Railroad development typically entails significant upfront capital investments. The time to recover returns can be many decades. This can make it difficult to marshal financing, particularly for smaller railroads or public entities. The Railroad Rehabilitation & Improvement Financing (RRIF) loan program can be an attractive option to finance a wide range of rail investments.

The Program and Eligibility

RRIF was established by Congress in 1998 to help support development of the US rail system. The program authorizes the U.S. Department of Transportation to provide direct loans and loan guarantees out of a $35 billion pool of revolving credit. To date, over $5 billion has been provided through 36 loans, ranging in size from tens of thousands of dollars up to $2.5 billion. RRIF has been successfully combined with loans from the Transportation Infrastructure Finance and Innovation (TIFIA) program, and many other types of public and private debt and equity financing.

 

OrganizationBorrowerModeYearAmt. ($ millions)
Amtrak Public Passenger 2016 $2,450.0
Arkansas and Missouri Railroad Co. Private Freight 2015 $6.8
New York MTA Public Passenger 2015 $967.1
Alameda Corridor Transportation Authority Public Freight 2012 $83.7
Kansas City Southern Railway Company Private Freight 2012 $56.6
NW Pacific Railroad Company/North Coast RR Authority PPP Freight 2011 $3.2
Amtrak Public Passenger 2011 $562.9
C&J Railroad Private Freight 2011 $0.056
Denver Union Station Project Authority Public Passenger 2010 $155.0
Great Lakes Central Railroad Private Freight 2010 $17.0
Georgia & Florida Railways Private Freight 2009 $8.1
Permian Basin Railways, Inc Private Freight 2009 $64.4
Iowa Interstate Railroad Private Freight 2008 $31.0
Nashville and Eastern Railroad Private Freight 2007 $4.0
Nashville and Eastern Railroad Private Freight 2007 $0.6
Columbia Basin Railroad Private Freight 2007 $3.0
Great Western Railway Private Freight 2007 $4.0
Virginia Railway Express Public Passenger 2007 $72.5
R.J. Corman Railway Private Freight 2007 $11.8
R.J. Corman Railway Private Freight 2007 $47.1
Dakota, Minnesota & Eastern Railroad Private Freight 2007 $48.0
Iowa Northern Railroad Private Freight 2006 $25.5
Wheeling & Lake Erie Railway Private Freight 2006 $14.0
Iowa Interstate Railroad Private Freight 2006 $9.35
Great Smoky Mountains Railroad Private Freight 2005 $7.5
Riverport Railroad Private Freight 2005 $5.5
The Montreal, Maine & Atlantic Railway Private Freight 2005 $34.0
Tex-Mex Railroad Private Freight 2005 $50.0
Iowa Interstate Railroad Private Freight 2005 $32.7
Stillwater Central Railroad Private Freight 2004 $4.6
Wheeling & Lake Erie Railway Private Freight 2004 $25.0
Arkansas & Missouri Railroad Private Freight 2003 $11.0
Nashville and Western Railroad Private Freight 2003 $2.3
Dakota, Minnesota & Eastern Railroad Private Freight 2003 $233.0
Amtrak Public Passenger 2002 $100.0
Mount Hood Railroad Private Freight 2002 $2.1

RRIF direct loans may fund up to 100% of a railroad project, with repayment periods of up to 35 years, at interest rates equal to those for the nearest equivalent term US Treasury securities. Deferrals of up to five years after project completion are possible. RRIF loans may be used to:

  • Acquire, improve, or rehabilitate intermodal, rail freight or passenger equipment or facilities, including track, bridges, yards, buildings, stations, maintenance shops, locomotives and rolling stock;
  • Develop or establish new intermodal or railroad facilities (such as terminals);
  • Refinance outstanding debt (including capital leases) incurred for these eligible purposes;
  • Finance eligible transit-oriented development (TOD) investments (for a limited application period through 2019).

RRIF may not be used for operating expenses. RRIF is generally used for new capital expenditures but past loans have included significant refinancing components.

Eligible applicants for RRIF loans include: railroads; state and local governments; government sponsored authorities or corporations; and a group of two or more entities (which may include private companies) at least one of which is a railroad, participating in a joint venture. Any private freight shipper who is “captive” to a single railroad is also eligible to receive RRIF loan funds as a sole applicant in order to finance building a connection to the infrastructure of a second railroad.

Collateral may be offered to reduce the risk premium charged by the government and can include the funded capital improvements or other assets, as well as secured revenue streams such as taxes or user fees.

The Application Process

RRIF applications are managed through a U.S. DOT agency, the National Surface Transportation and Innovative Finance Bureau. The Bureau provides a lender which is sector-specific; applicants will deal with DOT personnel familiar with the transportation industry and who understand the unique aspects of the rail sector.

The process begins with an information session with Bureau staff at U.S. DOT. Applications go through a defined process including engineering, legal, financial, safety and environmental reviews. An independent contractor will conduct a thorough credit risk analysis for DOT’s consumption. The DOT Credit Council and the White House Office of Management and Budget make decisions on key loan terms and credit risk premiums. While loan recipients often find the application process grueling, they have generally been pleased with the execution of RRIF financing.

Most successful applicants for RRIF loans hired an external advisor for assistance with application preparation. The scope of services provided by such advisors will vary. Seneca is one of the firms that regularly provide this assistance. We have supported applications for public and private entities, for projects involving both freight and passenger operations, and for financing requests ranging from tens to hundreds of millions of dollars.

For Additional Information

Interested parties should start by reviewing the basic legal documentation for the loan program including the authorizing statutes (45 U.S.C. 821-3 & 6) and the RRIF Program Guide. Applicants should also review the requirements for the National Environmental Policy Act (NEPA) and Buy America requirements. For more information on how Seneca can specifically support your efforts to secure financing for your infrastructure project, please contact us.