AUTHORITY: Implementing and authorized by Sections 49.25d and 49.25g-1 of the Civil Administrative Code of Illinois (Ill.Rev.Stat. 1985, ch. 127, pars. 49.25d and 49.25g-1).

SOURCE: Adopted at 10 Ill. Reg. 13345, effective July 28, 1986.

SUBPART A: INTRODUCTION

 

Section 800.10  Scope

 

The Department has the power to enter into agreements to loan or grant state funds to any railroad, unit of local government, rail user, or owner or lessee of a railroad right-of-way to rehabilitate, improve or construct rail facilities. (Ill. Rev. Stat. 1985, ch. 127, par. 49.25g-1) The purposes of the program are to preserve private sector rail service on freight lines and to promote economic development through the retention and development of rail-dependent industry. The program is administered by the Illinois Department of Transportation, Bureau of Railroads. These rules contain the Illinois Department of Transportation's requirements for rail freight capital improvement projects and the management and administration of the projects funded under this program.

 

Section 800.20  Definitions

 

The following words or phrases when used in this Part shall have the meanings ascribed to them below.

 

            "Benefit/Cost" – The ratio of project benefits and the net cost of the project.

 

            "Benefits" are categorized into three groups:  

            Economic Benefits – measured as the addition/ retention of employment or the avoidable loss of business and its related jobs to a community.

 

            Public Benefits – measured as the incremental reduction in directly related government expenditures resulting from the implementation of the rail project.

 

            Transportation Benefits – measured as the avoidable, additional cost of transporting affected freight shipments by other modes.

 

            "Contract" – The written agreement between the recipient and the Department defining the project and terms of the loan or grant.

 

            "Contractor" – Any person or organization, including its directors, officers and others engaged in managerial positions, which perform or seek to perform services or provide or seek to provide materials to the recipient; or any contractor of such person or organization.

 

            "Department" – The Illinois Department of Transportation.

 

            "FRA" – The Federal Railroad Administration

 

            "Fiscal Year" – The Fiscal Year of the State of Illinois; July 1 to June 30. A Fiscal Year is identified by the calendar year in which it ends.

 

            "Net Project Cost" – The total expenditure of funds of a proposed project minus the salvage value of materials extracted from the line during the construction of that project.

 

            "Project Completion" – When notified by the loan or grant recipient that a project is completed, Department engineers will perform a field inspection within 30 days unless weather conditions or a strike or lockout prevent inspection. If the work meets the terms of the loan or grant agreement, the project will be deemed complete and the recipient will be notified in writing.

 

            "Project Life" – The number of years the recipient is willing to commit itself, or is required to provide service over a line. In the benefit/cost analysis, project life is the period of time over which proposed project benefits and costs are calculated.

 

            "Recipient" – Grant or loan recipient.

 

            "Residual Value of Project Materials" – As determined by the Department, the residual value will be the expected salvage value of project materials based on existing market values plus or minus the projected increase or decrease in value based on previous price trends.

 

            "Salvage Value of Extracted Materials" – The expected salvage value of the materials which would be removed during a line rehabilitation  and sold, either for scrap or reuse. Salvage value will be determined by the Department based on a survey of existing market prices.

 

            "Secretary" – Secretary of the Illinois Department of Transportation.

 

            "Term of Contract":

 

            Loan:  The period of time it takes for the recipient to repay the loan.

 

            Grant:  The number of years the recipient has committed itself, or is expected, to provide or use service over a line. The minimum service period is five years.

SUBPART B: ELIGIBILITY PROCESS

 

Section 800.110  Review of Proposed Project

 

a)         A person or entity asking for assistance shall submit a formal, written request for State assistance to the Illinois Department of Transportation, Chief, Bureau of Railroads. Technical assistance is offered on request in the form of explaining the rights and duties of potential grant or loan recipients under federal abandonment regulations (49 U.S.C. 109) and the provision of engineering estimates or design plans (or verification of same) for projects.

 

b)         Following the receipt of the request, the Department will immediately commence an analysis of the potential benefits and costs of each proposed project. Each proposed investment option will be analyzed by the Bureau of Railroads.

 

Section 800.120  Project Analysis

 

a)         Economic Analysis

 

1)         The Department will gather background, historical or projected cost and revenues on the line, including on-line and off-line costs, maintenance expenditures, and administrative overhead. Current or proposed operation including service frequency, crew size and engines are incorporated.

 

2)         The Department will use shipper-provided information to estimate the impacts due to loss of rail service or benefits of new or improved rail service, including actual and projected car loadings, employment impacts and transportation costs.

 

3)         The Department will use the information obtained in Section 800.120(a)(2) to determine the total benefits to be realized from the proposed project over a project life of at least five years which reflects a minimum service or use commitment required for State investment.

