§16373 — Title 42 The Public Health and Welfare | U.S. Code

Summary

The Secretary may make secured loans to pay for or refinance costs of projects chosen under the program or that meet the program’s rules. Loan money can be used to build projects, to refinance short-term construction loans, or to refinance long-term debt if that refinancing gives extra money to finish, improve, or expand a qualifying project. Before agreeing to a loan, the Secretary and the Director of the Office of Management and Budget must set a credit subsidy amount that reflects the project’s credit risk. Loans can have terms the Secretary finds appropriate, including audits and other requirements. A loan can cover no more than 80 percent of expected eligible project costs. Loans must be repaid from user fees, payments from public-private partnerships, or other project revenues. Interest generally cannot be lower than the yield on comparable U.S. Treasury securities at loan signing, but the Secretary may lower it by up to 1½ percentage points (150 basis points) in certain situations when Treasury yields rose between key application or agreement dates and loan execution. Loans must mature by the earlier of 35 years after substantial completion or the asset’s useful life. Loans are not usually subordinated to other project debt, with a narrow waiver for some public agencies that meet rating and revenue-security conditions; if waived, the federal subsidy is capped at 10 percent of loan principal. The Secretary may charge up to $3,000,000 in fees at financial close, and that fee may be added to loan principal. Total federal help for a project, including grants, cannot exceed 80 percent. Repayments are set by projected cash flow and project life, must start within 5 years after completion, and may be deferred, capitalized, or prepaid under rules set by the Secretary. The Secretary may sell or reoffer loans on favorable terms but cannot change loan terms without the borrower’s written consent. Instead of making a loan, the Secretary may issue a loan guarantee if it costs the budget the same or less; those guarantees follow the same basic rules, though rate and prepayment terms are negotiated with the lender and require the Secretary’s approval.

Title 42, §16373

The Public Health and Welfare — Source: USLM XML via OLRC

(a)(1)Subject to paragraph (2), the Secretary may enter into agreements with 1 or more obligors to make secured loans, the proceeds of which—

(A)shall be used—

(i)to finance eligible project costs of any project selected under section 16372 of this title;

(ii)to refinance interim construction financing of eligible project costs of any project selected under section 16372 of this title; or

(iii)to refinance long-term project obligations or Federal credit instruments, if the refinancing provides additional funding capacity for the completion, enhancement, or expansion of any project that—

(I)is selected under section 16372 of this title; or

(II)otherwise meets the requirements of that section; and

(B)may be used in accordance with subsection (b)(7) to pay any fees collected by the Secretary under subparagraph (B) of that subsection.

(2)Before entering into an agreement under this subsection, the Secretary, in consultation with the Director of the Office of Management and Budget, shall determine an appropriate credit subsidy amount for each secured loan, taking into account all relevant factors, including the creditworthiness factors under section 16372(b)(2) of this title.

(b)(1)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 audits) as the Secretary determines to be appropriate.

(2)The amount of a secured loan under this section shall not exceed an amount equal to 80 percent of the reasonably anticipated eligible project costs.

(3)A secured loan under this section shall be payable, in whole or in part, from—

(A)user fees;

(B)payments owing to the obligor under a public-private partnership; or

(C)other revenue sources that also secure or fund the project obligations.

(4)(A)Except as provided in subparagraph (B), the interest rate on a secured loan under this section shall be not less than the interest rate reflected in 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)(i)Subject to clause (iii), the Secretary may lower the interest rate of a secured loan under this section to not lower than the interest rate described in clause (ii), if the interest rate has increased during the period—

(I)beginning on, as applicable—

(aa)the date on which an application acceptable to the Secretary is submitted for the applicable project; or

(bb)the date on which the Secretary entered into a master credit agreement for the applicable project; and

(II)ending on the date on which the Secretary executes the Federal credit instrument for the applicable project that is the subject of the secured loan.

(ii)The interest rate referred to in clause (i) is the interest rate reflected in the yield on United States Treasury securities of a similar maturity to the maturity of the secured loan in effect, as applicable to the project that is the subject of the secured loan, on—

(I)the date described in clause (i)(I)(aa); or

(II)the date described in clause (i)(I)(bb).

