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                                                       Calendar No. 548
107th Congress                                                   Report
                                 SENATE
 2d Session                                                     107-238
_______________________________________________________________________



                    RAILROAD TRACK MODERNIZATION ACT

                                OF 2002

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                    on

                                S. 1220





                 August 1, 2002.--Ordered to be printed

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
99-010                    WASHINGTON : 2002

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                      one hundred seventh congress
                             second session

              ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska
    Virginia                         CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
MAX CLELAND, Georgia                 GORDON SMITH, Oregon
BARBARA BOXER, California            PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida
                     Kevin D. Kayes, Staff Director
                       Moses Boyd, Chief Counsel
                      Gregg Elias, General Counsel
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Ann Begeman, Republican Deputy Staff Director

                                                       Calendar No. 548
107th Congress                                                   Report
                                 SENATE
 2d Session                                                     107-238

======================================================================



 
                RAILROAD TRACK MODERNIZATION ACT OF 2002

                                _______
                                

                 August 1, 2002.--Ordered to be printed

                                _______
                                

      Mr. Hollings, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 1220]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 1220) ``A Bill To authorize the 
Secretary of Transportation to establish a grant program for 
the rehabilitation, preservation, or improvements of railroad 
track'', having considered the same, reports favorably thereon 
with amendments and recommends that the bill as amended do 
pass.

                          Purpose of the Bill

    The purposes of this bill, as reported, are to assist 
smaller railroads in upgrading their tracks and roadbed, 
including the ability to accommodate newer, heavier freight 
cars on their lines, and to provide financial assistance to 
States to relocate rail lines or construct grade separations to 
mitigate traffic congestion.

                          Background and Needs

    Class II and Class III rail carriers are classified by the 
Surface Transportation Board based on their annual revenues. 
Class II railroads are regional carriers that operate at least 
350 miles of track and/or earned revenues between $40 million 
and $261.9 million in 2000. Class III railroads are small line 
haul or switching and terminal carriers, generally known as 
short lines, that operate less than 350 miles of track and 
earned less than $40 million in 2000. Although some smaller 
Class II and Class III railroads have existed for decades, 
several hundred new short line and regional railroads have been 
created since the enactment of the Staggers Rail Act of 1980 
(Staggers Act).
    Prior to the Staggers Act reforms that permitted large 
railroads (Class I rail carriers with revenues in 2000 
exceeding $261.9 million) to abandon unproductive lines more 
easily, deterioration of the rail network, especially on light-
density lines serving smaller towns and rural areas, was 
widespread. The generally higher operating costs of the Class I 
carriers, combined with low traffic levels, made many light-
density lines money-losing enterprises for the large railroads. 
Prior to 1980, most such lines were shed by Class I carriers 
(which the Interstate Commerce Commission (ICC) regulatory 
process permitted) through outright abandonment, removing the 
lines permanently from the rail network.
    The Staggers Act encouraged railroads to sell rather than 
abandon branch lines by establishing a new feeder line 
development program and by requiring that railroads make lines 
to be abandoned available for subsidy or sale. This made it 
easier for Class I railroads to sell or lease light density 
lines to smaller or start-up operations. In addition, Class I 
carriers quickly came to realize the benefits to their own 
systems of selling off high-cost, low-utilization lines to 
lower-cost operators, while retaining the customers on those 
lines. Together, these circumstances led to a boom in the 
formation of Class II and Class III railroads. In 1980, there 
were 220 short line railroads in the United States; today there 
are over 500.
    Short line and regional railroads are an important and 
growing component of the railroad industry. Today, they operate 
and maintain nearly one-third of the American railroad 
industry's route mileage, and account for 9 percent of the rail 
industry's freight revenue and 12 percent of railroad 
employment. Since 1982, short lines and regional railroads have 
assumed operations in areas where rail service would have been 
abandoned by the Class I railroads. Today, more than one 
quarter of rail freight carloads in the United States originate 
or terminate on short line or regional railroads.
    Some smaller railroads have succeeded financially, while 
others have not. In the majority of cases, the infrastructure 
acquired by the new smaller operators was already severely 
deteriorated by Class I standards, but still sufficiently sound 
to allow low-density (and often low-speed) freight operations. 
Besides attracting sufficient revenue, a secondary struggle by 
the smaller freight railroads involves acquiring sufficient 
capital to maintain and possibly upgrade the quality of the 
infrastructure inherited from the former owners of these lines.
    Further complicating the capital needs of smaller railroads 
has been the introduction of the new generation of heavier, 
higher-capacity freight cars, now built to a 286,000-pound 
weight standard. Used increasingly by the Class I railroads, 
these heavier cars require upgrade of tracks, ties, ballast, 
and bridges. A recent study funded in part by the Federal 
Railroad Administration and conducted under contract by the 
American Short Line and Regional Railroad Association 
established a need of $6.8 billion for small railroads to 
upgrade their track and facilities to handle these new, heavier 
286,000-pound freight cars. Because short lines typically 
receive and move freight in carloads, not in 100-car unit 
trains, they are not realizing the productivity benefits of 
these larger, heavier cars, yet the cost to upgrade their track 
to handle these cars is no less expensive.
    The heavier fleets increase the operating stresses and wear 
and tear on track systems, and depending on the level of 
deterioration, could prevent entirely operation of 286,000-
pound cars on certain light density lines. On a system-wide 
basis, this effect would impact the interoperability of 
equipment on the United States freight rail system.

