I
105TH CONGRESS
1ST SESSION
H. R. 1939
To modernize and improve Federal railroad infrastructure financing programs,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 17, 1997
Ms. MOLINARI introduced the following bill; which was referred to the
Committee on Transportation and Infrastructure
A BILL
To modernize and improve Federal railroad infrastructure
financing programs, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Railroad Infrastruc-
ture 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 fol-
lowing 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 inci-
dental 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 pay-
ments by or to the Government over the life of
the loan after adjusting for estimated defaults,
prepayments, fees, penalties, and other recover-
ies.
‘‘(C) The cost of a loan guarantee shall be the
net present value when a guaranteed loan is dis-
bursed, of the following cash flows:
‘‘(i) Estimated payments by the Govern-
ment to cover defaults and delinquencies, inter-
est subsidies, or other payments.
‘‘(ii) Estimated payments to the Govern-
ment, including origination and other fees, pen-
alties, and recoveries.
‘‘(D) Any Government action that alters the es-
timated net present value of an outstanding direct
loan or loan guarantee (except modifications within
the terms of existing contracts or through other ex-
isting 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 es-
timated present value of the direct loan or loan
guarantee at the time of modification.
‘‘(E) In estimating net present values, the dis-
count rate shall be the average interest rate on mar-
ketable Treasury securities of similar maturity to
the direct loan or loan guarantee for which the esti-
mate is being made.
‘‘(2) The term ‘direct loan’ means a disburse-
ment of funds by the Government to a non-Federal
borrower under a contract that requires the repay-
ment of such funds. The term includes the purchase
of, or participation in, a loan made by another lend-
er. 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 Transpor-
tation to make a direct loan when specified condi-
tions 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 inter-
est on any debt obligation of a non-Federal borrower
to a non-Federal lender, but does not include the in-
surance 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 mean-
ing 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 guaran-
tees to State and local governments, government spon-
sored authorities and corporations, and railroad carriers.
‘‘(b) ELIGIBLE PURPOSES.—
‘‘(1) IN GENERAL.—Direct loans and loan guar-
antees under this section shall be used to—
‘‘(A) acquire, improve, or rehabilitate rail
equipment or facilities, including track, compo-
nents 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 fa-
cilities.
‘‘(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 un-
paid principal amounts of obligations under direct loans
and loan guarantees made under this section shall not ex-
ceed $5,000,000,000 at any one time.
‘‘(e) RATES OF INTEREST.—
‘‘(1) DIRECT LOANS.—The Secretary shall re-
quire interest to be paid on a direct loan made
under this section at a rate not less than that nec-
essary 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 Sec-
retary determines to be reasonable, taking into con-
sideration the prevailing interest rates and cus-
tomary 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 au-
thority to cover the costs of direct loans and loan
‘‘(E) any other factors the Secretary con-
siders relevant.
‘‘(3) PAYMENT OF PREMIUMS.—Credit risk pre-
miums under this subsection shall be paid to the
Secretary before the disbursement of loan amounts.
‘‘(4) COHORTS OF LOANS.—In order to main-
tain 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 co-
hort, and interest accrued thereon, which were not
used to mitigate losses shall be returned to the origi-
nal source on a pro rata basis.
‘‘(g) PREREQUISITES FOR ASSISTANCE.—The Sec-
retary 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 justi-
fied by the present and probable future demand for
rail services;
‘‘(3) the applicant has given reasonable assur-
ances that the facilities or equipment to be acquired,
rehabilitated, improved, developed, or established
with the proceeds of the obligation will be economi-
cally and efficiently utilized;
‘‘(4) the obligation can reasonably be repaid,
using an appropriate combination of credit risk pre-
miums and collateral offered by the applicant to pro-
tect 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, re-
quire the applicant to agree to such terms and conditions
as are sufficient, in the judgment of the Secretary, to en-
sure 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 rail-
road 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 abil-
ity 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 pur-
poses stated in subsection (b).
‘‘SEC. 22303. ADMINISTRATION OF DIRECT LOANS AND
LOAN GUARANTEES.
‘‘(a) APPLICATIONS.—The Secretary of Transpor-
tation 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 di-
rect loans and loan guarantees made under that section.
‘‘(b) FULL FAITH AND CREDIT.—Loan guarantees
made under section 22302 shall constitute general obliga-
tions 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 pay-
ment 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 appli-
cant and, in the case of a loan guarantee or loan
guarantee commitment, the holder of the obligation.
‘‘(e) COMPLIANCE.—The Secretary shall assure com-
pliance, by an applicant, any other party to the loan, and
any railroad carrier for whose benefit assistance is in-
tended, 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 in-
spections.
‘‘(f) COMMERCIAL
VALIDITY.—For purposes of
claims by any party other than the Secretary, a loan guar-
antee 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 there-
for, except as to fraud or material misrepresentation by
such holder.
‘‘(g) DEFAULT.—The Secretary shall prescribe regu-
lations setting forth procedures in the event of default on
a loan made or guaranteed under section 22302. The Sec-
retary 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 guaran-
teed 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 re-
ceive payment or be entitled to retain payment in a
total amount which, together with all other recover-
ies (including any recovery based upon a security in-
terest 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 sub-
section (g) in connection with a loan guarantee made
under section 22302, the Secretary shall be sub-
rogated to all of the rights of the holder with respect
to the obligor under the loan.
‘‘(2) DISPOSITION
OF
PROPERTY.—The Sec-
retary may complete, recondition, reconstruct, ren-
ovate, repair, maintain, operate, charter, rent, sell,
or otherwise dispose of any property or other inter-
ests obtained pursuant to this section. The Secretary
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 chap-
ters 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 Revitaliza-
tion 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 sub-
section 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 Revitaliza-
tion and Regulatory Reform Act of 1976 (45 U.S.C. 821
et seq.)’’ and inserting in lieu thereof ‘‘chapter 223 of this
title’’.
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