request of up to $18 million.
The $500 million High Plains Processing facility broke ground in September 2023 and will be located along the BNSF line about 2 miles south of Mitchell. It's expected to open in fall 2025.
The rail specific plans call for more than 33,000 feet of new rail to be built and two turnouts to connect to the BNSF mainline. According to the loan application, HPP is estimating to produce 147 rail cars of traffic each week and will ship out 100-car unit trains once or twice a month.
Tom Kersting, the CEO of South Dakota Soybean Processors, which is the majority owner of the High Plains Processing, said the track on High Plains property will be able to hold 340 cars at once and will have a rail loop 3 1/2 times larger than the typical large-scale grain-handling facility in the state.
The costs will go to grading the land, building the track and rail loops on the property, land acquisition costs, a receiving and loadout building and connections for water, electric and natural gas facilities for the railroad. About $1 million will go toward BNSF Railway work at the property as well, as BNSF owns the line. HPP said Wednesday that it expects to start work on the rail equipment on Dec. 1.
The loan application was signed off upon by the newly formed Davison Regional Railroad Authority, which was formed earlier this year by the city of Mitchell and Davison County specifically for the plant. The railroad authorities are seen to help serve as a pass-through organization for the government funds to be handed down to businesses. The five-member board of the DRRA includes representatives of the Mitchell City Council and Davison County Commission and Mitchell Area Development Corporation CEO Mike Lauritsen, with Lauritsen representing the authority at the meeting Wednesday.
Kersting said on Wednesday that the project needs state and local support to be successful and is looking for "every incentive" they can for the project.
"We have a solid project but this will make it even better," he said of the loan application. "We need every bit of support that's out there."
He asked the board to consider an interest rate of 2%, which he said he thought was the expectation for economic development loans from the state. Jundt responded that the South Dakota Department of Transportation is trying to standardize its loans with other agencies in state government.
"We agree that the project is a worthwhile project and that's why we're providing a loan," Jundt said.
"I think it's reasonable. It's not even a competitive interest rate. It's a low interest rate," added board member Steve Scharnweber, of Pierre. "I know we will be getting funds back to build the funds back."
"$16 million would drain it down in excess of what loans we have coming," said board Chairman Jeffrey Burket, of Spearfish.
Kersting understood the concern about other potential projects but that "we're here today."
"We started out at $25 million at 2%. Now we're at $12 million at 2.95%," Kersting said of the loan terms, before the vote. "That's certainly appreciated but we had our expectations at a much higher level."
The Railroad Board did add at the end that HPP could come back and ask for another low-interest loan later if money was still available and it had a need.
The $12.6 million loan brings the amount of public incentives approved for the project to more than $40 million. The Davison County Commission approved a $21 million tax-increment financing proposal in April 2023 to pay for site work, improve power, water and natural gas utilities and a turn lane into the facility. In 2023, a reinvestment payment program was approved by the South Dakota State Board of Economic Development earlier this year for $6.6 million (not to exceed the sales and use tax on the project), which will offset upfront costs associated with the project.
