49 U.S.C. § 22402 — Direct loans and loan guarantees

(a) General Authority. The Secretary of Transportation must offer direct loans and loan guarantees to seven kinds of borrowers: state and local governments; groups formed under interstate compacts that Congress approved under a 1997 law about Amtrak; government-sponsored authorities and corporations; railroads; joint ventures that include at least one of those first four kinds of borrowers, or item (6) below; freight shippers with limited transport options who own a plant and only want a rail connection built between that plant and a railroad; and private companies that own a controlling stake in one or more freight railroads, other than the biggest ("Class I") ones. (b) Eligible Purposes. (1) In general. Direct loans and loan guarantees must be used for these purposes: (A) buying, improving, or fixing up rail or intermodal equipment or facilities — including track, bridges, tunnels, yards, buildings, and shops — and paying related costs, including costs before construction starts; (B) building new rail or intermodal facilities; (C) building port infrastructure on land, for seaports that rail also serves; (D) refinancing existing debt that was used for purposes (A), (B), or (C); (E) paying back planning, permitting, and design costs tied to (A), (B), or (C); or (F) financing economic development — including commercial and residential development and related infrastructure — but only if it meets four tests: private investors put in more than 20 percent of the total project cost; the project is physically connected to, or within half a mile of, a transit station, bus station, passenger rail station, or multimodal station that a railroad also serves; the applicant can show it can start construction contracts within 90 days of getting the loan or guarantee; and the project can show it will bring in new revenue — through more riders, more tenant lease payments, or other revenue-generating activities. (2) Operating expenses not eligible. This money cannot be used to pay a railroad's day-to-day operating expenses. (c) Priority Projects. When deciding which applications to approve, the Secretary must give priority to projects that do any of the following: improve public safety, including installing positive train control systems; boost economic development; help the environment; make U.S. companies more competitive internationally; are backed by the State's own transportation plans; improve stations and passenger facilities and encourage more development around transit; keep or improve rail and intermodal service to small or rural communities; boost service and capacity across the national rail system; or fix rail capacity problems that are hurting service to shippers and the national transportation system. (d) Extent of Authority. At any one time, the total unpaid amount of all direct loans and loan guarantees under this section cannot go over $35,000,000,000. Of that amount, at least $7,000,000,000 must be reserved for projects that mainly benefit freight railroads other than the biggest ("Class I") ones. The Secretary cannot cap how much of the unused money any single loan or guarantee can use. (e) Rates of Interest. (1) Direct loans. The interest rate on a direct loan cannot be lower than the yield on U.S. Treasury securities of a similar length ("maturity") on the day the loan agreement is signed. (2) Loan guarantees. The Secretary cannot guarantee a loan if its interest rate is higher than what the Secretary decides is reasonable, based on typical interest rates and fees in the private lending market. (f) Infrastructure Partners. (1) Authority of Secretary. Instead of, or along with, Congress appropriating money to cover the cost of a loan or guarantee (as normally required), the Secretary can accept a commitment from a non-federal source — like a state, local government, or public authority — to help pay the "credit risk premium" (the fee that covers the government's risk) and the cost of any later modification. Either way, the total money from appropriations and credit risk premiums for one loan or guarantee can never be less than that loan or guarantee's actual cost. (2) Credit risk premium amount. The Secretary decides how big this premium needs to be, based on: the applicant's situation, including any collateral offered; the planned schedule for paying out the loan; historical data on how similar borrowers repaid past loans; talking with the Congressional Budget Office; and any other factor the Secretary thinks matters. (3) Creditworthiness. When an applicant proposes a premium amount, the Secretary must also accept, in addition to any collateral, these things as a basis for setting the premium: the present value of a future stream of state or local subsidy money or other dedicated revenue backing the loan; adequate coverage from project cash flow or other dedicated revenue — like tolls, user fees, or payments owed under a public-private partnership — without recourse to other assets; an investment-grade rating on the loan (if the loan is over $150,000,000, the applicant needs that rating from at least two rating agencies); and projected freight or passenger demand based on regional