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11/13/2008



Rail News: Rail Industry Trends

USDOT's proposed RRIF rule changes a detriment to well-working program, congressmen say


House Transportation and Infrastructure Committee Chairman James Oberstar (D-Minn.), and Railroad, Pipelines and Hazardous Materials Subcommittee Chairman Corrine Brown (D-Fla.) recently sent a letter to the U.S. Department of Transportation (USDOT) opposing the agency's proposed rule changes for the Railroad Rehabilitation and Improvement Financing (RRIF) program and urging the transportation secretary to suspend action on the rulemaking.

The USDOT is considering several preconditions for RRIF loans, such as requiring an equity contribution of between 20 percent and 30 percent; capping the cumulative outstanding balance of loans and loan guarantees to a single borrower; and stipulating that many applicants obtain a credit rating or assessment prior to receiving financial assistance, according to the American Short Line and Regional Railroad Association's (ASLRRA) latest "Views and News" newsletter.

Under the RRIF program, the Federal Railroad Administration (FRA) is authorized to provide direct loans and loan guarantees up to $35 billion — with $7 billion set aside for regionals and short lines - to eligible applicants to acquire, improve or rehabilitate intermodal or rail equipment or facilities; refinance outstanding debt incurred for those purposes; or develop or establish new intermodal or railroad facilities. Eligible borrowers include railroads, state and local governments, government-sponsored authorities and corporations, joint ventures that include at least one railroad, and limited-option freight shippers who plan to construct a new rail connection.

The proposed rule changes would make it harder for railroads and other applicants to qualify for a RRIF loan, and provide program opponents "additional tools with which to reject an application," ASLRRA officials said in the newsletter.

The proposed rulemaking is the Bush administration's latest attempt to "reform" a system that's working well because the RRIF program's processes already require a thorough examination of an applicant's business and financial performance, Oberstar and Brown wrote in their letter.

"According to the FRA, no recipients of the 21 RRIF loans or loan guarantees that have been issued to date have defaulted on any loans or are delinquent in making payments," they wrote. "In fact, recipients have repaid two loans in full."


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