                      Summary of Major Provisions

    S. 1220 contains three main components. First, it amends 
title 49 of the United States Code to establish a program of 
capital grants to Class II and Class III railroads, or 
alternatively, with the concurrence of such railroads, to a 
State or local government to rehabilitate, preserve, and 
improve railroad tracks. This grant program would be available 
to short lines and regional carriers to improve railroad track 
(including roadbeds, bridges, and track structures) to a 
standard ensuring safe and efficient operation, including safe 
and efficient handling of 286,000-pound rail cars. Under this 
program, the Secretary of Transportation would be authorized to 
make grants to supplement direct loans or loan guarantees under 
the Railroad Rehabilitation Improvement Financing (RRIF) 
program (including grants for paying credit risk premiums, 
lowering rates of interest, or providing for a holiday on 
principal payments) for certain projects. With respect to 
projects financed by such grants, the bill would require 
implementation of certain employee protections and prevailing 
wage requirements. Second, the bill would direct the Secretary 
to study and report to Congress on such projects to determine 
the public interest benefits associated with the light density 
railroad networks in the States and their contribution to a 
multi-modal transportation system. Third, the bill would 
establish a grant program to relocate rail lines or construct 
grade separations to alleviate traffic congestion. Projects 
receiving grants under this program would be required to meet a 
cost-benefit standard. The Federal share for these projects 
would be 90 percent of the costs of the project.

                          Legislative History

    On May 9, 2001, the Subcommittee on Surface Transportation 
and Merchant Marine held an oversight hearing on the state of 
the railroad industry. In addition to testimony provided by a 
number of witnesses, Mr. Walter Brickwedel, President of the 
Oregon Short Line Railroad Association and Assistant to the 
General Manager, Central Oregon & Pacific Railroad, testified 
about the needs of Class II and Class III railroads and 
discussed the 286,000-pound car impact on smaller railroads.
    Senators Breaux and Smith (OR) introduced S. 1220 on July 
23, 2001; it is co-sponsored by Senators Brownback, Snowe, 
Wyden, Durbin, Grassley, Lincoln, Miller, Schumer, and Specter.
    On November 1, 2001, the Full Committee held a hearing on 
S. 1530, the Railroad Advancement and Infrastructure Law of the 
21st Century (RAIL-21), introduced by Senator Hollings on 
October 11, 2001. Mr. Frank Turner, President and CEO of the 
American Short Line and Regional Railroad Association, 
testified in support of S. 1530. S. 1530 incorporated the 
provisions of S. 1220 in its entirety into section 5.
    On April 18, 2002, the Committee met in executive session 
and ordered S. 1220 to be reported with amendments.
    Senators Breaux and Smith (OR) offered an amendment that 
was adopted to update the applicable years of appropriations 
and the deadlines before which the Secretary must take 
regulatory action. The amendment would also require the 
Secretary to develop criteria for awarding grants. The criteria 
include ensuring awards are made on a competitive basis, 
ensuring consideration is given to projects which are part of a 
State-sponsored rail plan, and the economic justifications for 
the project.
    Senator Lott offered an amendment that was also adopted to 
authorize the Secretary of Transportation to provide grants to 
States and communities to relocate rail lines. The amendment 
provides $350 million annually for FY 2003-2007 to States and 
political subdivisions to build a railroad tunnel, underpass, 
or overpass, or reroute rail lines to relieve traffic 
congestion.