economic forecasts, including any expected shift in traffic from other transportation modes. (4) Payment of premiums. Credit risk premiums must be paid to the Secretary before the loan money goes out (or, for a modification, before the modification takes effect) — but only to the extent Congress hasn't already appropriated money to cover those costs. (5) Cohorts of loans. For direct loans made before a 2015 transportation law under an older 1976 railroad law, and if funds are available, the Secretary must repay the credit risk premium plus interest, either 60 days after a 2021 transportation law if the borrower already paid off the loan, or 60 days after the borrower finishes paying it off, whichever applies. (6) Collateral. (A) An applicant can offer tangible and intangible assets as collateral, but not "goodwill." The Secretary must accept the net liquidation value of any such asset, and can also accept its market value — or, for a blanket pledge covering an entire operating business, the market value of the whole going concern. That going-concern value can include things like real property, track, equipment, stations, maintenance facilities, long-term shipping agreements, easements, leases, and access rights, along with any interchange commitments, valued by looking at cost, market comparisons, or discounted future cash flows over the loan's term. (B) When reviewing appraisals of that collateral, the Secretary must consider whether they follow standard appraisal principles (from the Appraisal Foundation) and whether the appraiser is qualified to value that type of asset. (7) Repayment of credit risk premiums. Once all of a loan or guarantee's obligations are paid off, the Secretary must return the credit risk premiums, plus any interest they earned, to whoever originally paid them. This applies to projects assisted after a 2021 transportation law. (g) Prerequisites for Assistance. Before making any direct loan or loan guarantee, the Secretary must find, in writing, that all five of these things are true. First, repayment must happen within a set time limit — the shortest of: 75 years after the project is substantially finished; the equipment or facility's estimated useful life (based on a proper risk review); or, for projects with a useful life longer than 35 years, a longer period calculated with a formula. Here is that formula, step by step: start with 35 years. Take the project's estimated useful life and subtract 35 years from it. Multiply that difference by 75 percent. Add the result to the original 35 years. That total is the repayment limit. Second, the loan or guarantee must be justified by current and likely future demand for rail or intermodal service. Third, the applicant must reasonably assure the Secretary that the equipment or facilities will be used efficiently and economically. Fourth, the loan must be reasonably repayable, using a mix of credit risk premiums and collateral that protects the federal government. Fifth, the loan's purpose must match the eligible purposes listed in subsection (b). (h) Conditions of Assistance. (1) Before giving assistance, the Secretary must get the applicant — and any railroad or railroad partner benefiting from it — to agree, for as long as money is still owed, to three things: not use rail or intermodal funds or assets for unrelated purposes if doing so would hurt their ability to provide rail service or to meet their obligations under this section; keep maintaining their capital program, equipment, facilities, and operations, as their money allows; and not make discretionary dividend payments that conflict with the purposes in subsection (b). (2) The Secretary cannot require an applicant to put up collateral. If collateral is offered anyway, it must be valued as a going concern, including the added value from the finished, operating project. The Secretary also cannot require an applicant to have already tried getting the money from somewhere else first. (3) Recipients must follow two other sets of rules: construction standards under section 24312 (as they existed in September 2002), the same way Amtrak has to follow them; and the worker-protection arrangements under section 22404, for employees affected by the project. (4) For an economic-development project under subsection (b)(1)(F), the recipient must contribute at least 25 percent of the total project cost from non-federal sources. (i) Application Processing Procedures. (1) Application status notices. Within 30 days of getting an application (or added information), the Secretary must tell the applicant in writing whether the application is complete. (2) Incomplete applications. If it's incomplete, the Secretary must list exactly what's missing, including anything an outside financial analyst needs, and let the applicant resubmit with that missing material. (3) Approvals and disapprovals. Within 60 days of telling an applicant their application is complete, the Secretary must say in writing whether it's approved or disapproved. The Office of Management and Budget must act fast enough to let the Secretary meet that 60-day deadline. (4) Streamlined review. Within 180 days of a 2021 transportation law, the Secretary had to set up a