23 U.S.C. § 603 — Secured loans

Page 483 TITLE 23—HIGHWAYS § 603 vided, see section 10003 of Pub. L. 117–58, set out as a note under section 101 of this title. Pub. L. 117–58, div. A, title II, § 12002(b), Nov. 15, 2021, 135 Stat. 622, provided that: ‘‘The amendments made by this section [amending this section] shall apply with respect to any agreement for credit assistance entered into on or after the date of enactment of this Act [Nov. 15, 2021].’’ EFFECTIVE DATE OF 2015 AMENDMENT Amendment by Pub. L. 114–94 effective Oct. 1, 2015, see section 1003 of Pub. L. 114–94, set out as a note under section 5313 of Title 5, Government Organization and Employees. EFFECTIVE DATE OF 2012 AMENDMENT Amendment by Pub. L. 112–141 effective Oct. 1, 2012, see section 3(a) of Pub. L. 112–141, set out as an Effec- tive and Termination Dates of 2012 Amendment note under section 101 of this title. § 603. Secured loans (a) IN GENERAL.— (1) AGREEMENTS.—Subject to paragraphs (2) and (3), the Secretary may enter into agree- ments with 1 or more obligors to make secured loans, the proceeds of which shall be used— (A) to finance eligible project costs of any project selected under section 602; (B) to refinance interim construction fi- nancing of eligible project costs of any project selected under section 602; (C) to refinance existing Federal credit in- struments for rural infrastructure projects; or (D) to refinance long-term project obliga- tions or Federal credit instruments, if the refinancing provides additional funding ca- pacity for the completion, enhancement, or expansion of any project that— (i) is selected under section 602; or (ii) otherwise meets the requirements of section 602. (2) LIMITATION ON REFINANCING OF INTERIM CONSTRUCTION FINANCING.—A loan under para- graph (1) shall not refinance interim construc- tion financing under paragraph (1)(B)— (A) if the maturity of such interim con- struction financing is later than 1 year after the substantial completion of the project; and (B) later than 1 year after the date of sub- stantial completion of the project. (3) RISK ASSESSMENT.—Before entering into an agreement under this subsection, the Sec- retary, in consultation with the Director of the Office of Management and Budget, shall determine an appropriate capital reserve sub- sidy amount for each secured loan, taking into account each rating letter provided by an agency under section 602(b)(3)(B). (b) TERMS AND LIMITATIONS.— (1) IN GENERAL.—A secured loan under this section with respect to a project shall be on such terms and conditions and contain such covenants, representations, warranties, and requirements (including requirements for au- dits) as the Secretary determines to be appro- priate. (2) MAXIMUM AMOUNT.— (A) IN GENERAL.—Except as provided in subparagraph (B), the amount of a secured loan under this section shall not exceed the lesser of 49 percent of the reasonably antici- pated eligible project costs or if the secured loan does not receive an investment grade rating, the amount of the senior project ob- ligations. (B) RURAL PROJECTS FUND.—In the case of a project capitalizing a rural projects fund, the maximum amount of a secured loan made to a State infrastructure bank shall be determined in accordance with section 602(a)(5)(B)(iii). (3) PAYMENT.—A secured loan under this sec- tion— (A) shall— (i) be payable, in whole or in part, from— (I) tolls; (II) user fees; (III) payments owing to the obligor under a public-private partnership; (IV) other dedicated revenue sources that also secure the senior project obli- gations; or (V) in the case of a secured loan for a project capitalizing a rural projects fund, any other dedicated revenue sources available to a State infrastruc- ture bank, including repayments from loans made by the bank for rural infra- structure projects; and (ii) include a rate covenant, coverage re- quirement, or similar security feature sup- porting the project obligations; and (B) may have a lien on revenues described in subparagraph (A), subject to any lien se- curing project obligations. (4) INTEREST RATE.— (A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), the interest rate on a secured loan under this section shall be not less than the yield on United States Treasury securities of a similar maturity to the maturity of the secured loan on the date of execution of the loan agreement. (B) RURAL INFRASTRUCTURE PROJECTS.— (i) IN GENERAL.—The interest rate of a loan offered to a rural infrastructure project or a rural projects fund under the TIFIA program shall be at 1⁄2 of the Treas- ury Rate in effect on the date of execution of the loan agreement. (ii) APPLICATION.