WASHINGTON — Transportation stakeholders are urging increased support from the Department of Transportation for state and local governments and railroads to take advantage of a rail financing program that provides low-interest federal loans and credit for infrastructure projects and debt refinancing.
Under the Railroad Rehabilitation and Improvement Financing Program established in 1998, the Federal Railroad Administration provides up to $35 billion in direct loans at interest rates roughly equal to the 30-year Treasury rate, as well as loan guarantees.
The loans can be used to refinance outstanding debt that results from infrastructure projects, which the program also helps to finance at up to the total cost.
State and local governments, government-sponsored authorities, and corporations, railroads, and others can participate in the program.
But since 2002, only $787 million of loans have been extended to 19 railroads.
“You can get a better deal through RRIF — interest rates are about 3.84% — than you can get through the private market right now, and I’m hopeful that more railroads, shippers, and states will use the program to finance their infrastructure investments,” said House Transportation and Infrastructure Committee chairman James L. Oberstar, D-Minn., during a subcommittee hearing Wednesday.
“Secretary [Ray] LaHood should be encouraging increased utilization of the RRIF program to help freight railroads, states, and local governments meet their infrastructure needs despite the current economic crisis,” he said.
Oberstar cited the 2008 voter-approved $10 billion bond measure to build a high-speed rail line between northern and southern California as a potential candidate for the program.
“The California High Speed Rail Authority has halted work on the project due to the state’s frozen infrastructure fund,” Oberstar said. “In addition, the bond market is so poor that the state is not selling bonds, which would generate money to build the system.”
The program is available to passenger and freight rail, and is unrelated to the high-speed rail initiative proposed by the Obama administration, which would provide funding for development of high-speed rail corridors.
The hearing was partly aimed at the administration, asking for none of the restrictions and credit requirements that the White House Office of Management and Budget has attempted to impose on the program in the past.
Oberstar railed against a failed move last year by the OMB to require large equity contributions from applicants, cap loans at $500 million, and require a credit rating for financial assistance totaling more than $250 million.
In addition, other speakers at the House subcommittee hearing urged more clarity in the application process and certain other requirements such as a credit risk premium.
Dale Zehner, chief executive officer of Virginia Railway Express, which received a $72.5 million loan through the program in 2007, recommended “explicitly allowing alternatives to the credit risk premium, such as the use of bond insurance.”
Zehner added that the program’s flexibility on repayment compared with “standard tax-exempt debt issuance” was the “single greatest reason” the railway applied for RRIF credit.
“What can we do mechanically to make it a more attractive facility, particularly at this time?” asked Patrick B. Simmons, director of the rail division at the North Carolina Department of Transportation, during an interview yesterday. “If there’s a way to not just continue the program but expand it, increase participation, it would help leverage investments.”