Minnesota Regional Railroads Association

1. Minnesota Regional Railroads Association Iowa Railroad Revolving Loan and Grant Program July 17, 2006

2. A Very Brief History of Iowa Rail Funding Programs • Changes – to rail system Deregulation, bankruptcy, abandonment, mergers, new short lines, railroad earnings, system condition, etc. • Programs – response to those changes State Rail Assistance Federal Rail Assistance Iowa Railway Finance Authority (IRFA) Rail Economic Development Revolving Loan Program • Today – Railroad Revolving Loan and Grant Program

3. IRFA Railroad Revolving Loan and Grant Program • Background: Started in 1998 – with IRFA loan repayment Loan program only Administered by the Iowa DOT Purpose - rail assistance • 2005 legislation: Included Grant funding in program (50%) Added “economic development and job growth” as program purpose Funded with all IRFA and other loan repayments (2006 estimate - $3.6 million available) Program Administration -- IRFA

4. Railroad Revolving Loan and Grant ProgramSchedule • Legislation – February 2005 • Effective Date – July 2005 • Program Kickoff – October 2005 • Applications - February 2006 • Prepared analysis and rankings – March/April • Review with IRFA Board – May • Decision by Board – June • Preparations underway for next round of applications

5. Railroad Revolving Loan and Grant Program • 26 applications - $11.82 million in grant requests $3.98 million in loan requests • Overall Project impacts: Over 1000 direct new jobs $27 million in annual wages $168 million in annual transport savings $545 million in total capital investments.

6. Railroad Revolving Loan and Grant Program • Purpose: “rail assistance” “spur economic development and job growth” • Board may consider - “number of direct and indirect jobs” “economic development benefits” “total capital investment” “railroad transportation service benefits” “financing requested” “public benefits vs. public costs” “other potential impacts”

7. Railroad Revolving Loan and Grant ProgramOverall Goals • Do as many projects as possible • Meet 50% limitation on grant funding • Maximize Public Value get the most public benefit relative to the public (program) cost

8. Railroad Revolving Loan and Grant ProgramOverall Process • Identify project categories • Determine evaluation criteria and weights. • Determine amount of funding per project category. • Prepare project rankings for each project category. • Establish funding decision rules for funding recommendations.

9. Railroad Revolving Loan and Grant ProgramProject Categories • Branch Line Assistance Projects (2) Traditional rail improvement assistance projects on short-line railroads or branch lines. Projects are to have a railroad sponsor and generally improve service for all shippers on the line. • Industrial Service Projects (12) Rail improvement projects that improve or provide new service to single/multiple industries. Generally a new spur or improvement that will primarily benefit the industry being served. • Bio-Energy Development Projects (7) Rail improvement projects that support the development of bio-energy plants. A significant sub-set of the industrial service projects category. • Industrial Park Economic Development Projects(5) Rail improvement projects that will improve or provide new service to areas specifically established or being established as industrial economic developments.

10. Railroad Revolving Loan and Grant ProgramEvaluation Criteria • Immediate Jobs (number of jobs created within 2 years) • Program cost per job (jobs leverage) • Match ratio (financial leverage) • Transport savings/program cost (transportation leverage) • Capital investment/program cost (investment leverage)

11. Railroad Revolving Loan and Grant ProgramCriteria and Weights by Project Category Branch Line Assistance Projects: transport leverage -- 50% match – 50% Industrial Service Projects: immediate jobs 30% jobs leverage 30% match 30% investment leverage 10% Bio-Energy Development Projects: immediate jobs 30% jobs leverage 30% match 30% investment leverage 10% Industrial Park Economic Development Projects: immediate jobs 30% jobs leverage 40% match 30%

12. Railroad Revolving Loan and Grant ProgramProposed Funding Limits per Category Category Funding Share Branch Line Assistance Projects 10% Industrial Service Projects 30% Bio-Energy Development Projects 30% Industrial Park Economic Development Projects 30%

13. Railroad Revolving Loan and Grant ProgramProposed Decision Rules Offer funding by point rankings by category. Each category will meet the 50% grant level limit. Provide grant funding first. If no grant funds available, offer loan. Do not grant over $6000 per job. (Cost per job limit) If no jobs involved, offer loans only.

14. Railroad Revolving Loan and Grant Program Summary Results • All or partial funding of 14 of 26 applications (54%) 1 Branchline, 8 Industrial Service, 3 Bio-energy, 2 Economic Development • Total grant funding is less than 50%. • Maximized Public Value by; Gaining 600 jobs (60%) Average cost per job of $5,210 Receiving $70m. in annual transport savings Leveraging $270m. in capital investments Providing14% of total rail project costs with applicants providing 86%

15. Summary Perspective • Iowa’s Rail System – improved condition railroads have earnings shippers want rail access changing transport market • Iowa Rail Program – moved away from “rehab and upgrade” assistance funding job growth and development focus is on support of business/industry emphasis is “connection” to the system • Benefits – “job growth and development” transportation choice, lower shippers costs, accesses new markets, provides customers to railroads => revenues, earnings, improvement • Next Steps – New round of applications, $1.0 million available; Preparation of legislative proposal – need appropriations to sustain program.