Railroad Infrastructure Financing Improvement Act of 1997

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Railroad Infrastructure Financing 
Improvement Act of 1997''.

SEC. 2. RAIL INFRASTRUCTURE AND EQUIPMENT LOANS.

    (a) Amendment to Title 49, United States Code.--Part B of subtitle 
V of title 49, United States Code, is amended by inserting after 
chapter 221 the following new chapter:

         ``CHAPTER 223--RAIL INFRASTRUCTURE AND EQUIPMENT LOANS

``Sec.
``22301. Definitions.
``22302. Direct loans and loan guarantees.
``22303. Administration of direct loans and loan guarantees.

``SEC. 22301. DEFINITIONS.

    ``For purposes of this chapter:
            ``(1)(A) The term `cost' means the estimated long-term cost 
        to the Government of a direct loan or loan guarantee, 
        calculated on a net present value basis, excluding 
        administrative costs and any incidental effects on governmental 
        receipts or outlays.
            ``(B) The cost of a direct loan shall be the net present 
        value, at the time when the direct loan is disbursed, of the 
        following cash flows:
                    ``(i) Loan disbursements.
                    ``(ii) Repayments of principal.
                    ``(iii) Payments of interest and other payments by 
                or to the Government over the life of the loan after 
                adjusting for estimated defaults, prepayments, fees, 
                penalties, and other recoveries.
            ``(C) The cost of a loan guarantee shall be the net present 
        value when a guaranteed loan is disbursed, of the following 
        cash flows:
                    ``(i) Estimated payments by the Government to cover 
                defaults and delinquencies, interest subsidies, or 
                other payments.
                    ``(ii) Estimated payments to the Government, 
                including origination and other fees, penalties, and 
                recoveries.
            ``(D) Any Government action that alters the estimated net 
        present value of an outstanding direct loan or loan guarantee 
        (except modifications within the terms of existing contracts or 
        through other existing authorities) shall be counted as a 
        change in the cost of that direct loan or loan guarantee. The 
        calculation of such changes shall be based on the estimated 
        present value of the direct loan or loan guarantee at the time 
        of modification.
            ``(E) In estimating net present values, the discount rate 
        shall be the average interest rate on marketable Treasury 
        securities of similar maturity to the direct loan or loan 
        guarantee for which the estimate is being made.
            ``(2) The term `direct loan' means a disbursement of funds 
        by the Government to a non-Federal borrower under a contract 
        that requires the repayment of such funds. The term includes 
        the purchase of, or participation in, a loan made by another 
        lender. The term does not include the acquisition of a 
        federally guaranteed loan in satisfaction of default claims.
            ``(3) The term `direct loan obligation' means a binding 
        agreement by the Secretary of Transportation to make a direct 
        loan when specified conditions are fulfilled by the borrower.
            ``(4) The term `loan guarantee' means any guarantee, 
        insurance, or other pledge with respect to the payment of all 
        or a part of the principal or interest on any debt obligation 
        of a non-Federal borrower to a non-Federal lender, but does not 
        include the insurance of deposits, shares, or other 
        withdrawable accounts in financial institutions.
            ``(5) The term `loan guarantee commitment' means a binding 
        agreement by the Secretary to make a loan guarantee when 
        specified conditions are fulfilled by the borrower, the lender, 
        or any other party to the guarantee agreement.
            ``(6) The term `railroad carrier' has the meaning given 
        that term in section 20102.

``SEC. 22302. DIRECT LOANS AND LOAN GUARANTEES.

