House Panel Republicans Want Rail Funding Bill to Encourage Use of P3s, Loans

Republican leaders on the House Transportation Committee said Tuesday that they intend to reauthorize a rail bill this year and want the legislation to take into consideration innovative financing methods such as public-private partnerships and federal loans.

“We all need to be creative in ways to stretch federal dollars and work with our partners in the states, with communities and with the private sector,” Jeff Denham, chairman of the Transportation and Infrastructure committee’s subcommittee on railroads, pipelines and hazardous materials, said during a hearing.

Public entities are increasingly using innovative financing methods for transportation projects as bond costs are increasing and budgets are tightening, but the methods have mostly been used for highway projects, according to a briefing memo by committee staff.  Denham said at the hearing that his aim with the reauthorization of the Passenger Rail Investment and Improvement Act is to “extend that trend to passenger rail.”

Witnesses at the hearing said that private sector involvement can be valuable in rail projects.

Frank Chechile, chief executive officer of Parallel Infrastructure, described how his firm has helped railroad property owners develop revenue-generating assets on the owners’ right-of way property. The returns from these ventures are shared between Parallel and the owners, who can use them as collateral to secure capital for a project.

Panel members said state and local governments and authorities should take more advantage of the Railroad Rehabilitation and Improvement Financing (RRIF) program, which provides direct loans and loan guarantees to finance rail projects. The RRIF program has not traditionally been popular because those seeking assistance find the application process cumbersome. “[RRIF] is the one program where we have more financial capacity than applications,” Deputy U.S. Transportation Secretary John Porcari said. “And it’s a little bit frustrating for all of us that we know that we could be out there building more infrastructure.”

Porcari said he looks forward to working with Congress to figure out how to implement the RRIF program more effectively.

States and localities tend to prefer getting loans from the Transportation Infrastructure Finance and Innovation Act program because its credit risk premiums can be subsidized. But Porcari said that when TIFIA and RRIF loans are both used for a project, “the benefits are truly inspiring.”

In addition to use of P3s and federal credit programs, Porcari said that predictable public funding is necessary. President Barack Obama’s fiscal year 2014 budget requests $6.4 billion and $40 billion over the next five years for the National High-Performance Rail System program. The administration wants this program to be funded by a new rail account in a broader Transportation Trust Fund. Money for the trust fund would initially come from general fund transfers that would be offset by capping overseas contingency operations activities.

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