                            Estimated Costs

    In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 3, 2002.
Hon. Ernest F. Hollings,
Chairman, Committee on Commerce, Science, and Transportation,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1220, the Railroad 
Track Modernization Act of 2002.
    If you wish further details on this estimate we will be 
pleased to provide them. The CBO staff contact is Rachel 
Milberg.
            Sincerely,
                                         Barry B. Anderson,
                                    (For Dan L. Crippen, Director.)
    Enclosure.

               Congressional Budget Office Cost Estimate


S. 1220--Railroad Track Modernization Act of 2002

    Summary: S. 1220 would authorize the Secretary of 
Transportation to administer two new grant programs. Under the 
first program, the Secretary would provide grants to states and 
to class II and class III railroads for improving railroad 
track. Under the second program, the Secretary would provide 
grants to states for relocating rail lines. The bill would 
authorize the appropriation of $2.8 billion over the 2003-2007 
period for these programs.
    CBO estimates that implementing S. 1220 would cost $1.9 
billion over the 2003-2007 period, and another $0.9 billion 
after 2007. S. 1220 would not affect direct spending or 
receipts; therefore, pay-as-you-go procedures would not apply.
    S. 1220 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
Any costs to states that receive grants under this bill would 
be incurred voluntarily.
    Estimated costs to the Federal Government: The estimated 
budgetary impact of S. 1220 is shown in the following table. 
The costs of this legislation fall within budget function 400 
(transportation).

----------------------------------------------------------------------------------------------------------------
                                                                   By Fiscal Year, in Millions of Dollars--
                                                             ---------------------------------------------------
                                                               2002    2003     2004     2005     2006     2007
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law for Railroad Track Grants:
    Budget Authority........................................      0        0        0        0        0        0
    Estimated Outlays \1\...................................      1        0        0        0        0        0
Proposed Changes:
    Authorization Level.....................................      0      700      700      700      350      350
    Estimated Outlays.......................................      0       70      350      420      490      560
Spending Under S. 1220 for Railroad Track Grants:
    Authorization Level.....................................      0      700      700      700      350      350
    Estimated Outlays \1\...................................      1       70      350      420      490      560
----------------------------------------------------------------------------------------------------------------
\1\ Outlays in 2002 are from prior appropriations for railroad capital improvement grants.

