DOT Ties Rail Track Loans to Broader Policy Goals

The Department of Transportation served notice this week that it will increasingly tie a low-interest loan account for railroad track improvements to a broad array of Obama administration policy goals.

The new DOT guidelines for the Railroad Rehabilitation and Improvement Financing program could set the stage for greater use of the account, which is authorized to lend or guarantee up to $35 billion at the government's own cost of borrowing. Since it first started making loans in 2002, the RRIF program has only issued 26 credits with a face value of just over $1 billion, and after repayments it still has about $34.4 billion to lend.

In a Federal Register notice, the DOT's Federal Railroad Administration said the program that has so far mainly made small loans to short line freight railroads will now look at how credit applications align with a host of DOT strategic goals -- from reducing transportation emissions to boosting economic development or export promotion, expanding passenger rail service or making communities more livable.

Although the DOT has yet to finalize its own strategic plan, the FRA notice about its RRIF program referred would-be borrowers to the draft strategic plan the DOT issued last spring.

It is not clear if the new RRIF guidance will make it easier for small freight lines to get credit, in what industry officials have sometimes said is a cumbersome application process with many layers of federal review. For instance, although no short line has ever failed to make a scheduled RRIF payment and regular credit markets have been tight now for several years, industry sources say the three new freight rail loans the Obama administration has approved since taking office were already in process before 2009. And short line officials complained during the Bush administration that RRIF often had too many hurdles for credit-worthy applicants.

With President Obama's push to sharply expand passenger rail systems, more transit agencies as well as some larger freight operations are looking at RRIF as a potential credit source, and for higher dollar amounts than most freight short lines have sought.