Section 810.10  Scope

 

The Illinois Department of Transportation (the Department) has the power to enter into agreements to loan or grant Federal and/or state funds to any railroad, unit of local government rail user, or owner or lessee of a railroad right-of-way to rehabilitate, improve or construct rail facilities.  The Department also has the power to grant or loan funds to any rail users located on an abandoned line, to a unit of local government, or to an owner or lessee of an abandoned railroad right-of-way to undertake substitute service projects. (Section 49.25g of the Civil Administrative Code of Illinois (Ill. Rev. Stat. 1987, ch. 127, par. 49.25g))  The purposes of the program are to preserve private sector rail service on freight lines and to promote economic development through the retention and development of rail-dependent industry.  The program is administered by the Illinois Department of Transportation, Bureau of Railroads.  This Part contains the Illinois Department of Transportation's requirements for Local Rail Service Assistance projects and for the management and administration of the projects funded under this program.

 

Section 810.20  Incorporation by Reference of Federal Regulations and Federal Grant Agreement

 

With respect to Local Rail Service Assistance (LRSA) project requirements, this Part incorporates by reference 49 CFR 255 (1987), 49 CFR 266 (1987), not including any later amendments or editions, and "Grant Agreement for Local Rail Service Assistance Under Section 5 of the Department of Transportation Act" (49 U.S.C. 1654, as amended by the Local Rail Service Assistance Act of 1978), effective April 22, 1986.  Copies of the federal regulations and grant agreement are available from the Chief, Bureau of Railroads, 2300 S. Dirksen Parkway, Springfield, Il. 62764.

 

Section 810.30  Definitions

 

The following words or phrases, when used in this Part, and in conjunction with the federal rules, shall have the meanings ascribed to them below:  

 

"Benefit/Cost" – The ratio of project benefits and the net cost of the project.

 

"Benefits" are categorized into three groups:  

 

Economic Benefits – measured as the addition/retention of employment or the avoidable loss of business and its related jobs to a community.

 

Public Benefits – measured as the incremental reduction in directly related government expenditures resulting from the implementation of the rail project.

 

Transportation Benefits – measured as the avoidable, additional cost of transporting affected freight shipments by other modes or other routing.

 

"Contract" – The written agreement between the recipient and the Department defining the project and terms of the loan or grant.

 

"Department" – The Illinois Department of Transportation.

 

"FRA" – The Federal Railroad Administration.

 

"Light Density Rail Line" – Those rail lines which carry less than 3 million gross tons per mile per year.

 

"Local Rail Service Assistance Program (LRSA)" – The LRSA program provides loans or grants for capital improvements to light density rail lines and for substitute service projects.  LRSA funding is normally 70 percent federal and 30 percent State or local, but these percentages may change in the future.  Federal funding levels are determined by Congress and may be altered from time to time due to amendments to the Department of Transportation Act (49 U.S.C. 1654 as amended by the Local Rail Service Assistance Act of 1978).

 

"Project Life" – The number of years the recipient is willing to commit itself, or is required, to provide service over a line.  In the benefit/cost analysis, project life is the period of time over which proposed project benefits and costs are calculated.

 

"Recipient" – Grant or loan recipient.

 

"Residual Value of Project Materials" – As determined by the Department, the residual value will be the expected salvage value of project materials based on existing market values plus or minus the projected increase or decrease in value based on price trends.

 

"Salvage Value of Extracted Materials" – The expected salvage value of the materials which would be removed during a line rehabilitation and sold, either for scrap or reuse.  Salvage value will be determined by the Department based on a survey of existing market prices.

 

"State Rail Plan Update" – The document published by the Department every two years which describes the LRSA program methodology.  The plan is also used to establish project eligibility.

 

"Substitute Service" – Assistance designed to reduce the costs of lost rail service in a manner less expensive than continuing that rail service and includes (but is not limited to) the acquisition, construction, or improvement of facilities for the provision of substitute freight transportation services and/or the relocation of shippers.

 

Section 810.40  Eligibility Process:  Review of Proposed Project

 

a)         A person or entity asking for financial assistance shall submit a formal, written request for State assistance to the Illinois Department of Transportation, Chief, Bureau of Railroads.  Technical assistance, moreover, is also offered and can encompass the Department's review of engineering plans, project specifications and estimates for track construction or rehabilitation, as well as assistance to those faced with a downgrading or potential loss of rail freight service through abandonments.

