Monday, July 24, 2000 (Washington, DC) U.S. Secretary of Transportation Rodney E. Slater today announced a direct loan and loan guarantee program for railroads that will provide up to $3.5 billion in loans, including $1 billion for projects benefitting shortline and regional railroads.

"President Clinton and Vice President Gore have worked to ensure that we continue to build a safe, efficient, and intelligent transportation system for the 21st century," said Secretary Slater. "The funding provided under this program illustrates once again our commitment to the ideals of TEA-21 such as improving safety, protecting the environment and promoting economic growth."

According to the U.S. Department of Transportation’s Federal Railroad Administration (FRA), the Railroad Rehabilitation and Improvement Financing Program (RRIF) program will provide funding for small railroads to accommodate 286,000-pound cars, for highway-rail grade crossing elimination projects and for other railroad infrastructure improvements. The program will enable small railroads to make track improvements to help ensure their continued viability.

The RRIF program was authorized by TEA-21 (Transportation Equity Act for the 21st Century), which was signed into law by President Clinton in June 1998. RRIF funding may be used to acquire, improve, or rehabilitate intermodal or rail equipment or facilities, including track, components of track, bridges, yards, buildings and shops; to refinance outstanding debt incurred for the previous purposes; and to develop or establish new intermodal or railroad facilities.

"This innovative financing program will help preserve and enhance rail or intermodal service to small communities and rural areas around the country," said FRA Administrator Jolene M. Molitoris. "RRIF will also preserve the environment by funding infrastructure improvements that ensure the continuation of energy efficient rail-freight service."

Payment for the risk of the loan will be through the credit risk premium, which is a payment to the FRA by the applicants and/or infrastructure partners. The credit risk premium must cover the estimated long-term cost to the federal government of the loan or loan guarantee, taking into consideration potential defaults, recoveries, delinquencies, penalties, fees and prepayments. The direct loans or loan guarantees can be provided for a maximum term of up to 25 years.

The RRIF final rule, issued in the Federal Register on July 6, is on FRA’s Internet website, http://www.fra.dot.gov.