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New Bill Targets Rail Infrastructure Project Financing

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New Bill Targets Rail Infrastructure Project Financing

Two U.S. senators last week introduced bipartisan legislation aimed at helping short line railroads and passenger railroads finance capital investment projects.

Republican Senator John Thune (South Dakota) and Democrat Senator Maggie Hassan (New Hampshire) introduced the Railroad Rehabilitation and Financing Innovation Act, which aims to bolster the existing railroad rehabilitation and improvement financing (RRIF) loan program.

The bill seeks to improve the existing program through three objectives. One is to provide dedicated funding for RRIF funding costs, half of which would go towards short line railroads and the other half would be for passenger rail projects.

A second objective is to streamline the application process by making an expedited credit review process for loans and also requiring the U.S. Department of Transportation (DOT) to update applicants on the status of their application.

A third objective is to improve the program's flexibility through longer loan terms for certain rail infrastructure projects and by modifying how DOT evaluates collateral and creditworthiness.

"RRIF was created to provide stable financing to small railroads for infrastructure investment, however, short lines are often unable to afford the time and expense associated with the current RRIF application process, discouraging them from using the program," Thune said. "This legislation makes necessary updates to RRIF, so that short lines are better able to use the program as originally intended."

The American Short Line and Regional Railroad Association (ASLRRA) responded positively to the bill's introduction, saying that the changes would make the program an attractive option for long-term financing. 

The RRIF loan program "has long been a promising but underutilized and frequently frustrating program," said ASLRRA President Chuck Baker. Although the program was created more than 20 years ago, only one short line loan has been approved since 2012 because of the expense and uncertainty and time commitment involved with the application process, Baker said. 

He continued, "Short lines will especially appreciate the streamlining of the application process, including the mandating of regular updates which will improve visibility, the extension of loan terms out to 50 years which will lower annual costs and better match asset lives, increased flexibility regarding collateral requirements which is important when working with small businesses, and perhaps most importantly the authorization of funds to reduce both the direct cost of applying and also the credit risk premium charges that have frequently been a hurdle to completing successful loans."

In addition to the existing RRIF program, DOT created a pilot program called RRIF Express, which is an expedited, lower-cost loan program for short line railroads. Some of the objectives in that program are included in last week's bill, according to Baker.

Photo by Brett Sayles from Pexels.

 

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Posted-In: American Short Line and Regional Railroad Association ASLRRA DOT John Thune Maggie Hassan RRIF ExpressMarkets