 

b)         Following the receipt of the request, the Department will immediately begin an analysis, as described in Section 810.60, of the potential benefits and costs of each proposed project.  Each proposed investment option will be analyzed by the Bureau of Railroads.

 

Section 810.50  Criteria for Project Selection

 

a)         The Department's role in selecting projects is shaped by its commitment to preserving the private-sector rail industry which serves and sustains the Illinois economy.  The Department views its primary role as a catalyst to private-sector solutions for local freight service problems. While its ability to resolve local rail service problems is limited by the availability of funds, the Department will select projects based on the following criteria:  

 

1)         Lines with the greatest potential for regional economic development or retention, measured in the number and type of businesses, jobs and traffic that would be affected by a project.

 

2)         Lines with the greatest potential for improving access to markets for Illinois agricultural products, coal and industrial products.

 

3)         Lines in which the State's participation will leverage private investment and which will benefit the State's economic growth by fostering permanent solutions to rail service problems.

 

b)         A determination of project eligibility does not guarantee implementation of a LRSA project.  The State's decision to commit funds can be influenced by its limited financial resources; the lack of commitment, financial or otherwise, by shippers, railroads and local governmental entities; or by the prospective recipient's inability to establish the necessary detailed ownership and service arrangements.  (For example, a typical type of service arrangement may include, but not be limited to, the execution of an industrial track agreement, a switching agreement or a trackage rights agreement; a typical type of land acquisition arrangement may include, but not be limited to, the conveyance of land by warranty deed, quit claim deed or lease agreement.)  The LRSA program targets funds toward loans and, to a diminishing degree, grants that hold the most potential to provide permanent solutions to rail service problems on light density lines.  Grants, generally, are awarded where additional public and/or private investments are present.  Loans, generally, are provided where returns to a railroad generate a profit or where there are economic benefits accruing to a single industry, without major employment creation or retention.

 

c)         Financing the Project

            The Department will make available to the recipient in the form of a loan or grant, such funds in such amounts as are necessary to finance the project.  The Department generally offers funds in the form of a loan except for one or more of the following reasons:

 

1)         When the offering of a grant instead of a loan affects the project's viability;

 

2)         When the offering of a grant instead of a loan attracts investment by another party or parties greater than the State's investment;

 

3)         When the offering of a grant instead of a loan is necessary due to a recipient's limited ability to repay loan amounts;

 

4)         When the offering of a grant instead of a loan is warranted because the projected profitability of the rail operation subsequent to the rehabilitation, improvement or construction provides insufficient return to cover the repayment of loaned funds; and

 

5)         When the offering of a grant instead of a loan is warranted because of the high level of public transportation, and economic benefits which will accrue as a result of the project.

 

d)         The terms and conditions of a loan shall be:

 

1)         the term of a loan shall be the minimum equal to that of the benefits, or the benefit stream (five year benefit equals a five year loan);

 

2)         the interest rate shall never be higher than the prime; and

 

3)         prepayment may be made without interest penalties.

 

Section 810.60  Project Analysis

 

a)         Economic Analysis

 

1)         The Department will gather background, historical or projected cost and revenues on the line, including on-line and off-line costs, maintenance expenditures, and administrative overhead.  The Department will also evaluate the current or proposed operation, including service frequency, crew size and engines.

 

2)         The Department will use shipper-provided information to estimate the impacts due to loss of rail service or benefits of new or improved rail service, including actual and projected car loadings, employment impacts and transportation costs.  The Department will distribute shipper surveys to every shipper on a line to determine existing and projected transportation needs for which State assistance is requested.  This proprietary information will be used to determine impacts of the loss of, or failure to provide, service.

 

3)         The Department will use the information obtained in subsection (a)(2) to determine the total benefits to be realized from the proposed project over a project life of at least five years, which reflects a minimum service or use commitment required for State investment.

 

b)         Engineering Analysis

 

1)         The Department will perform a detailed field inspection of the project.  It will sample track condition and assess each switch, crossing, and structure on a line.  It will use the railroad's published engineering standards or appropriate AREA specifications (1985-86 Manual For Railway Engineering, Vol. I & II and Portfolio of Trackwork Plans, American Railway Engineering Association, Washington, D.C., 1985, not including any subsequent amendments or editions).

 

2)         Based on the inspection, the Department will develop a physical description of the project, including track, switches, crossings and structures, emphasizing their condition and capability.