 

b)         Engineering Analysis

 

1)         The Department will perform a detailed field inspection of the project. It will sample track condition (a minimum of 5 samples per line) and assess each switch, crossing, and structure on a line. It will use the railroad's published engineering standards or appropriate AREA specifications (1985-86 Manual For Railway Engineering, Vol. I & II and Portfolio of Trackwork Plans, American Railway Engineering Association, Washington, D.C. 1985. This incorporation by reference does not include any subsequent amendments or editions) where required.

 

2)         The Department will distribute shipper surveys to every shipper on a line to determine existing and projected transportation needs for which State assistance is requested. This proprietary information will be used to determine impacts of the loss or failure to provide service. Based on the inspection, the Department will develop a physical description of the project, including track, switches, crossings and structures, emphasizing the condition and load bearing capability of the components.

 

3)         The project description will be used to estimate the necessary construction, rehabilitation and/or improvement costs to bring the line up to (or maintain) the appropriate Federal Railroad Administration (FRA) safety class standards (49 CFR 213 (1985)). The Department will perform or verify engineering cost estimates to determine the estimated cost of the project for necessary construction or rehabilitation. The development or verification shall include, as applicable, the land that must be acquired, the lineal footage of track to be constructed, improved, or rehabilitated, material items needed, number of units of materials, unit cost of materials, total materials costs, net salvage value of materials to be replaced, labor cost to install materials, special equipment costs, and the total net cost.

 

4)         Based on these estimates the Department will determine the cost component of the benefit/cost analysis by calculating the capital investment required to implement the project, less the residual value of the project material after the project life has been realized.

 

c)         Comparison of Economic Benefits to Project Costs

            The Department will determine a project's eligibility based on a benefit/cost ratio. Failure of benefits to exceed costs will render a proposed project ineligible.

 

d)         The applicant may respond to the preliminary review by providing additional benefit and cost information.

 

Section 800.130  Public Review of State Rail Plan Update

 

a)         The detailed line analyses will be published in the State Rail Plan Update or as individual amendments thereto. They will be available for public review from the Department. Notification of updates and amendments will be placed in the official State paper and project area local papers. This will provide all interested parties with the opportunity to review each project analyzed and understand the benefits and cost associated with each project. The State Rail Plan Update will contain the following items:  

 

1)         Documentation of any changes in Department rules which may affect the plan.

 

2)         Evaluations of the efficacy of the project(s) for employment retention or development associated with continued or new rail services as described in Section 800.20 under "Economic Benefits."

 

3)         Updated information from previous published plans or amendments (if any) which have been found to be incomplete or incorrect as a result of actions on the part of shippers, railroads, or units of local government.

 

4)         A list of lines abandoned or services which have been discontinued since the last submission of the Plan Update.

 

5)         Changes in State legislation affecting State funds for rail purposes.

 

6)         Other updates and analyses as may be appropriate as a result of actions by railroad companies, the Interstate Commerce Commission, or other State agencies, such as:  

 

A)        changes in System Diagram Maps produced by railroads;

 

B)        petitions for abandonment under 49 U.S.C. 109 (1985) or Ill. Rev. Stat. 1985, ch. 95˝, pars. 18C-1701 et seq., or Interstate or Illinois Commerce Commission actions on such petitions.

 

b)         Notice of the opportunity for a public hearing on the Rail Plan shall be published. The public shall be allowed thirty days to review and comment on each project analyzed. Notice of the hearing shall be published.

 

Section 800.140  Determination of Project Potential

 

a)         Following the thirty day review period, the Department will use the line analysis and the record of written and oral public comments to reevaluate and, if necessary, amend its project analysis.

 

b)         Eligible projects will be funded in the order that the applicant submits completed acquisition of right-of-way agreements, railroad service agreements, and additional funding agreements, if necessary as funds are available.

SUBPART C: PROJECT REQUIREMENTS

 

Section 800.310  Procurement

 

a)         The recipient shall use its best efforts (as outlined in (b), (c), (d) and (e)) below to coordinate the construction and purchase of the itemized materials in the stated quantities at or below the estimated prices listed in the contract. In the event actual prices are less than or more than the estimates contained in the contract, the Department will authorize the recipient to internally adjust the line item budgets up or down to maximize purchasing power. An internal adjustment is one that affects the unit price of the elements of a line item. The Department will permit these adjustments when the request is verified via an engineering evaluation. Such adjustments are necessary to account for changes in unit prices (and therefore the line item total) which may vary by quantity and with the passage of time. These adjustments shall not increase the State's funding. Any upward internal adjustment of line item budgets over ten percent shall require an amendment to the contract. Authorization is required to assure that line item adjustments are not, in the case of lowering the unit price, resulting in the purchase of inferior or substandard materials. In the case of raising the unit costs, authorization is required to assure that line item adjustments are not resulting in the purchase of materials at costs greater than available elsewhere, or for materials that exceed project specifications.  Downward adjustments of more than ten percent may occur with the Department's permission.

