UPDATED WITH DOT RESPONSE (see below)

The U.S. Department of Transportation is loaning Amtrak more than half a billion dollars to buy new locomotives for the Northeast and Keystone Corridors. This will pay for first fleet upgrade in the Northeast since Acela service was introduced a decade ago.

This is big news, in part because federal money for Amtrak is rarely for new equipment. State of good repair projects— like signal upgrades, bridge repairs, switch maintenance—generally rise to the top of the federal funding list. Today’s announced loan is also the largest, by leaps and bounds, so far issued under an obscure and, some say, underused federal loan program that has not been tapped to its full potential thus far.

“This type of loan will allow Amtrak to move ahead today to purchase equipment to improve service on the Northeast Corridor and create jobs when we need them the most,” said Petra Todorovich, Director of America 2050.

Amtrak’s President Joseph Boardman said in a statement that the loan means that “Amtrak’s purchase of 70 new, energy efficient and higher performing electric locomotives is fully funded.”

The new Siemens locomotives will be built in the United States, creating 250 manufacturing jobs, and will replace units that have been in service for 20-30 years, with an average of 3.5 million miles traveled. The new locomotives will enter service in 2013.

This purchase is part of a larger fleet strategy plan (details pasted below) from Amtrak that also involves almost $300 million for 130 passenger cars for long distance trains.

The $562.9 million loan is the largest to date in the history of the Railroad Rehabilitation & Improvement Financing (RRIF) Program. In fact, this loan nearly matches all previous loans under the $35 billion program since it began in 2000. Including Wednesday’s announced loan. Just $1.66 billion has been allocated, less than five percent of available funds.

“This is a program that has been underutilized. So it’s heartening to see the U.S. DOT putting the program to use,” said Todorovich.

RRIF allows railroads, government agencies and rail shippers to receive 35 year loans at government interest rates, extremely favorable financing terms for businesses that can get them. Most of the money so far has gone to freight railroads.

The catch is, that not many have done so. Advocates for newer rail construction, particularly high-speed rail, have called for the program to ease the collateral requirements as one way to facilitate more RRIF lending.

From a DOT spokesperson:

‪‪The $35 billion is the cap amount available.  When a loan is paid in full (not as they are paid down over time), the principal amount lent is then added back to available funds for lending activities.

The RRIF program has not made a change in lending philosophy and continues to receive applications on a continuous basis.  FRA holds many pre-application meetings each month to potential borrowers to assist in ensuring they understand the program and how it might work for their project.  The most recent changes in the credit markets (making it more difficult to finance capital improvements and at higher rates) has made RRIF more attractive to various types of borrowers.
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‪The RRIF program offers very favorable terms for borrowers especially when compared to terms offered in the private sector via commercial financing.  RRIF loans can be made for a term up to 35 years and the interest rates charged are basically the cost of financing to the government (i.e. treasury rates) which are far lower than normal financing costs.
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‪Lastly, the current RRIF statistics are:  30 loans with a total financing of $1,659,949,761.
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From Amtrak:

NEW AMTRAK ELECTRIC LOCOMOTIVESFOR NORTHEAST AND KEYSTONE CORRIDORSUpdated Fleet Strategy PlanIn April 2011, Amtrak released its updated Fleet Strategy Plan that analyzes the company’s need to replace its existing conventional and high-speed fleet and manage capacity to meet the forecasted growth in ridership across its national network.The report lays out the basis for recapitalizing the entire fleet over a period of time in a manner that will not only provide new and modern equipment for passengers, but will also develop and sustain the domestic production capacity needed for the long term viability of intercity passenger rail in the United States.The $465.9 million contract for 70 electric locomotives is a key element of the Fleet Strategy Plan and follows another major equipment procurement of a $298 million contract to build 130 single-level passenger rail cars to support growing ridership on its long-distance trains.Electric Locomotives Contract and BenefitsAs part of this comprehensive plan to modernize and expand its fleet of equipment, Amtrak has purchased 70 new electric locomotives to provide improved performance and reliability for its Northeast intercity passenger rail services.The first Amtrak Cities Sprinter ACS-64 electric locomotive is to be delivered in 2013 and will operate at speeds up to 125 mph (201 kph) on the Northeast Corridor from Washington, D.C. to Boston and up to 110 mph (177 kph) on the Keystone Corridor from Philadelphia to Harrisburg, Pa. They will replace locomotives in service between 20 and 30 years with average mileage of 3.5 million miles traveled.The six-year, $465.9 million contract was awarded to Siemens Mobility and will create 250 jobs primarily at a facility in Sacramento, California, but also at plants in Norwood, Ohio and Alpharetta, Georgia.FundingThe Railroad Rehabilitation and Improvement Financing (RRIF) loan from the Federal Railroad Administration totals $562.9 million and includes $465.9 million for the 70 electric locomotives and $97 million for maintenance facility upgrades and spare parts.Amtrak projects that improved ticket revenue from more reliable locomotives can fund the debt service payments to repay this loan.Amtrak has worked strategically to improve its financial performance across a number of measurements, including successfully reducing its debt by half since 2002 to about $2 billion at the end of FY 2010.