 

3)         The project description will be used to estimate the necessary construction, rehabilitation and/or improvement costs to bring the line within (or to maintain) the appropriate Federal Railroad Administration safety class standards (49 CFR 213 (1985), not including any later amendments or editions).  The Department will perform or verify engineering cost estimates to determine the estimated cost of the project for necessary construction or rehabilitation. The development or verification shall include, as applicable, the lineal footage of track to be constructed, improved, or rehabilitated, material items needed, number of units of materials, unit cost of materials, total materials cost, net salvage value of materials to be replaced, labor cost to install materials, special equipment costs, and the total cost.

 

4)         Based on these estimates the Department will determine the cost component of the benefit/cost analysis by calculating the capital investment required to implement the project, less the residual value of the project material after the project life has been realized.

 

c)         Comparison of Benefits to Project Costs

            The Department will determine a project's eligibility based on a benefit/cost ratio, as well as the criteria found in Section 810.50(b).  In all cases, however, failure of benefits to exceed costs will render a proposed project ineligible.

 

d)         The applicant may respond to the preliminary review by providing additional benefit and cost information.

 

Section 810.70  Public Review of State Rail Plan Update

 

a)         The detailed line analyses will be published in the State Rail Plan Update or as individual amendments thereto.  They will be available for public review from the Department.  Notification of updates and amendments will be placed in the official State newspaper and local newspapers within the project area.  This will provide all interested parties with the opportunity to review each project analyzed and understand the benefits and cost associated with each project.  The State Rail Plan Update will contain the following items:  

 

1)         Documentation of any changes in Department rules which may affect the plan.

 

2)         Evaluations of the efficiency of the project(s) for employment retention or development associated with continued or new rail services as described in Section 810.30 under "Economic Benefits."

 

3)         Updated information from previous published plans or amendments (if any) which have been found to be incomplete or incorrect as a result of actions on the part of shippers, railroads, or units of local government.

 

4)         A list of lines abandoned or services which have been discontinued since the last submission of the Plan Update.

 

5)         Changes in State or federal legislation affecting funds for rail purposes.

 

6)         Other updates and analyses as may be appropriate as a result of actions by railroad companies, the Interstate Commerce Commission, or other State agencies, such as:  

 

A)        Changes in System Diagram Maps produced by railroads;

 

B)        Petitions for abandonment under 49 U.S.C. 109 (1985) (the Revised Interstate Commerce Act) or Sections 18C-1701 et seq. of the Illinois Commercial Transportation Law (Ill. Rev. Stat. 1987, ch. 95½, pars. 18C-1701 et seq.) or Interstate or Illinois Commerce Commission actions on such petitions.

 

b)         Notice of the opportunity for a public hearing on the Rail Plan shall be published in accordance with 49 CFR 266.15 (1987), not including any later amendments or editions).  The Public shall be allowed thirty days to review and comment on each project analyzed.  Notice of the hearing shall also be published, as applicable.

 

Section 810.80  Determination of Project Potential

 

a)         Following the thirty day review period, the Department will use the line analysis and the record of written and oral public comments to reevaluate and, if necessary, amend its project analysis.

 

b)         Eligible projects will be contractually funded in the order that the applicant submits completed acquisition of right-of-way agreements, railroad service agreements, and additional funding agreements, if necessary, and as funds are available.  No eligible project will receive a loan or grant unless 100% funding is available to ensure project completion.

 

Section 810.90  Retainage

 

The Department shall retain up to ten percent of its total share of a project as follows:  for projects of less than $25,000, no retainage shall be held; for projects of more than $25,000 but less than $500,000, ten percent shall be retained; for projects of $500,000 or greater, five percent shall be retained.  The following are the two instances when the State's retainage is released:  

 

a)         If the State is financing only part of the project, the retainage shall be released to the recipient within ninety calendar days of when the Department verifies that the State's share of the project has been completed, and the remaining portion of the project is proceeding on schedule, as evidenced by the Department's engineering inspection reports.  (Engineering inspections are required in accordance with the Department of Transportation Act (49 USC 1654, as amended by the Local Rail Service Assistance Act of 1978)).  If the remaining portion of the project is not on schedule, then the State will hold the retainage until total project completion; and

 

b)         If the State is financing the total project, the retainage will be released to the recipient within ninety days after the Department's engineer has approved total project completion.  Total project completion is determined by the Department's engineer and coincides with the completion of all work or line items found within the project contract.