Summary
The U.S. Department of Transportation (USDOT) announced its final rule amending the Railroad Rehabilitation and Improvement Financing (RRIF) and Transportation Infrastructure Finance and Innovation Act (TIFIA) programs to implement the Bipartisan Infrastructure Law (Infrastructure Investment and Jobs Act (IIJA)).
The Upshot
- The final rule, effective June 24, 2024, implements provisions of the IIJA regarding interest rate setting and interest rate spreads as was first proposed by the USDOT on January 24, 2024.
- The new interest rate setting provision applies to any RRIF and TIFIA loan that has a final maturity date later than 35 years after substantial completion of the project and a loan term of more than 40 years. The interest rate will be equal to State and Local Government Series (SLGS) 30-to-40 year securities plus one basis point, plus an annual interest rate adjustment for years 40 through 100.
- The new interest rate spread provision applies only to RRIF direct loans projected to require a subsidy (i.e., have a positive subsidy cost), adding credit spread provisions that will reduce the credit risk premium to zero dollars on such RRIF loans.
- The USDOT also amended 49 CFR 80 to reduce TIFIA project requirements. TIFIA projects now need only to meet the planning and programming requirements of 23 U.S.C. 134 and 135 and no longer must be included in or consistent with the relevant state’s transportation plan.
The Bottom Line
The final rule expands RRIF and TIFIA accessibility and utility for a wider range of projects. The new interest rate setting provision will provide for longer-term TIFIA and RRIF obligations to be adjusted on a yearly basis beyond the current 30-to-40 year timetable, providing higher value to longer-term projects. The interest rate spread provisions remove a barrier to utilization of RRIF by no longer requiring borrowers to repay credit risk premiums. The change in statutory requirements regarding TIFIA eligibility expands the scope of the TIFIA program to projects that are not included in the applicable state’s transportation plan.
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The USDOT promulgated the final rule amending the Railroad Rehabilitation and Improvement Financing (RRIF) and Transportation Infrastructure Finance and Innovation Act (TIFIA) programs to implement provisions of the Infrastructure Investment and Jobs Act (IIJA).
In light of feedback from borrowers, potential applicants, and provisions in the Bipartisan Infrastructure Law, USDOT amended the regulations to enhance client satisfaction. The final rule addresses various concerns, aiming to enhance the viability of loan products for certain borrowers.
The final rule, effective June 24, 2024, implements changes to the RRIF and TIFIA program made by the IIJA regarding interest rate setting for long term obligations and credit risk premiums. The new rule will allow loans with maturity terms of over 35 years to be adjusted on a yearly basis and will set the credit risk premium on subsidized RRIF loans to zero. The interest rate will be equal to State and Local Government Series (SLGS) 30-to-40 year securities plus one basis point, plus an annual interest rate adjustment for years 40 through 100. The rule changes the statutory requirements for a project to be TIFIA-eligible by eliminating criteria requiring consistency and inclusion with a state transportation plan. The USDOT also amended 49 CFR 80 to reduce TIFIA project requirements. TIFIA projects now need only meet the planning and programming requirements of 23 U.S.C. 134 and 135 and no longer must be included in or consistent with the relevant state’s transportation plan. The new interest rate spread provision applies only to RRIF direct loans projected to require a subsidy (i.e., have a positive subsidy cost), adding credit spread provisions that will reduce the credit risk premium to zero dollars on such RRIF loans.
The changes increase accessibility and utility of the RRIF and TIFIA programs to a wider range of projects by providing higher value to longer term projects, removing the credit risk premium repayment barrier under the RRIF program, and expanding the scope of projects that may be eligible for TIFIA funding. Attorneys in Ballard Spahr’s P3/Infrastructure Group are closely monitoring the changes brought forth by the final rule and will continue to advise.
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