The Railroad Rehabilitation and Improvement Financing (RRIF) Program

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 37 loans totaling $5.4 billion (valued at $5.9 billion in 2018 dollars). The program, which is administered by the Build America Bureau within the Office of the Secretary of Transportation, has approved only four loans since 2012. Congress has authorized $35 billion in loan authority for the RRIF program and repeatedly has urged the Department of Transportation (DOT) 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, the Build America Bureau has 90 days from the time a completed application is submitted to render a decision on the application. This timeline becomes uncertain due to the Bureau’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 DOT’s other prominent loan assistance program, the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, RRIF requires loan recipients to pay a credit risk premium, which is intended to offset the risk of a default on their loan. 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 other types of federal, state, or private financing. 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. Changes made by Congress in the Fixing America’s Surface Transportation Act (P.L. 114-94), enacted in December 2015, may lead to even greater use of the RRIF program by sponsors of passenger rail and transit-related projects, as opposed to small freight railroads. 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.