 

b)         The recipient shall, to the extent of its ability and consistent with the other provisions of the contract, take all cash and trade discounts, tax exemptions or other credits in connection with goods and services purchased or used on any approved project or task. The recipient may procure goods and services from the recipient's stocks or under long-term continuing supply contracts.

 

c)         All procurement transactions, regardless of whether by sealed bids or by negotiation and without regard to dollar value, shall be conducted in a manner that provides maximum open and free competition with these requirements:  

 

1)         that no fewer than three bidders will be solicited unless fewer than three bidders can be identified; and

 

2)         that the lowest bid responding to the bid requirements is selected.

 

d)         Solicitations of offers, whether by competitive sealed bids or competitive negotiation, shall incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description shall not, in  competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured, and when necessary, shall set forth those essential characteristics and standards to which it must conform if it is to satisfy its intended use.

 

e)         Awards shall be made only to responsible contractors who possess the potential ability to perform successfully under the terms and conditions of a proposed procurement. The ability to perform will be based on the record of past performance, and financial and technical resources.

 

Section 800.320  Financing the Project

 

a)         The Department will make available to the recipient in the form of a loan or grant, such funds in such amounts as are necessary to finance the project. The Department generally offers funds in the form of a loan except for one or more of the following reasons:  

 

1)         When the offering of a grant instead of a loan affects the projects viability;

 

2)         When the offering of a grant instead of a loan attracts investment by another party or parties greater than the State's investment;

 

3)         When the offering of a grant instead of a loan is necessary due to a recipient's limited ability to repay loan amounts;

 

4)         When the offering of a grant instead of a loan is warranted because the projected profitability of the rail operation subsequent to the rehabilitation, improvement or construction provides insufficient return to cover the repayment of loaned funds; and

 

5)         When the offering of a grant instead of a loan is warranted because of the high level of public, transportation, and economic benefits which will accrue as a result of the project.

 

b)         The terms and conditions of a loan shall be:  

 

1)         the term of a loan shall be the minimum equal to that of the benefits, or the benefit stream (five year benefit equals a five year loan);

 

2)         the interest rate shall never be higher than the prime; and

 

3)         repayment may be made without interest penalties.

 

c)         State funds will be provided on a reimbursement basis. The State's total share of the project cost shall be stated in the contract. The terms and conditions under which the Department will make such funds available to the recipient are contained in the contract.

 

d)         The recipient may not delete or add to any of the work items in the contract without written approval of the Department. Deletions and additions will be approved provided they do not affect the costs or benefits of a project in such a way that they cause the cost of a project to equal or exceed the benefits of a project as described in 800.120. Any costs incurred by the recipient in excess of the net project cost, as provided in the contract, shall be the sole responsibility of the recipient. The obligation of the Department to make funds available pursuant to the contract and to make payments under the contract is subject to appropriations by the Illinois General Assembly.

 

e)         Costs incurred prior to contract execution are ineligible as project costs.

 

Section 800.330  Use and Maintenance of Property

 

The property which is constructed, improved or rehabilitated under the contract is to be used in conjunction with rail freight service for a minimum of five years following project completion or while any funds loaned by the Department remain unrepaid. The property must also be maintained at the level established in the contract for a minimum of five years or while any funds loaned by the Department remain unrepaid.

 

Section 800.340  Ownership of Material and Property Management

 

All materials financed with State funds provided under the contract shall be owned by the recipient. In the event the recipient invoices the Department under Section 800.380 for materials prior to installation of said materials, the recipient shall not, for the period that such materials are held in inventory, sell, lease, assign, mortgage, or otherwise transfer its interest in the materials without prior written approval of the Department. Approval will be granted when the transfer is made subject to the State's security interest.

 

Section 800.350  Security Interest

 

a)         The Department shall retain a purchase money security interest on all such rail and ties, purchased with State funds under the contract.  The Department will perfect said security interest at its own expense.

 

b)         All loan recipients shall grant the Department a first mortgage on rail and ties financed with State funds provided under the contract.  The recipient shall be responsible for preparing mortgage documents enforceable by the Department and filing executed mortgage documents with the appropriate Recorder(s) of Deeds. The recipient shall provide the Department with legal descriptions of the property on which rail and ties are to be installed.

 

c)         The Department's obligation to make payments to the recipient under Section 800.380 is expressly conditioned upon prior receipt by the Department of the above-described mortgage documents and legal descriptions. The recipient shall provide the Department with an inventory identifying materials financed with State funds. Ties and rail shall be identifiable by distinctive durable mark or brand.  Upon full payment and satisfaction of all of the recipient's liabilities under the contract, the Department will provide the recipient with a written release of its security.

