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Published February 19, 2010, 11:19 AM

Rail panel closes book on ethanol loan default

PIERRE — Seven years after the Tri State Ethanol plant at Rosholt went into bankruptcy, the State Railroad Board decided Thursday to forego the remaining interest owed on a loan made to assist the project.
Board members voted 5-1 to declare the loan paid in full. The board has recovered the loan principal of $334,756 and received $11,237 in interest. There was $92,281 interest owed on the loan at the time of the 2003 bankruptcy filing.

By: Bob Mercer, Republic Capitol Bureau

PIERRE — Seven years after the Tri State Ethanol plant at Rosholt went into bankruptcy, the State Railroad Board decided Thursday to forego the remaining interest owed on a loan made to assist the project.

Board members voted 5-1 to declare the loan paid in full. The board has recovered the loan principal of $334,756 and received $11,237 in interest. There was $92,281 interest owed on the loan at the time of the 2003 bankruptcy filing.

While more than $80,000 remains owed, no additional payments are expected from U.S. Bankruptcy Court.

The loan officially was to the Northeast Roberts Regional Railroad Authority.

The authority’s articles of incorporation from 1996 don’t allow it to use the tax powers available under state law.

“We haven’t had any trouble with anybody in terms of repayment other than Tri-State Ethanol,” Bruce Lindholm, an official with the state Office of Local Transportation Programs, said.

Board member Chet Groseclose of Sioux Falls said he was ashamed that the loan had been made without ensuring the regional railroad authority had preserved its power to levy a local property tax in case of a default.

Groseclose said he had “serious reservations” about declaring the loan paid off while there was a large amount of interest still due. “We don’t really have any alternatives,” he said.

Board member Dan Baker of Rapid City cast the dissenting vote.

He said there probably are other loans outstanding which lack the necessary safety net of local taxing authority.

Lindholm agreed but said he doesn’t think there are any recent loans of that type.

“I’m pretty comfortable with the situation we’re in now,” he said.

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