Railroad Rehabilitation Improvement Finance Program

$3.5 Billion Railroad Rehabilitation & Improvement Financing Program U.S. Secretary of Transportation Rodney E. Slater today announced a direct loan and loan guarantee program for railroads that will provide up to $3.5 billion in loans, including $1 billion for projects benefiting shortline and regional railroads. "The funding provided under this program illustrates once again our commitment to the ideals of  TEA-21 such as improving safety, protecting the environment and promoting economic growth." According to the U.S. Department of Transportations Federal Railroad Administration (FRA), the Railroad Rehabilitation and Improvement Financing Program (RRIF) program will provide funding for small railroads to accommodate 286,000-pound cars, for highway-rail grade crossing elimination projects and for other railroad infrastructure improvements. Eligible projects include: (1) acquisition, improvement or rehabilitation of intermodal or rail equipment or facilities (including tracks, components of tracks, bridges, yards, buildings, and shops), (2) refinancing outstanding debt incurred for these purposes, or (3) development or establishment of new intermodal or railroad facilities. The aggregate unpaid principal amounts of direct loans and loan guarantees made under this program cannot exceed $3.5 billion at any one time and not less than $1 billion is to be available solely for projects benefiting freight railroads other than Class I carriers. (note to: CKR - this means you have to actually have to use the money to improve the railroad. - DepotNews) The program will enable small railroads to make track improvements to help ensure their continued viability. The RRIF program was authorized by TEA-21 (Transportation Equity Act for the 21st Century), which was signed into law by President Clinton in June 1998. RRIF funding may be used to acquire, improve, or rehabilitate intermodal or rail equipment or facilities, including track, components of track, bridges, yards, buildings and shops; to refinance outstanding debt incurred for the previous purposes; and to develop or establish new intermodal or railroad facilities. "This innovative financing program will help preserve and enhance rail or intermodal service to small communities and rural areas around the country," said FRA Administrator Jolene M. Molitoris. "RRIF will also preserve the environment by funding infrastructure improvements that ensure the continuation of energy efficient rail-freight service." Payment for the risk of the loan will be through the credit risk premium, which is a payment to the FRA by the applicants and/or infrastructure partners. It should be noted, that this 'credit risk premium' is also the biggest barrier in getting monies.  Although several Congressional Representatives have initially argued that these premiums should be discontinued, thus far no legislation has been passed.-DepotNews  The credit risk premium must cover the estimated long-term cost to the federal government of the loan or loan guarantee, taking into consideration potential defaults, recoveries, delinquencies, penalties, fees and prepayments. The direct loans or loan guarantees can be provided for a maximum term of up to 25 years.