—The rate described in clause (i) shall only apply to any portion of a loan the subsidy cost of which is fund- ed by amounts set aside for rural infra- structure projects and rural project funds under section 608(a)(3)(A). (C) LIMITED BUYDOWNS.—The interest rate of a secured loan under this section may not be lowered by more than the lower of— (i) 11⁄2 percentage points (150 basis points); or (ii) the amount of the increase in the in- terest rate. (5) MATURITY DATE.— (A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), the final matu- rity date of the secured loan shall be the lesser of— Page 484 TITLE 23—HIGHWAYS § 603 (i) 35 years after the date of substantial completion of the project; and (ii) if the useful life of the capital asset being financed is of a lesser period, the useful life of the asset. (B) RURAL PROJECTS FUND.—In the case of a project capitalizing a rural projects fund, the final maturity date of the secured loan shall not exceed 35 years after the date on which the secured loan is obligated. (C) LONG LIVED ASSETS.—In the case of a capital asset with an estimated life of more than 50 years, the final maturity date of the secured loan shall be the lesser of— (i) 75 years after the date of substantial completion of the project; or (ii) 75 percent of the estimated useful life of the capital asset. (6) NONSUBORDINATION.— (A) IN GENERAL.—Except as provided in subparagraph (B), the secured loan shall not be subordinated to the claims of any holder of project obligations in the event of bank- ruptcy, insolvency, or liquidation of the ob- ligor. (B) PREEXISTING INDENTURE.— (i) IN GENERAL.—The Secretary shall waive the requirement under subparagraph (A) for a public agency borrower that is fi- nancing ongoing capital programs and has outstanding senior bonds under a pre- existing indenture, if— (I) the secured loan is rated in the A category or higher; (II) the secured loan is secured and payable from pledged revenues not af- fected by project performance, such as a tax-backed revenue pledge or a system- backed pledge of project revenues; and (III) the TIFIA program share of eligi- ble project costs is 33 percent or less. (ii) LIMITATION.—If the Secretary waives the nonsubordination requirement under this subparagraph— (I) the maximum credit subsidy to be paid by the Federal Government shall be not more than 10 percent of the principal amount of the secured loan; and (II) the obligor shall be responsible for paying the remainder of the subsidy cost, if any. (7) FEES.—The Secretary may establish fees at a level sufficient to cover all or a portion of the costs to the Federal Government of mak- ing a secured loan under this section. (8) NON-FEDERAL SHARE.—The proceeds of a secured loan under the TIFIA program may be used for any non-Federal share of project costs required under this title or chapter 53 of title 49, if the loan is repayable from non-Federal funds. (9) MAXIMUM FEDERAL INVOLVEMENT.— (A) IN GENERAL.—The total Federal assist- ance provided for a project receiving a loan under the TIFIA program shall not exceed 80 percent of the total project cost. (B) RURAL PROJECTS FUND.—A project cap- italizing a rural projects fund shall satisfy subparagraph (A) through compliance with the Federal share requirement described in section 610(e)(3)(B). (c) REPAYMENT.— (1) SCHEDULE.—The Secretary shall establish a repayment schedule for each secured loan under this section based on— (A) the projected cash flow from project revenues and other repayment sources; and (B) the useful life of the project. (2) COMMENCEMENT.—Scheduled loan repay- ments of principal or interest on a secured loan under this section shall commence not later than 5 years after the date of substantial completion of the project. (3) DEFERRED PAYMENTS.— (A) IN GENERAL.—If, at any time after the date of substantial completion of the project, the project is unable to generate sufficient revenues to pay the scheduled loan repayments of principal and interest on the secured loan, the Secretary may, subject to subparagraph (C), allow the obligor to add unpaid principal and interest to the out- standing balance of the secured loan. (B) INTEREST.—Any payment deferred under subparagraph (A) shall— (i) continue to accrue interest in accord- ance with subsection (b)(4) until fully re- paid; and (ii) be scheduled to be amortized over the remaining term of the loan. (C) CRITERIA.— (i) IN GENERAL.—Any payment deferral under subparagraph (A) shall be contin- gent on the project meeting criteria estab- lished by the Secretary. (ii) REPAYMENT STANDARDS.