    Basis of Estimate: For this estimate, CBO assumes that S. 
1220 will be enacted in fiscal year 2002 and that the 
authorized amounts will be appropriated for each year. 
Estimates of spending are based on information from the Federal 
Railroad Administration and historical spending patterns of 
similar programs.
    S. 1220 would repeal the existing authority of the 
Secretary of Transportation to provide grants to states for 
capital improvements to railroads. No appropriations have been 
made for these grants since 1995. Instead the bill would 
authorize the Secretary to make improvement grants directly to 
certain railroads, or to states with the concurrence of a class 
II and class III railroad.
    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: S. 1220 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. States and railroads that receive funds under 
the programs authorized by the bill would be required to 
contribute up to 20 percent of the project's total cost. Any 
resulting costs to state or local governments would be incurred 
voluntarily.
    Previous CBO estimate: On June 6, 2001, CBO transmitted a 
cost estimate for H.R. 1020, the Rail Track Modernization Act 
of 2001, as ordered reported by the House Committee on 
Transportation and Infrastructure on May 16, 2001. The House 
bill would not authorize a grant program for the relocation of 
rail lines, and it would authorize appropriations for the track 
improvement grants over the 2002-2004 period rather than the 
2003-2007 period. The cost estimates reflect these differences.
    Estimate prepared by: Federal costs: Rachel Milberg; impact 
on state, local and tribal governments: Susan Sieg Tompkins; 
impact on the private sector: Jean Talarico.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

    In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:
    S. 1220 establishes two direct grant programs, both of 
which will involve paperwork associated with grant 
applications. The legislation would have no further effect on 
the number or types of individuals and businesses regulated or 
the personal privacy of affected individuals.

                      Section-by-section Analysis


Section 1. Short title.

    This Act may be cited as the ``Railroad Track Modernization 
Act of 2002."

Section 2. Capital grants for railroad track.

