Repairs underway on rail line at Hugo industrial park

Like many city-backed business parks around Minnesota, the Bald Eagle Industrial Park in Hugo is served by a freight rail spur, giving it a major advantage in the competition for manufacturing companies who list access to rail as a "must-have."

With cities and towns across the state touting local business parks to spark economic development, such rail links are a key selling point. For instance, the one serving the Bald Eagle park has been vital for occupants such as JL Schwieters Construction Inc., Loadmaster Lubricants and National Recycling Inc.

But in 2015 it was in danger of shutting down. Its operator, Minnesota Commercial Railway, faced a major bill to upgrade the deteriorating tracks — a sum the independent hauler could not pay for based on the modest revenue the track generated.

It's a common story around Minnesota, state transportation officials said: Some "short line" railroads serving small-town and suburban business parks aren't able to afford the continuing investments in track and equipment needed to stay competitive. As a result, manufacturers who could be using less-costly and energy-efficient rail transport are instead turning to trucking.

Minnesota has 14 small "Class III" railroads, and those serving low-volume markets are struggling financially, according to the state's 2015 Rail Plan, which notes that "it is apparent that some short lines operating in Minnesota and elsewhere are not meeting critical-volume thresholds, and services and investment in track and equipment are declining."

Meanwhile, business was booming for Schwieters Construction, so much so that president and owner John Schwieters wanted to add a new manufacturing facility to keep up with the soaring demand for his company's services of supplying preassembled wall and floor panels and trusses to Twin Cities-area homebuilders and commercial developers.

"We have daily shipments of milled lumber from the Pacific Northwest which are only economically viable by rail," he said this week. "We wanted to expand in Hugo, but with the condition of the rail line, we looked at possible alternative locations all the way down to Rochester. What we found was that there weren't any places available anywhere with the combination of rail access and outdoor storage we needed."

After more than two years of pushing their cause at the Capitol, the effort eventually earned bipartisan support and paid off in a $1.5 million bonding appropriation. The rehab project, now underway and expected to be completed later this summer, includes replacing more than 7,500 rotting ties and the installation of dozens of carloads of new rock ballast. Without the upgrades, the tracks were too unstable to reliably carry heavier cars.

With the line now under repair, Schwieters Construction this month officially kicked off its expansion plans. The company secured city approvals this spring for a new, 144,000-square-foot manufacturing facility located just across the street from its current headquarters building.

"We're at 250 employees right now and I expect that we're going to add 100 jobs here at the shop," John Schwieters said. "That will eventually translate into more jobs out in the field, also. We have 55 people working in the plant now, and this expansion will allow us to triple that number."

With the Twin Cities construction market robust and demand for preassembled walls and floors booming, Schwieters said the plans are to run two night shifts to keep up with the orders.

"I expect this current market to last for awhile due to the demand from millennials who have put off homebuying but who are now starting families," he said.