—The criteria established pursuant to clause (i) shall in- clude standards for reasonable assurance of repayment. (4) PREPAYMENT.— (A) USE OF EXCESS REVENUES.— (i) IN GENERAL.—Except as provided in clause (ii), any excess revenues that re- main after satisfying scheduled debt serv- ice requirements on the project obliga- tions and secured loan and all deposit re- quirements under the terms of any trust agreement, bond resolution, or similar agreement securing project obligations may be applied annually to prepay the se- cured loan without penalty. (ii) CERTAIN APPLICANTS.—In the case of a secured loan or other secured Federal credit instrument provided after the date of enactment of the Surface Transpor- tation Reauthorization Act of 2021, if the obligor is a governmental entity, agency, or instrumentality, the obligor shall not be required to prepay the secured loan or other secured Federal credit instrument with any excess revenues described in clause (i) if the obligor enters into an agreement to use those excess revenues only for purposes authorized under this title or title 49. (B) USE OF PROCEEDS OF REFINANCING.—The secured loan may be prepaid at any time without penalty from the proceeds of refi- nancing from non-Federal funding sources. Page 485 TITLE 23—HIGHWAYS § 603 (d) SALE OF SECURED LOANS.— (1) IN GENERAL.—Subject to paragraph (2), as soon as practicable after substantial comple- tion of a project and after notifying the obli- gor, the Secretary may sell to another entity or reoffer into the capital markets a secured loan for the project if the Secretary deter- mines that the sale or reoffering can be made on favorable terms. (2) CONSENT OF OBLIGOR.—In making a sale or reoffering under paragraph (1), the Secretary may not change the original terms and condi- tions of the secured loan without the written consent of the obligor. (e) LOAN GUARANTEES.— (1) IN GENERAL.—The Secretary may provide a loan guarantee to a lender in lieu of making a secured loan under this section if the Sec- retary determines that the budgetary cost of the loan guarantee is substantially the same as that of a secured loan. (2) TERMS.—The terms of a loan guarantee under paragraph (1) shall be consistent with the terms required under this section for a se- cured loan, except that the rate on the guaran- teed loan and any prepayment features shall be negotiated between the obligor and the lender, with the consent of the Secretary. (f) STREAMLINED APPLICATION PROCESS.— (1) IN GENERAL.—Not later than 180 days after the date of enactment of the FAST Act, the Secretary shall make available an expe- dited application process or processes avail- able at the request of entities seeking secured loans under the TIFIA program that use a set or sets of conventional terms established pur- suant to this section. (2) TERMS.—In establishing the streamlined application process required by this sub- section, the Secretary may include terms com- monly included in prior credit agreements and allow for an expedited application period, in- cluding— (A) the secured loan is in an amount of not greater than $100,000,000; (B) the secured loan is secured and payable from pledged revenues not affected by project performance, such as a tax-backed revenue pledge, tax increment financing, or a system-backed pledge of project revenues; and (C) repayment of the loan commences not later than 5 years after disbursement. (3) ADDITIONAL TERMS FOR EXPEDITED DECI- SIONS.— (A) IN GENERAL.—Not later than 120 days after the date of enactment of this para- graph, the Secretary shall implement an ex- pedited decision timeline for public agency borrowers seeking secured loans that meet— (i) the terms under paragraph (2); and (ii) the additional criteria described in subparagraph (B). (B) ADDITIONAL CRITERIA.—The additional criteria referred to in subparagraph (A)(ii) are the following: (i) The secured loan is made on terms and conditions that substantially conform to the conventional terms and conditions established by the National Surface Trans- portation Innovative Finance Bureau. (ii) The secured loan is rated in the A category or higher. (iii) The TIFIA program share of eligible project costs is 33 percent or less. (iv) The applicant demonstrates a rea- sonable expectation that the contracting process for the project can commence by not later than 90 days after the date on which a Federal credit instrument is obli- gated for the project under the TIFIA pro- gram. (v) The project has received a categorical exclusion, a finding of no significant im- pact, or a record of decision under the Na- tional Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). (C) WRITTEN NOTICE.