2015 WisDOT Annual Freight Railroad Conference

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1 2015 WisDOT Annual Freight Railroad Conference Scott Greene Chief, Freight Rail Policy Division Office of Policy and Planning Federal Railroad Administration November 17,

2 Today s Topics Federal Support for Transportation Rail Programs & Incentives FRA Short Line Capital Needs Study Update on MAP-21 Freight Provisions

3 Billions of Dollars Public Policy and Transportation Choices Highways Capital Mass Transit Capital Aviation Capital Rail Capital

4 Programs: Funding and Financing Opportunities Railroad Rehabilitation and Improvement Financing (RRIF) program (Direct Loans or Loan Guarantees) Acquire, improve, or rehabilitate intermodal facilities or rail equipment Infrastructure loans for track, bridges, yard buildings and shops Refinance outstanding debt $35 billion in lending authority TIGER Competitive grants for surface transportation projects $4.7 billion in the seven offerings Nearly $1.4 billion to rail; $1.14 billion has gone toward freight rail projects Railroad Maintenance Tax Credit (26 U.S.C. 45G) For Class II and Class III railroads only

5 RRIF Class II and Class III Railroad Loans Year Railroad Amount ($) 2002 Mt. Hood Railroad 2,070, Nashville and Western Railroad 2,300, Arkansas & Missouri Railroad 11,000, Dakota Minnesota & Eastern Railroad 233,601, Wheeling & Lake Erie Railroad 25,000, Stillwater Central Railroad 4,675, Iowa Interstate Railroad 32,732, Tex-Mex Railroad 50,000, The Montreal Maine & Atlantic Railway 34,000, Riverport Railroad 5,514, Great Smokey Mountains Railroad 7,500, Iowa Interstate Railroad 9,350, Wheeling & Lake Erie Railroad 14,000, RJ Corman Railway 47,131, RJ Corman Railway 11,768, Iowa Northern Railroad 25,500, Dakota Minnesota & Eastern Railroad 48,320, Great Western Railway 4,030, Columbia Basin Railroad 3,000, Nashville and Eastern Railroad 600, Nashville and Eastern Railroad 4,000, Iowa Interstate Railroad 31,000, Permian Basin Railways, Inc 64,400, Georgia & Florida Railways 8,100, Great Lakes Central Railroad 17,000, C&J Railroad 56, Northwestern Pacific Railroad Company and North Coast Railroad Authority 3,180, The Arkansas and Missouri Railroad Company 6,809,000 SUM 706,638,761

6 Class II and Class III Railroad RRIF Loan Allocation

7 TIGER and Rail Projects Funded Total Offering All Rail Dollars Freight Rail Short Lines % Rail % to Short Lines Tiger I $1.50b $639,331,028 $ 394,351,028 $ 17,551,028 43% 1% Tiger II $600m $197,140,775 $ 171,170,675 $107,040,675 33% 18% Tiger III $527m $165,680,051 $ 144,120,051 $ 43,382,895 31% 8% Tiger IV $500m $239,140,848 $ 113,219,490 $ 65,779,490 48% 13% Tiger V $474m $181,747,615 $ 134,156,437 $ 60,123,401 38% 13% Tiger VI $600m $ 94,139,615 $ 58,339,615 $ 51,669,652 16% 9% Tiger VII $500m $173,510,143 $ 123,510,143 $ 30,000,000 36% 8%

8 TIGER Recap From Recovery Act forward, Congress has appropriated $4.7 billion for TIGER Of the $4.7b, approximately 36% has gone to rail projects; 24% is freight rail and 8% to short lines. Short lines received over $375 million, principally for capacity enhancements, track improvements, and bridge repairs. TIGER grants also leverage other funding sources to maximize the available dollars going to these infrastructure investments. Considering a match in the range of 25 percent to 30 percent on a project demonstrates that as much as $469 million to $488 million of infrastructure investment may have gone to these projects.

9 Short Line Railroad Rehabilitation and Investment Act of 2015 Tax Credit (26 U.S.C. 45G) H.R. 721 introduced in House in February Currently has 247 cosponsors. Similar measure introduced in Senate (S.637) in March Currently has 52 cosponsors. ASLRRA estimates that the tax credit has helped fund more than $300 million of improvements, annually, and supported over $1.2 billion of investment.

10 Short Line Spending from Federal Initiatives Between RRIF, TIGER, and 45G tax credit Short Lines have been able to fund over $2.3 billion for infrastructure and refinancing debt. But significant capital needs still exists Continuing need on short lines to invest to bring track and bridges up to state of good repair to handle 286,000 pound rail cars. ASLRRA reported that in 2002, 39 percent of the route-miles on short lines could handle the heavier cars and in 2010 this had increased to 57 percent.

11 FRA Class II and Class III Railroad Capital Needs Study Study sent to Congress in October 2014 Study found that total spending needs are $6.9 billion. Includes current spending needs of $1.6 billion and spending needs over a 5-year period of $5.3 billion. Results from preliminary analysis of Upper Great Plains Transportation Institute (UGPTI) survey.

12 Survey Results: Source of Funds Owner, 3% Fed. Grants/Loans, 7% State Grants/Loans, 9% Other, 1% Commercial Loans, 5% Cash Flow, 73%

13 Emergence of the Holding Company

14 Going Forward While carriers under holding companies have been able to access capital, challenges remain. Difficulties in obtaining all the capital from one source. Holding companies reported that they need private and government programs to meet needs. Track upgrades to 286K are critical as well as investment in the bridges to accommodate traffic and maintain a state of good repair. Investment has been incremental. Sources of funding include private capital markets, State programs, RRIF, TIGER, and 45G tax credits.

15 Going Forward Consolidation of short lines under holding companies will continue, where there is value or potential value. Concern going forward is with independent short lines that are poor performers. States will need to assess how these carriers can help meet future transportation needs. State Rail Plans and State Freight Plans are essential in state transportation planning efforts. All is not rosy. Holding companies have changed the lending calculus, but they are piecing together and spreading thinly all of the investment dollars they can get.

16 Update Freight Provisions of MAP-21 Comprehensive Truck Size and Weight Study On June 5 th, Volume 1 Summary and technical papers were released Upcoming report to Congress National Freight Strategic Plan On October 18 th, Secretary Foxx announced the release of the Draft Plan. Freight Conditions and Performance Report (Upcoming) Freight Policy Council and National Freight Advisory Committee were established to provide advice and guidance.