    This section would amend title 49, section 22301, to 
establish a program of capital grants for railroad track 
infrastructure.
    Subsection (a)(1) would direct the Secretary of 
Transportation to establish the grant program, and specifies 
that the grants may be used for rehabilitation, preservation, 
or improvement of railroad track (including roadbed, bridges, 
and related track structures) of short lines and regional 
railroads. Grants may specifically be used to rehabilitate, 
preserve, or improve track to handle 286,000-pound rail cars. 
The paragraph also specifies that grants may be awarded 
directly to a short line railroad, or, with the concurrence of 
the short line railroad, to a State or local government.
    Subsection (a)(2) would encourage short line railroads to 
utilize the expertise of State transportation officials in 
applying for and administering grants.
    Subsections (a)(3) and (a)(4) would require the Secretary 
to promulgate an interim final rule to implement the grant 
program by December 31, 2002, and a final regulation by October 
1, 2003.
    Subsection (a)(5) would direct the Secretary, in developing 
regulations, to condition the award of a grant on reasonable 
assurances that the facilities to be rehabilitated and improved 
will be economically utilized; that the grant is justified by 
demand for rail services by the railroad; and that 
consideration is given to projects that are part of a State-
sponsored rail plan and that all grants are awarded on a 
competitive basis.
    Subsection (b) would specify the maximum Federal share of 
any project receiving funds under this section to be 80 percent 
of the total project cost. The non-Federal share may be 
provided by any non-Federal source, including cash, equipment, 
supplies, or any other in-kind contribution approved by the 
Secretary.
    Subsection (c) would specify that for a project to be 
eligible to receive a grant award, it must be owned or operated 
by a Class II or Class III railroad as of the date of enactment 
of this Act.
    Subsection (d) would provide that grant funds must be 
contractually obligated within three years after the grant is 
awarded.
    Subsection (e) would allow grant funds to be used to 
supplement the existing Federal direct loan or loan guarantee 
program made under the RRIF program under section 502(d) of the 
Railroad Revitalization and Regulatory Reform Act of 1976. This 
subsection also specifies that grants may be used for paying 
credit risk premiums, lowering rates of interest, or providing 
for a holiday on principal payments associated with a section 
502(d) loan.
    Subsection (f) would require that grant recipients provide 
for fair labor arrangements, at least as protective as the 
terms imposed under section 11326(a) of title 49, United States 
Code.
    Subsection (g) would specify that Davis-Bacon Act 
requirements apply to projects using funds awarded by a grant 
under this section, and that wage rates in a collective 
bargained agreement negotiated under the Railway Labor Act are 
deemed to satisfy Davis-Bacon Act requirements.
    Subsection (h) would require that the Secretary undertake a 
study of the projects carried out under the new grant program 
to determine the public interest benefits associated with the 
light density railroad networks in the States and their 
contribution to a multi-modal transportation system. The 
Secretary is directed to report to Congress any recommendations 
regarding the eligibility of light density rail networks for 
Federal infrastructure financing by March 31, 2003.
    Subsection (i) would authorize appropriations of $350 
million for each of fiscal years 2003, 2004, and 2005.
    The section also would add a new section 22302 to chapter 
223 of title 49, United States Code, authorizing a new 
Department of Transportation capital grant program for rail 
line relocation projects.
    New section 22302(a) would establish a new capital grant 
program to provide financial assistance for local rail line 
relocation projects.
    New section 22302(b) would set eligibility standards for 
States making grant applications. Proposed rail line relocation 
projects for the improvement of a route or structure passing 
through a municipality must: (1) mitigate the adverse effects 
of rail traffic on safety or motor vehicle traffic flow in the 
municipality; (2) involve a lateral or vertical relocation of 
the rail line to avoid the closing of a grade crossing or the 
relocation of a road; and (3) meet a costs-benefits test.
    New section 22302(c) would require that for a project to be 
eligible for funding, the projected benefits of the project 
must exceed the project costs. In determining project benefits 
and costs, the Secretary is to consider: (1) the effects of the 
rail line and the rail traffic on motor vehicle and pedestrian 
traffic, safety, and area commerce, before and after the rail 
line relocation; and (2) the effects of the rail line 
relocation on freight and rail passenger operations on the rail 
line.
    New section 22302(d) would require the Secretary to 
consider, in addition to benefits and costs, the following 
factors in making grant award decisions: (1) the capability of 
the State to fund the relocation project without Federal grant 
funding; (2) the equitable treatment of various regions of the 
United States; and (3) certain allocation requirements 
described below in section 22302(e).
    New section 22302(e) would prescribe two allocation 
requirements for rail line relocation grants: (1) at least 50 
percent of all grant funding available in a fiscal year must be 
provided as grant awards of less than $20 million each; and (2) 
not more than 25 percent of the grant funding available in a 
fiscal year may be provided for any single project.
    New section 22302(f) would establish the Federal share for 
grants awarded under this authority at 90 percent of the costs.
    New section 22302(g) would establish the State share for 
grants awarded under this authority at 10 percent of the shared 
costs. The State share may be paid in the form of cash, the 
contribution of real or tangible property (including property 
provided by a person on behalf of the State), or the services 
of State employees (excluding overhead and administrative 
costs). State in-kind costs may include certain pre-application 
contributions. The shared costs of a project may not include 
any cost that is defrayed with any funds or in-kind 
contribution that a source (other than the municipality) makes 
available unless the contribution is conditioned on the 
municipality using the funds only for the project and the 
execution of the project. The Secretary is to determine which 
project costs are shared costs and which are not.
    New section 22302(h) would authorize two or more States to 
combine grants for a common project that benefits such States, 
subject to State authority.
    New section 22302(i) would direct the Secretary to 
prescribe regulations for carrying out this section.
    New section 22302(j) would include political subdivisions 
of States in the definition of ``State''.
    New section 22302(k) would authorize appropriations for the 
grant program of $350 million for each of fiscal years 2003 
through 2007.
    The section would also direct the Secretary of 
Transportation to issue temporary regulations to implement the 
grant program by October 1, 2002, and final regulations by 
April 1, 2003. Those regulations must ensure that grants are 
awarded on a competitive basis.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
material is printed in italic, existing law in which no change 
is proposed is shown in roman):