faster, streamlined application process for smaller loans. To use it, an applicant must be asking for $150,000,000 or less, use the money only for the purposes in subsection (b)(1)(A) or (B), and meet any other criteria the Secretary sets after consulting the Department's Council on Credit and Finance. Under this fast-track process, the whole review — from submission to approval or denial — cannot take more than 90 days. If it does, the Secretary must give the applicant written notice explaining the delay and a new time estimate, and must post that notice on the public dashboard described below. (5) Dashboard. The Secretary must post a monthly public report online covering, for each application: the type of applicant; where the project is; a short description of the project and its purpose; the amount requested; the date the applicant got a status notice; the date of approval or disapproval; and whether the streamlined process was used. (6) Creditworthiness review status. The Secretary must track, and share with the applicant on request, detailed status information about each application, including: the loan or guarantee's total value; the applicant's name; the project's planned funding mix, including federal and non-federal shares; whether it's new construction, rehabilitation, or refinancing; how long any deferred payment would last; the applicant's credit rating; details of any other, subordinate debt involved; a schedule for when the project will be ready for financing; what federal permits are needed, including environmental reviews and any Buy America waivers; other details the Secretary considers key to reviewing creditworthiness; where the application stands in the review process; how much the Secretary has spent on outside advisors for the application; a description of the risk factors the Secretary is weighing and how risky each one looks (low, moderate, or high); a rough, non-binding estimate of the credit risk premium (or an explanation of why one can't be given yet); and what information the Secretary still needs to finish the review. The Secretary must provide this information within 30 days of a request. Applications that went through the streamlined process are not covered by this requirement. (j) Repayment Schedules. (1) The Secretary must set a repayment schedule that starts payments no later than 5 years after the project is substantially complete. (2) Interest starts building up ("accruing") from the day the money is paid out, and gets spread out ("amortized") over the rest of the loan once payments begin. (3) Deferred payments. If, after substantial completion, a borrower can't make a scheduled payment, the Secretary may let the borrower add the unpaid principal and interest onto the loan balance — for a total of up to one year over the life of the loan. That deferred amount keeps earning interest until the loan is paid off, and gets spread out over the rest of the loan term. (4) Prepayments. Leftover project revenue — after covering scheduled debt payments and any required deposits — can be used each year to pay off the direct loan early, without penalty. The loan can also be paid off early, without penalty, using money from refinancing through non-federal sources. (k) Sale of Direct Loans. (1) After a project is substantially complete, and after telling the borrower, the Secretary may sell or reoffer the direct loan to another buyer or into the capital markets, if the Secretary thinks it can be sold on good terms. (2) When doing that sale, the Secretary cannot change the loan's original terms without the borrower's written consent. (l) Nonsubordination. (1) In general, if the borrower goes bankrupt or is liquidated, a direct loan from the Secretary cannot be placed behind ("subordinated" to) the claims of anyone holding the project's other debt. (2) Preexisting indentures. There's an exception: the Secretary can waive that rule for a public agency that's already running ongoing capital programs and has older, senior bonds outstanding, if three things are true — the direct loan has an A-category rating or better; it's secured by dedicated revenue not tied to how well the project performs, like tax revenue or system-wide revenue; and the loan covers 50 percent or less of the project's eligible costs. The Secretary can add limits to this waiver if doing so protects the federal government's financial interests. (m) Master Credit Agreements. (1) The Secretary may sign a "master credit agreement" — a deal that promises a future direct loan or loan guarantee once all the normal conditions are met — subject to the overall $35 billion cap in subsection (d). (2) Each master credit agreement must: set the maximum loan or guarantee amount and its general terms; name one or more dedicated non-federal revenue sources that will repay it; only commit the money once every requirement for the actual projects is met; and set one or more deadlines by which the agreement either turns into actual loans or guarantees, or gets released. (n) Non-Federal Share. Money from a loan under this section can count as the non-federal share of costs for any other grant program the Secretary runs, as long as the loan itself gets repaid with non-federal money.