    ``(a) General Authority.--The Secretary of Transportation may 
provide direct loans and loan guarantees to State and local 
governments, government sponsored authorities and corporations, and 
railroad carriers.
    ``(b) Eligible Purposes.--
            ``(1) In general.--Direct loans and loan guarantees under 
        this section shall be used to--
                    ``(A) acquire, improve, or rehabilitate rail 
                equipment or facilities, including track, components of 
                track, bridges, yards, buildings, and shops;
                    ``(B) refinance outstanding debt incurred for the 
                purposes described in subparagraph (A); or
                    ``(C) develop or establish new railroad facilities.
            ``(2) Operating expenses not eligible.--Direct loans and 
        loan guarantees under this section shall not be used for 
        railroad operating expenses.
    ``(c) Priority Projects.--In granting applications for direct loans 
or guaranteed loans under this section, the Secretary shall give 
priority to projects that--
            ``(1) enhance public safety;
            ``(2) enhance the environment;
            ``(3) promote economic development;
            ``(4) enable United States companies to be more competitive 
        in international markets;
            ``(5) are endorsed by the plans prepared under section 135 
        of title 23 by the State or States in which they are located; 
        or
            ``(6) preserve rail service to small communities or rural 
        areas.
    ``(d) Extent of Authority.--The aggregate unpaid principal amounts 
of obligations under direct loans and loan guarantees made under this 
section shall not exceed $5,000,000,000 at any one time.
    ``(e) Rates of Interest.--
            ``(1) Direct loans.--The Secretary shall require interest 
        to be paid on a direct loan made under this section at a rate 
        not less than that necessary to recover the cost of making the 
        loan.
            ``(2) Loan guarantees.--The Secretary shall not make a loan 
        guarantee under this section if the interest rate for the loan 
        exceeds that which the Secretary determines to be reasonable, 
        taking into consideration the prevailing interest rates and 
        customary fees incurred under similar obligations in the 
        private capital market.
    ``(f) Infrastructure Partners.--
            ``(1) Authority of secretary.--In lieu of or in combination 
        with appropriations of budget authority to cover the costs of 
        direct loans and loan guarantees as required under section 
        504(b)(1) of the Federal Credit Reform Act of 1990, the 
        Secretary may accept on behalf of an applicant for assistance 
        under this section a commitment from a non-Federal source to 
        fund in whole or in part credit risk premiums with respect to 
        the loan that is the subject of the application. In no event 
        shall the aggregate of appropriations of budget authority and 
        credit risk premiums described in this paragraph with respect 
        to a direct loan or loan guarantee be less than the cost of 
        that direct loan or loan guarantee.
            ``(2) Credit risk premium amount.--The Secretary shall 
        determine the amount required for credit risk premiums under 
        this subsection on the basis of--
                    ``(A) the circumstances of the applicant, including 
                the amount of collateral offered;
                    ``(B) the proposed schedule of loan disbursements;
                    ``(C) historical data on the repayment history of 
                similar borrowers;
                    ``(D) consultation with the Congressional Budget 
                Office; and
                    ``(E) any other factors the Secretary considers 
                relevant.
            ``(3) Payment of premiums.--Credit risk premiums under this 
        subsection shall be paid to the Secretary before the 
        disbursement of loan amounts.
            ``(4) Cohorts of loans.--In order to maintain sufficient 
        balances of credit risk premiums to adequately protect the 
        Federal Government from risk of default, while minimizing the 
        length of time the Government retains possession of those 
        balances, the Secretary shall establish cohorts of loans. When 
        all obligations attached to a cohort of loans have been 
        satisfied, credit risk premiums paid for the cohort, and 
        interest accrued thereon, which were not used to mitigate 
        losses shall be returned to the original source on a pro rata 
        basis.
    ``(g) Prerequisites for Assistance.--The Secretary shall not make a 
direct loan or loan guarantee under this section unless the Secretary 
has made a finding in writing that--
            ``(1) repayment of the obligation is required to be made 
        within a term of not more than 25 years from the date of its 
        execution;
            ``(2) the direct loan or loan guarantee is justified by the 
        present and probable future demand for rail services;
            ``(3) the applicant has given reasonable assurances that 
        the facilities or equipment to be acquired, rehabilitated, 
        improved, developed, or established with the proceeds of the 
        obligation will be economically and efficiently utilized;
            ``(4) the obligation can reasonably be repaid, using an 
        appropriate combination of credit risk premiums and collateral 
        offered by the applicant to protect the Federal Government; and
            ``(5) the purposes of the direct loan or loan guarantee are 
        consistent with subsection (b).
    ``(h) Conditions of Assistance.--The Secretary shall, before 
granting assistance under this section, require the applicant to agree 
to such terms and conditions as are sufficient, in the judgment of the 
Secretary, to ensure that, as long as any principal or interest is due 
and payable on such obligation, the applicant, and any railroad carrier 
for whose benefit the assistance is intended--
            ``(1) will not use any funds or assets from railroad 
        operations for nonrail purposes, if such use would impair the 
        ability of the applicant or railroad carrier to provide rail 
        services in an efficient and economic manner, or would 
        adversely affect the ability of the applicant or railroad 
        carrier to perform any obligation entered into by the applicant 
        under this section;
            ``(2) will, consistent with its capital resources, maintain 
        its capital program, equipment, facilities, and operations on a 
        continuing basis; and
            ``(3) will not make any discretionary dividend payments 
        that unreasonably conflict with the purposes stated in 
        subsection (b).