                        TITLE 49. TRANSPORTATION


                       SUBTITLE V. RAIL PROGRAMS

                           PART B. ASSISTANCE

          [CHAPTER 223. LIGHT DENSITY RAIL LINE PILOT PROJECTS


[Sec. 22301. Light density rail line pilot projects

    [(a) Grants.--The Secretary of Transportation may make 
grants to States that have State rail plans described in 
section 22102 (1) and (2), to fund pilot projects that 
demonstrate the relationship of light density railroad services 
to the statutory responsibilities of the Secretary, including 
those under title 23.
    [(b) Limitations.--Grants under this section may be made 
only for pilot projects for making capital improvements to, and 
rehabilitating, publicly and privately owned rail line 
structures, and may not be used for providing operating 
assistance.
    [(c) Private Owner Contributions.--Grants made under this 
section for projects on privately owned rail line structures 
shall include contributions by the owner of the rail line 
structures, based on the benefit to those structures, as 
determined by the Secretary.
    [(d) Study.--The Secretary shall conduct a study of the 
pilot projects carried out with grant assistance under this 
section to determine the public interest benefits associated 
with the light density railroad networks in the States and 
their contribution to a multimodal transportation system. Not 
later than March 31, 2003, the Secretary shall report to 
Congress any recommendations the Secretary considers 
appropriate regarding the eligibility of light density rail 
networks for Federal infrastructure financing.
    [(e) Authorization of Appropriations.--There are authorized 
to be appropriated to the Secretary to carry out this section 
$17,500,000 for each of the fiscal years 1998, 1999, 2000, 
2001, 2002, and 2003. Such funds shall remain available until 
expended.]

             CHAPTER 223--CAPITAL GRANTS FOR RAILROAD TRACK

Sec.
    22301. Capital grants for railroad track.
    22302. Capital grants for rail line relocation projects.

