ASLRRA Comments on RRFIA

Written by Andrew Corselli
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“We applaud Chairman DeFazio’s release of a five-year surface transportation reauthorization bill," said Chuck Baker, President, ASLRRA.

U.S. Senators John Thune (R-S.D.), a member of the Senate Committee on Commerce, Science and Transportation, and Maggie Hassan (D-N.H.) recently introduced the Railroad Rehabilitation and Financing Innovation Act (RRFIA).

The legislation aims to improve the Railroad Rehabilitation and Improvement Financing (RRIF) loan program by providing dedicated funding for RRIF financing costs, streamlining the application process and extending loan terms for certain assets.

The RRFIA would:

  • Streamline the application process: Building on the work done by the Department of Transportation (DOT) in creating the RRIF Express pilot program, the bill establishes an expedited credit review process for loans meeting certain financial and operational criteria. The bill also reduces applicant uncertainty by requiring DOT to provide applicants with regular updates on the status of their application.
  • Improve program flexibility: The bill makes several changes to improve program flexibility, including longer loan terms for certain rail infrastructure projects and increased flexibility for DOT to evaluate collateral and creditworthiness.
  • Provide dedicated funding for RRIF financing costs: Similar to the Transportation Infrastructure Finance and Innovation Act loan program, the legislation authorizes funding to cover financing costs associated with providing RRIF loans. Half of the funding is dedicated solely to short line railroads, while the remainder is reserved for passenger rail projects.

“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,” said Thune. “This legislation makes necessary updates to RRIF, so that short lines are better able to use the program as originally intended.”

“As communities consider steps to promote economic recovery from the COVID-19 pandemic, this bipartisan legislation looks ahead to strengthen funding opportunities for passenger rail,” said Hassan. “Passenger rail can provide a significant economic boost to Granite State communities, and as Congress considers future transportation and infrastructure packages, it should prioritize passenger rail efforts.”

Chuck Baker, President of the American Short Line and Regional Railroad Association (ASLRRA), issued the following comment:

“The Railroad Rehabilitation and Improvement Financing (RRIF) loan program has long been a promising but underutilized and frequently frustrating program. RRIF was created more than 20 years ago to provide long-term low-cost financing to short line railroads to allow them to make critical, major infrastructure investments to serve our country. In reality the time, uncertainty and expense of applying has made it largely unusable for short line railroads—in fact, only one short line loan has been approved since 2012.

“That is why we welcome this legislation from Senators Thune and Hassan. Senator Thune is a former state Rail Director in South Dakota, a former Chairman of the Senate Commerce Committee, and possesses a deep understanding of the benefits that short line railroads can provide to agricultural, energy, industrial and manufacturing shippers throughout South Dakota and the entire country.

“This legislation would certainly improve the RRIF program and make it more viable for short lines. It addresses several important issues that have been hurdles to participation in the RRIF program for our short line members, including some solutions that are being piloted in the RRIF Express program. 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. This last change would bring the RRIF program more in line with the comparatively more successful TIFIA program.

“With these changes and a commitment from the USDOT to make the program work, RRIF loans can be an attractive long-term financing option for short line railroads, and these changes will enable more short line railroads to bring qualified, necessary projects forward that will improve efficiency and safety, and enhance freight rail service for thousands of shippers across the country.

“In these challenging times, short lines are honored to be playing a key role every day in keeping America’s supply chain moving. However, the sharp economic contraction underway is negatively impacting short line customers, and thus short lines too. We are eager to participate in an economic recovery, and optimistic that this bill could make the RRIF program a viable option for short lines to use as a tool for long-term infrastructure financing.

“Please contact me with any questions.”

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