``SEC. 22303. ADMINISTRATION OF DIRECT LOANS AND LOAN GUARANTEES.

    ``(a) Applications.--The Secretary of Transportation shall 
prescribe the form and contents required of applications for assistance 
under section 22302, to enable the Secretary to determine the 
eligibility of the applicant's proposal, and shall establish terms and 
conditions for direct loans and loan guarantees made under that 
section.
    ``(b) Full Faith and Credit.--Loan guarantees made under section 
22302 shall constitute general obligations of the United States backed 
by the full faith and credit of the United States.
    ``(c) Assignment of Loan Guarantees.--The holder of a loan 
guarantee made under section 22302 may assign the loan guarantee in 
whole or in part, subject to such requirements as the Secretary may 
prescribe.
    ``(d) Modifications.--The Secretary may approve the modification of 
any term or condition of a direct loan, loan guarantee, direct loan 
obligation, or loan guarantee commitment, including the rate of 
interest, time of payment of interest or principal, or security 
requirements, if the Secretary finds in writing that--
            ``(1) the modification is equitable and is in the overall 
        best interests of the United States; and
            ``(2) consent has been obtained from the applicant and, in 
        the case of a loan guarantee or loan guarantee commitment, the 
        holder of the obligation.
    ``(e) Compliance.--The Secretary shall assure compliance, by an 
applicant, any other party to the loan, and any railroad carrier for 
whose benefit assistance is intended, with the provisions of this Act, 
regulations issued hereunder, and the terms and conditions of the 
direct loan or loan guarantee, including through regular periodic 
inspections.
    ``(f) Commercial Validity.--For purposes of claims by any party 
other than the Secretary, a loan guarantee or loan guarantee commitment 
shall be conclusive evidence that the underlying obligation is in 
compliance with the provisions of this Act, and that such obligation 
has been approved and is legal as to principal, interest, and other 
terms. Such a guarantee or commitment shall be valid and incontestable 
in the hands of a holder thereof, including the original lender or any 
other holder, as of the date when the Secretary granted the application 
therefor, except as to fraud or material misrepresentation by such 
holder.
    ``(g) Default.--The Secretary shall prescribe regulations setting 
forth procedures in the event of default on a loan made or guaranteed 
under section 22302. The Secretary shall ensure that each loan 
guarantee made under that section contains terms and conditions that 
provide that--
            ``(1) if a payment of principal or interest under the loan 
        is in default for more than 30 days, the Secretary shall pay to 
        the holder of the obligation, or the holder's agent, the amount 
of unpaid guaranteed interest;
            ``(2) if the default has continued for more than 90 days, 
        the Secretary shall pay to the holder of the obligation, or the 
        holder's agent, 90 percent of the unpaid guaranteed principal;
            ``(3) after final resolution of the default, through 
        liquidation or otherwise, the Secretary shall pay to the holder 
        of the obligation, or the holder's agent, any remaining amounts 
        guaranteed but which were not recovered through the default's 
        resolution;
            ``(4) the Secretary shall not be required to make any 
        payment under paragraphs (1) through (3) if the Secretary 
        finds, before the expiration of the periods described in such 
        paragraphs, that the default has been remedied; and
            ``(5) the holder of the obligation shall not receive 
        payment or be entitled to retain payment in a total amount 
        which, together with all other recoveries (including any 
        recovery based upon a security interest in equipment or 
        facilities) exceeds the actual loss of such holder.
    ``(h) Rights of the Secretary.--
            ``(1) Subrogation.--If the Secretary makes payment to a 
        holder, or a holder's agent, under subsection (g) in connection 
        with a loan guarantee made under section 22302, the Secretary 
        shall be subrogated to all of the rights of the holder with 
        respect to the obligor under the loan.
            ``(2) Disposition of property.--The Secretary may complete, 
        recondition, reconstruct, renovate, repair, maintain, operate, 
        charter, rent, sell, or otherwise dispose of any property or 
        other interests obtained pursuant to this section. The 
        Secretary shall not be subject to any Federal or State 
        regulatory requirements when carrying out this paragraph.
    ``(i) Action Against Obligor.--The Secretary may bring a civil 
action in an appropriate Federal court in the name of the United States 
in the event of a default on a direct loan made under section 22302, or 
in the name of the United States or of the holder of the obligation in 
the event of a default on a loan guaranteed under section 22302. The 
holder of a guarantee shall make available to the Secretary all records 
and evidence necessary to prosecute the civil action. The Secretary may 
accept property in full or partial satisfaction of any sums owed as a 
result of a default. If the Secretary receives, through the sale or 
other disposition of such property, an amount greater than the 
aggregate of--
            ``(1) the amount paid to the holder of a guarantee under 
        subsection (g) of this section; and
            ``(2) any other cost to the United States of remedying the 
        default,
the Secretary shall pay such excess to the obligor.
    ``(j) Breach of Conditions.--The Attorney General shall commence a 
civil action in an appropriate Federal court to enjoin any activity 
which the Secretary finds is in violation of this Act, regulations 
issued hereunder, or any conditions which were duly agreed to, and to 
secure any other appropriate relief.
    ``(k) Attachment.--No attachment or execution may be issued against 
the Secretary, or any property in the control of the Secretary, prior 
to the entry of final judgment to such effect in any State, Federal, or 
other court.
    ``(l) Investigation Charge.--The Secretary may charge and collect 
from each applicant a reasonable charge for appraisal of the value of 
the equipment or facilities for which the direct loan or loan guarantee 
is sought, and for making necessary determinations and findings. Such 
charge shall not aggregate more than one-half of 1 percent of the 
principal amount of the obligation.''.
    (b) Conforming Amendment.--The table of chapters of subtitle V of 
title 49, United States Code, is amended by inserting after the item 
relating to chapter 221 the following:

``223. RAIL INFRASTRUCTURE AND EQUIPMENT LOANS..............   22301''.

SEC. 3. TECHNICAL AND CONFORMING PROVISIONS.

    (a) Repeal.--Title V of the Railroad Revitalization and Regulatory 
Reform Act of 1976 (45 U.S.C. 821 et seq.) is repealed.
    (b) Savings Provision.--A transaction entered into under the 
authority of title V of the Railroad Revitalization and Regulatory 
Reform Act of 1976 before the date of the enactment of this Act shall 
be administered until completion under its terms as if subsection (a) 
of this subsection were not enacted.
    (c) Technical and Conforming Amendments.--(1) Section 211(i) of the 
Regional Rail Reorganization Act of 1973 (45 U.S.C. 721(i)) is 
repealed.
    (2) Section 306(b) of title 49, United States Code, is amended by 
striking ``title V of the Railroad Revitalization and Regulatory Reform 
Act of 1976 (45 U.S.C. 821 et seq.)'' and inserting in lieu thereof 
``chapter 223 of this title''.

Summary: Railroad Infrastructure Financing Improvement Act of 1997 - Amends Federal railroad law to authorize the Secretary of Transportation to provide not more than $5 billion in direct loans and loan guarantees to State and local governments, government sponsored authorities and corporations, and railroad carriers to: (1) acquire, improve, or rehabilitate existing rail equipment or facilities, or establish new railroad facilities. Or (2) refinance outstanding debt incurred in carrying out such activities. Sets forth specified conditions and eligibility requirements for such loans.