Sec. 22301. Capital grants for railroad track

  (a) Establishment of Program.--
          (1) Establishment.--The Secretary of Transportation 
        shall establish a program of capital grants for the 
        rehabilitation, preservation, or improvement of 
        railroad track (including roadbed, bridges, and related 
        track structures) of class II and class III railroads. 
        Such grants shall be for rehabilitating, preserving, or 
        improving track used primarily for freight 
        transportation to a standard ensuring that the track 
        can be operated safely and efficiently, including 
        grants for rehabilitating, preserving, or improving 
        track to handle 286,000 pound rail cars. Grants may be 
        provided under this chapter--
                  (A) directly to the class II or class III 
                railroad; or
                  (B) with the concurrence of the class II or 
                class III railroad, to a State or local 
                government.
          (2) State cooperation.--Class II and class III 
        railroad applicants for a grant under this chapter are 
        encouraged to utilize the expertise and assistance of 
        State transportation agencies in applying for and 
        administering such grants. State transportation 
        agencies are encouraged to provide such expertise and 
        assistance to such railroads.
          (3) Interim regulations.--Not later than December 31, 
        2002, the Secretary shall issue temporary regulations 
        to implement the program under this section. Subchapter 
        II of chapter 5 of title 5 does not apply to a 
        temporary regulation issued under this paragraph or to 
        an amendment to such a temporary regulation.
          (4) Final regulations.--Not later than October 1, 
        2003, the Secretary shall issue final regulations to 
        implement the program under this section.
          (5) Criteria.--In developing interim and final 
        regulations, the Secretary shall establish criteria 
        that--
                  (A) condition the award of a grant to a 
                railroad on reasonable assurances by the 
                railroad that the facilities to be 
                rehabilitated and improved will be economically 
                and efficiently utilized;
                  (B) ensure that the award of a grant is 
                justified by present and probable future demand 
                for rail services by the railroad to which the 
                grant is to be awarded;
                  (C) ensure that consideration is given to 
                projects that are part of a State-sponsored 
                rail plan; and
                  (D) ensure that all such grants are awarded 
                on a competitive basis.
  (b) Maximum Federal Share.--The maximum Federal share for 
carrying out a project under this section shall be 80 percent 
of the project cost. The non-Federal share may be provided by 
any non-Federal source in cash, equipment, or supplies. Other 
in-kind contributions may be approved by the Secretary on a 
case by case basis consistent with this chapter.
  (c) Project Eligibility.--For a project to be eligible for 
assistance under this section the track must have been operated 
or owned by a class II or class III railroad as of the date of 
the enactment of the Railroad Track Modernization Act of 2002.
  (d) Use of Funds.--Grants provided under this section shall 
be used to implement track capital projects as soon as 
possible. In no event shall grant funds be contractually 
obligated for a project later than the end of the third Federal 
fiscal year following the year in which the grant was awarded. 
Any funds not so obligated by the end of such fiscal year shall 
be returned to the Secretary for reallocation.
  (e) Additional Purpose.--In addition to making grants for 
projects as provided in subsection (a), the Secretary may also 
make grants to supplement direct loans or loan guarantees made 
under title V of the Railroad Revitalization and Regulatory 
Reform Act of 1976 (45 U.S.C. 822(d)), for projects described 
in the last sentence of section 502(d) of such title. Grants 
made under this subsection may be used, in whole or in part, 
for paying credit risk premiums, lowering rates of interest, or 
providing for a holiday on principal payments.
  (f) Employee Protection.--The Secretary shall require as a 
condition of any grant made under this section that the 
recipient railroad provide a fair arrangement at least as 
protective of the interests of employees who are affected by 
the project to be funded with the grant as the terms imposed 
under section 11326(a), as in effect on the date of the 
enactment of the Railroad Track Modernization Act of 2001.
  (g) Labor Standards.--
          (1) Prevailing wages.--The Secretary shall ensure 
        that laborers and mechanics employed by contractors and 
        subcontractors in construction work financed by a grant 
        made under this section will be paid wages not less 
        than those prevailing on similar construction in the 
        locality, as determined by the Secretary of Labor under 
        the Act of March 3, 1931 (known as the Davis-Bacon Act; 
        40 U.S.C. 276a et seq.). The Secretary shall make a 
        grant under this section only after being assured that 
        required labor standards will be maintained on the 
        construction work.
          (2) Wage rates.--Wage rates in a collective 
        bargaining agreement negotiated under the Railway Labor 
        Act (45 U.S.C. 151 et seq.) are deemed for purposes of 
        this subsection to comply with the Act of March 3, 1931 
        (known as the Davis-Bacon Act; 40 U.S.C. 276a et seq.).
  (h) Study.--The Secretary shall conduct a study of the 
projects carried out with grant assistance under this section 
to determine the public interest benefits associated with the 
light density railroad networks in the States and their 
contribution to a multimodal transportation system. Not later 
than March 31, 2003, the Secretary shall report to Congress any 
recommendations the Secretary considers appropriate regarding 
the eligibility of light density rail networks for Federal 
infrastructure financing.
  (i) Authorization of Appropriations.--There are authorized to 
be appropriated to the Secretary of Transportation $350,000,000 
for each of the fiscal years 2003 through 2005 for carrying out 
this section.

