The Railroad Rehabilitation and Improvement Financing (RRIF) Program (CRS Report for Congress)
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| Release Date |
Revised Jan. 31, 2018 |
| Report Number |
R44028 |
| Report Type |
Report |
| Authors |
David Randall Peterman, Analyst in Transportation Policy |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
Congress created the Railroad Rehabilitation and Improvement Financing (RRIF) program to offer long-term, low-cost loans to railroad operators, with particular attention to small freight railroads, to help them finance improvements to infrastructure and investments in equipment. The program is intended to operate at no cost to the government, and it does not receive an annual appropriation. Since 2000, the RRIF program has made 34 loans totaling $2.7 billion (valued at $2.9 billion in 2015 dollars). Although the program, which is administered by the Federal Railroad Administration (FRA), regularly receives applications, it has approved only one loan since 2012.
Congress has authorized $35 billion in loan authority for the RRIF program and repeatedly has urged FRA to increase the number of loans the program makes. Reports suggest the uncertain length and outcome of the RRIF loan application process and the up-front costs to prospective borrowers are among the elements of the program that have reduced its appeal compared with other financing options available to railroads.
By statute, FRA has 90 days from the time a completed application is submitted to render a decision on the application. This timeline becomes uncertain due to FRA's discretion in determining when a loan application is "complete." A 2014 audit indicated that some loan applications had been in process for more than a year.
Unlike the Department of Transportation's other prominent loan assistance program, the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, RRIF loan recipients are required to deposit the equivalent of a bond, referred to as a credit risk premium, which is intended to offset the risk of a default on their loan. The money is returned to the borrower when the loan is paid back. The credit risk premium helps the program comply with a congressional requirement that federal loan assistance programs operate at no cost to the federal government. However, it may make RRIF loans less attractive to borrowers than TIFIA loans, for which Congress appropriates funds to pay the cost of the credit risk premium for loan recipients, or than private loans, in which risk premiums typically are folded in to the cost of the loan and paid as part of the loan repayment schedule.
Since 2008, several RRIF loans have been made to government-run intercity passenger rail projects. A number of private companies seeking to build intercity passenger rail lines also have expressed interest in RRIF loans. Such loans likely would be quite large relative to those RRIF typically extends to small freight railroads, raising questions about the risk to the federal government if the projects are not completed or if they fail to generate sufficient revenue to service the loans. Legislation introduced in the 114th Congress would reserve 40% of RRIF lending authority for Amtrak and would change elements of the RRIF program to make it more attractive to potential applicants.