(iii)The interest rate of a secured loan may not be lowered pursuant to clause (i) by more than 1½ percentage points (150 basis points).

(5)The final maturity date of the secured loan shall be the earlier of—

(A)the date that is 35 years after the date of substantial completion of the project; and

(B)if the useful life of the capital asset being financed is of a lesser period, the date that is the end of the useful life of the asset.

(6)(A)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 bankruptcy, insolvency, or liquidation of the obligor.

(B)(i)The Secretary shall waive the requirement under subparagraph (A) for a public agency borrower that is financing ongoing capital programs and has outstanding senior bonds under a preexisting indenture, if—

(I)the secured loan is rated in the A category or higher; and

(II)the secured loan is secured and payable from pledged revenues not affected by project performance, such as a tax-backed revenue pledge or a system-backed pledge of project revenues.

(ii)If the Secretary waives the nonsubordination requirement under this subparagraph—

(I)the maximum credit subsidy amount 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 amount, if any.

(7)(A)The Secretary may collect a fee on or after the date of the financial close of a Federal credit instrument under this section in an amount equal to not more than $3,000,000 to cover all or a portion of the costs to the Federal Government of providing the Federal credit instrument.

(B)If the Secretary collects a fee from an obligor under subparagraph (A) to cover all or a portion of the costs to the Federal Government of providing a secured loan, the obligor and the Secretary may amend the terms of the secured loan to add to the principal of the secured loan an amount equal to the amount of the fee collected by the Secretary.

(8)The total Federal assistance provided for a project under the CIFIA program, including any grant provided under section 16374 of this title, shall not exceed an amount equal to 80 percent of the eligible project costs.

(c)(1)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)Scheduled loan repayments 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)(A)If, at any time after the date of substantial completion of a project, the project is unable to generate sufficient revenues in excess of reasonable and necessary operating expenses 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 outstanding balance of the secured loan.

(B)Any payment deferred under subparagraph (A) shall—

(i)continue to accrue interest in accordance with subsection (b)(4) until fully repaid; and

(ii)be scheduled to be amortized over the remaining term of the loan.

(C)(i)Any payment deferral under subparagraph (A) shall be contingent on the project meeting criteria established by the Secretary.

(ii)The criteria established pursuant to clause (i) shall include standards for the reasonable prospect of repayment.

(4)(A)Any excess revenues that remain after satisfying scheduled debt service requirements on the project obligations and secured loan and all deposit requirements under the terms of any trust agreement, bond resolution, or similar agreement securing project obligations may be applied annually to prepay the secured loan, without penalty.

(B)A secured loan may be prepaid at any time without penalty from the proceeds of refinancing from non-Federal funding sources.

(d)(1)Subject to paragraph (2), as soon as practicable after substantial completion of a project and after notifying the obligor, the Secretary may sell to another entity or reoffer into the capital markets a secured loan for the project if the Secretary determines that the sale or reoffering can be made on favorable terms.

(2)In making a sale or reoffering under paragraph (1), the Secretary may not change any original term or condition of the secured loan without the written consent of the obligor.

(e)(1)The Secretary may provide a loan guarantee to a lender in lieu of making a secured loan under this section if the Secretary determines that the budgetary cost of the loan guarantee is substantially the same as, or less than, that of a secured loan.

(2)The terms of a loan guarantee under paragraph (1) shall be consistent with the terms required under this section for a secured loan, except that the rate on the guaranteed loan and any prepayment features shall be negotiated between the obligor and the lender, with the consent of the Secretary.

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 16373, Pub. L. 109–58, title IX, § 999C, Aug. 8, 2005, 119 Stat. 921, related to additional requirements for awards, prior to repeal by Pub. L. 113–67, div. A, title III, § 301(a), Dec. 26, 2013, 127 Stat. 1181.

Statutory Notes and Related Subsidiaries

Wage Rate RequirementsFor provisions relating to rates of wages to be paid to laborers and mechanics on projects for

Construction

, alteration, or repair work funded under div. D or an amendment by div. D of Pub. L. 117–58, including authority of Secretary of Labor, see section 18851 of this title.

§16373 Secured loans