Sec. 22302. Capital grants for rail line relocation projects

  (a) Establishment of Program.--The Secretary of 
Transportation shall carry out a grant program to provide 
financial assistance for local rail line relocation projects.
  (b) Eligibility.--A State is eligible for a grant under this 
section for any project for the improvement of the route or 
structure of a rail line passing through a municipality of the 
State that--
          (1) is carried out for the purpose of mitigating the 
        adverse effects of rail traffic on safety or motor 
        vehicle traffic flow in the municipality;
          (2) involves a lateral or vertical relocation of any 
        portion of the rail line within the municipality to 
        avoid a closing of a grade crossing or the construction 
        of a road underpass or overpass; and
          (3) meets the costs-benefits requirement set forth in 
        subsection (c).
  (c) Costs-Benefits Requirement.--A grant may be awarded under 
this section for a project for the relocation of a rail line 
only if the benefits of the project for the period equal to the 
estimated economic life of the relocated rail line exceed the 
costs of the project for that period, as determined by the 
Secretary considering the following factors:
          (1) The effects of the rail line and the rail traffic 
        on motor vehicle and pedestrian traffic, safety, and 
        area commerce if the rail line were not so relocated.
          (2) The effects of the rail line, relocated as 
        proposed, on motor vehicle and pedestrian traffic, 
        safety, and area commerce.
          (3) The effects of the rail line, relocated as 
        proposed, on the freight and passenger rail operations 
        on the rail line.
  (d) Considerations for Approval of Grant Applications.--In 
addition to considering the relationship of benefits to costs 
in determining whether to award a grant to an eligible State 
under this section, the Secretary shall consider the following 
factors:
          (1) The capability of the State to fund the rail line 
        relocation project without Federal grant funding.
          (2) The requirement and limitation relating to 
        allocation of grant funds provided in subsection (e).
          (3) Equitable treatment of the various regions of the 
        United States.
  (e) Allocation Requirements.--
          (1) Grants not greater than $20,000,000.--At least 50 
        percent of all grant funds awarded under this section 
        out of funds appropriated for a fiscal year shall be 
        provided as grant awards of not more than $20,000,000 
        each.
          (2) Limitation per project.--Not more than 25 percent 
        of the total amount available for carrying out this 
        section for a fiscal year may be provided for any one 
        project in that fiscal year.
  (f) Federal Share.--The total amount of a grant awarded under 
this section for a rail line relocation project shall be 90 
percent of the shared costs of the project, as determined under 
subsection (g)(4).
  (g) State Share.--
          (1) Percentage.--A State shall pay 10 percent of the 
        shared costs of a project that is funded in part by a 
        grant awarded under this section.
          (2) Forms of contributions.--The share required by 
        paragraph (1) may be paid in cash or in kind.
          (3) In-kind contributions.--The in-kind contributions 
        that are permitted to be counted under paragraph (2) 
        for a project for a State are as follows:
                  (A) A contribution of real property or 
                tangible personal property (whether provided by 
                the State or a person for the State).
                  (B) A contribution of the services of 
                employees of the State, calculated on the basis 
                of costs incurred by the State for the pay and 
                benefits of the employees, but excluding 
                overhead and general administrative costs.
                  (C) A payment of any costs that were incurred 
                for the project before the filing of an 
                application for a grant for the project under 
                this section, and any in-kind contributions 
                that were made for the project before the 
                filing of the application, if and to the extent 
                that the costs were incurred or in-kind 
                contributions were made, as the case may be, to 
                comply with a provision of a statute required 
                to be satisfied in order to carry out the 
                project.
          (4) Costs not shared.--
                  (A) In general.--For the purposes of 
                subsection (f) and this subsection, the shared 
                costs of a project in a municipality do not 
                include any cost that is defrayed with any 
                funds or in-kind contribution that a source 
                other than the municipality makes available for 
                the use of the municipality without imposing at 
                least one of the following conditions:
                          (i) The condition that the 
                        municipality use the funds or 
                        contribution only for the project.
                          (ii) The condition that the 
                        availability of the funds or 
                        contribution to the municipality is 
                        contingent on the execution of the 
                        project.
                  (B) Determinations of the secretary.--The 
                Secretary shall determine the amount of the 
                costs, if any, that are not shared costs under 
                this paragraph and the total amount of the 
                shared costs. A determination of the Secretary 
                shall be final.
  (h) Multistate Agreements To Combine Amounts.--Two or more 
States (not including political subdivisions of States) may, 
pursuant to an agreement entered into by the States, combine 
any part of the amounts provided through grants for a project 
under this section if--
          (1) the project will benefit each of the States 
        entering into the agreement; and
          (2) the agreement is not a violation of a law of any 
        such State.
  (i) Regulations.--The Secretary shall prescribe regulations 
for carrying out this section.
  (j) State Defined.--In this section, the term `State' 
includes, except as otherwise specifically provided, a 
political subdivision of a State.
  (k) Authorization of Appropriations.--There are authorized to 
be appropriated to the Secretary for use in carrying out this 
section $350,000,000 for each of the fiscal years 2003 through 
2007.