—The Secretary shall provide to an applicant seeking a secured loan under the expedited decision process under this paragraph a written notice in- forming the applicant whether the Secretary has approved or disapproved the application by not later than 180 days after the date on which the Secretary submits to the appli- cant a letter indicating that the National Surface Transportation Innovative Finance Bureau has commenced the creditworthiness review of the project. (Added Pub. L. 105–178, title I, § 1503(a), June 9, 1998, 112 Stat. 245, § 183; renumbered § 603 and amended Pub. L. 109–59, title I, §§ 1601(d), 1602(b)(3), (5), (d), Aug. 10, 2005, 119 Stat. 1240, 1247; Pub. L. 112–141, div. A, title II, § 2002, July 6, 2012, 126 Stat. 614; Pub. L. 114–94, div. A, title II, § 2001(c), Dec. 4, 2015, 129 Stat. 1442; Pub. L. 117–58, div. A, title II, § 12001(e), (f), (h), Nov. 15, 2021, 135 Stat. 619.) Editorial Notes REFERENCES IN TEXT The date of enactment of the Surface Transportation Reauthorization Act of 2021 and the date of enactment of this paragraph, referred to in subsecs. (c)(4)(A)(ii) and (f)(3)(A), are the date of enactment of div. A of Pub. L. 117–58, which was approved Nov. 15, 2021. The date of enactment of the FAST Act, referred to in subsec. (f)(1), is the date of enactment of Pub. L. 114–94, which was approved Dec. 4, 2015. The National Environmental Policy Act of 1969, re- ferred to in subsec. (f)(3)(B)(v), is Pub. L. 91–190, Jan. 1, 1970, 83 Stat. 852, which is classified generally to chap- ter 55 (§ 4321 et seq.) of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see Short Title note set out under section 4321 of Title 42 and Tables. AMENDMENTS 2021—Subsec. (b)(5)(A). Pub. L. 117–58, § 12001(e)(1), substituted ‘‘subparagraphs (B) and (C)’’ for ‘‘subpara- graph (B)’’ in introductory provisions. Subsec. (b)(5)(C). Pub. L. 117–58, § 12001(e)(2), added subpar. (C). Subsec. (c)(4)(A). Pub. L. 117–58, § 12001(f), designated existing provisions as cl. (i), inserted heading, sub- stituted ‘‘Except as provided in clause (ii), any excess’’ for ‘‘Any excess’’, and added cl. (ii). Subsec. (f)(3). Pub. L. 117–58, § 12001(h), added par. (3). 2015—Subsec. (a)(2). Pub. L. 114–94, § 2001(c)(1), added par. (2) and struck out former par. (2). Prior to amend- ment, text read as follows: ‘‘A loan under paragraph (1) Page 486 TITLE 23—HIGHWAYS § 604 shall not refinance interim construction financing under paragraph (1)(B) later than 1 year after the date of substantial completion of the project.’’ Subsec. (b)(2). Pub. L. 114–94, § 2001(c)(2)(A), des- ignated existing provisions as subpar. (A), inserted sub- par. (A) heading, substituted ‘‘Except as provided in subparagraph (B), the amount of’’ for ‘‘The amount of’’, and added subpar. (B). Subsec. (b)(3)(A)(i)(V). Pub. L. 114–94, § 2001(c)(2)(B), added subcl. (V). Subsec. (b)(4)(B)(i). Pub. L. 114–94, § 2001(c)(2)(C)(i), substituted ‘‘or a rural projects fund under the TIFIA program’’ for ‘‘under this chapter’’. Subsec. (b)(4)(B)(ii). Pub. L. 114–94, § 2001(c)(2)(C)(ii), inserted ‘‘and rural project funds’’ after ‘‘rural infra- structure projects’’. Subsec. (b)(5). Pub. L. 114–94, § 2001(c)(2)(D), des- ignated existing provisions as subpar. (A) and inserted heading, substituted ‘‘Except as provided in subpara- graph (B), the final’’ for ‘‘The final’’, redesignated former subpars. (A) and (B) as cls. (i) and (ii), respec- tively, of subpar. (A), and added subpar. (B). Subsec. (b)(8). Pub. L. 114–94, § 2001(c)(2)(E), sub- stituted ‘‘the TIFIA program’’ for ‘‘this chapter’’. Subsec. (b)(9). Pub. L. 114–94, § 2001(c)(2)(F), des- ignated existing provisions as subpar. (A) and inserted heading, substituted ‘‘The total Federal assistance pro- vided for a project receiving a loan under the TIFIA program’’ for ‘‘The total Federal assistance provided on a project receiving a loan under this chapter’’, and added subpar. (B). Subsec. (f). Pub. L. 114–94, § 2001(c)(3), added subsec. (f). 2012—Pub. L. 112–141 amended section generally. Prior to amendment, section related to secured loans. 2005—Pub. L. 109–59, § 1602(d), renumbered section 183 of this title as this section. Subsec. (a)(1). Pub. L. 109–59, § 1601(d)(1), in subpars. (A) and (B) inserted ‘‘of any project selected under sec- tion 602’’ after ‘‘costs’’, added subpar. (C), and struck out concluding provisions which read as follows: ‘‘of any project selected under section 182.’’ Subsec. (a)(3). Pub. L. 109–59, § 1602(b)(3), substituted ‘‘602(b)(2)(B)’’ for ‘‘182(b)(2)(B)’’. Subsec. (a)(4). Pub. L. 109–59, § 1601(d)(2), substituted ‘‘The execution’’ for ‘‘The funding’’ and struck out be- fore period at end ‘‘, except that— ‘‘(A) the Secretary may fund an amount of the se- cured loan not to exceed the capital reserve subsidy amount determined under paragraph (3) prior to the obligations receiving an investment-grade rating; and ‘‘(B) the Secretary may fund the remaining portion of the secured loan only after the obligations have re- ceived an investment-grade rating by at least 1 rating agency’’. Subsec. (b)(2). Pub. L. 109–59, § 1601(d)(3)(A), inserted ‘‘the lesser of’’ before ‘‘33 percent’’ and ‘‘or, if the se- cured loan does not receive an investment grade rating, the amount of the senior project obligations’’ before period at end. Subsec. (b)(3)(A)(i). Pub. L. 109–59, § 1601(d)(3)(B), in- serted ‘‘that also secure the senior project obligations’’ after ‘‘sources’’. Subsec. (b)(4). Pub. L. 109–59, § 1601(d)(3)(C), struck out ‘‘marketable’’ before ‘‘United States Treasury securi- ties’’. Subsec. (b)(8). Pub. L. 109–59, § 1602(b)(5), substituted ‘‘this chapter’’ for ‘‘this subchapter’’. Subsec. (c)(3) to (5). Pub. L. 109–59, § 1601(d)(4), redes- ignated pars. (4) and (5) as (3) and (4), respectively, in par. (3)(A), struck out ‘‘during the 10 years’’ after ‘‘at any time’’, in par. (3)(B)(ii), substituted ‘‘loan’’ for ‘‘loan beginning not later than 10 years after the date of substantial completion of the project in accordance with paragraph (1)’’, and struck out heading and text of former par. (3). Text read as follows: ‘‘The sources of funds for scheduled loan repayments under this section shall include tolls, user fees, or other dedicated revenue sources.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2021 AMENDMENT Amendment by Pub. L. 117–58 effective Oct. 1, 2021, see section 10003 of Pub. L. 117–58, set out as a note under section 101 of this title. EFFECTIVE DATE OF 2015 AMENDMENT Amendment by Pub. L. 114–94 effective Oct. 1, 2015, see section 1003 of Pub. L. 114–94, set out as a note under section 5313 of Title 5, Government Organization and Employees. EFFECTIVE DATE OF 2012 AMENDMENT Amendment by Pub. L. 112–141 effective Oct. 1, 2012, see section 3(a) of Pub. L. 112–141, set out as an Effec- tive and Termination Dates of 2012 Amendment note under section 101 of this title. § 604. Lines of credit (a) IN GENERAL.— (1) AGREEMENTS.—Subject to paragraphs (2) through (4), the Secretary may enter into agreements to make available to 1 or more ob- ligors lines of credit in the form of direct loans to be made by the Secretary at future dates on the occurrence of certain events for any project selected under section 602. (2) USE OF PROCEEDS.—The proceeds of a line of credit made available under this section shall be available to pay debt service on project obligations issued to finance eligible project costs, extraordinary repair and re- placement costs, operation and maintenance expenses, and costs associated with unex- pected Federal or State environmental restric- tions. (3) RISK ASSESSMENT.—Before entering into an agreement under this subsection, the Sec- retary, in consultation with the Director of the Office of Management and Budget and each rating agency providing a preliminary rating opinion letter under section 602(b)(3), shall determine an appropriate capital reserve subsidy amount for each line of credit, taking into account the rating opinion letter. (4) INVESTMENT-GRADE RATING REQUIRE- MENT.—The funding of a line of credit under this section shall be contingent on the senior obligations of the project receiving an invest- ment-grade rating from 2 rating agencies. (b) TERMS AND LIMITATIONS.— (1) IN GENERAL.—A line of credit under this section with respect to a project shall be on such terms and conditions and contain such covenants, representations, warranties, and requirements (including requirements for au- dits) as the Secretary determines to be appro- priate. (2) MAXIMUM AMOUNTS.—The total amount of a line of credit under this section shall not ex- ceed 33 percent of the reasonably anticipated eligible project costs. (3) DRAWS.—Any draw on a line of credit under this section shall— (A) represent a direct loan; and (B) be made only if net revenues from the project (including capitalized interest, but not including reasonably required financing reserves) are insufficient to pay the costs specified in subsection (a)(2). (4) INTEREST RATE.—Except as provided in subparagraphs (B) and (C) of section 603(b)(4),