 

Section 800.360  Default

 

Default under the contract shall occur if a loan recipient fails to make any payment to the Department as required by the contract. Upon the occurrence of such a default, the Department will have the right to foreclose.

 

Section 800.370  Monitoring of Work

 

a)         During construction, the Department or its representatives will monitor work in progress to verify that all work items are being done to contract specifications.

 

b)         The Department shall have the right to have one or more of its representatives present on the work site during working hours. Upon a minimum of 24 hours notice, the recipient shall allow the Department to visit the project site and inspect all books and records of the recipient relating to the project.

 

Section 800.380  Payments

 

The Department will make payments, only for materials purchased or work completed, within ninety days of the receipt by the Department of itemized invoices showing a balance due to the recipient. The Department will make payment provided that the invoices are appropriately supported by supplemental information which shows an itemization of labor performed, materials procured and installed, and special equipment employed.

 

Section 800.390  Retainage

 

The Department shall retain up to ten percent of its total share of a project as follows:  For projects of less than $25,000, no retainage shall be employed, for projects of more than $25,000, but less than $500,000, ten percent shall be retained. For projects of $500,000 or greater, five percent shall be retained. The following are the two instances when the State's retainage is released:  

 

a)         if the State is financing only part of the project, the retainage shall be released to the recipient within ninety calendar days of when the Department's engineer verifies that the State's share of the project has been completed, and the remaining portion of the project is proceeding on schedule. If the remaining portion of the project is not on schedule, then the State will hold the retainage until total project completion; and

 

b)         if the State is financing the total project, the retainage will be released to the recipient within ninety days after the Department's engineer has approved total project completion.

 

Section 800.400  Indemnity

 

If any loss, damage, destruction, injury or death occurs to any person or property as a result of or in the course of the performance by recipient of its obligations under the contract, (including acts or omissions of a contractor) whether intentional or unintentional, recipient agrees to indemnify and hold harmless the State from any and all liability of State which may result from any such loss, damage, destruction, injury or death, including all related costs and legal fees; provided, however, that recipient is not obligated to indemnify and hold harmless the State from liability for injury or death when the injury or death is caused by the negligence or intentional act of an employee or agent of the State.

 

Section 800.410  Project Audit

 

a)         Upon a minimum 24-hour notice, the recipient shall allow the Department to inspect all books and records of the recipient relating to the project or task receiving funds under the contract. The recipient shall maintain the following until the expiration of three years after the project completion:  

 

1)         records that identify the expenditure of funds for the projects;

 

2)         supporting source documents;

 

3)         records that are required for the recipient to show compliance with the contract; and

 

4)         records necessary to disclose fully the amount and disposition of funds provided under the contract and charged to an approved project or task, evidencing in detail the nature and propriety of the charges, the total cost of each undertaking for which the assistance was loaned or granted, the amount of the costs of the undertaking supplied by other sources, and books, records, and documents needed for a full and complete verification of recipient's obligations and responsibilities and all payments and charges under the contract. These records include bid specifications, bid advertisement, bids received, copies of contracts and subcontracts, detailed billings, work schedules, labor time sheets, invoices of materials procured, an inventory of materials installed, and invoices of special equipment.

 

b)         The recipient shall maintain a set of accounting records separately identifiable for the project funded by the State.

 

c)         Subcontracts:  

            The recipient shall include the substance of the provisions of subsection (a) of this Section in all subcontracts entered pursuant to the contract.

 

d)         Overpayment by State:  

            If the Department's final audit determines that the recipient's allowable costs are less than the amount that has been paid to recipient, that amount will be subtracted from the retained amount provided for in Section 800.380. An allowable cost is a line item, identified on the contract, for which the State has agreed to provide funds. If the retained amount is insufficient for these purposes, the recipient shall repay the Department within ninety days after the Department notifies recipient of the amount of said overpayment. The recipient reserves the right to correct its billing within ninety days after the Department notifies recipient of an overpayment by submitting other allowable costs for reimbursement.  The recipient shall repay the State within ninety days after receiving Department notification of adjusted overpayment.

 

Section 800.420  Termination

 

a)         Recipient's Termination:  

            The recipient shall have the right to terminate the contract in the event of a material breach of the contract by the Department. The recipient shall provide the Department with thirty days written notice in the exercise of its rights under this provision. The recipient will repay loaned amounts according to contract repayment provisions.  The recipient will not be required to repay funds granted prior to termination.

 

b)         Suspension of Funding or Termination by Department:  

            The Department shall have the right to suspend funding of the project at any time and for so long as recipient is in material breach of the contract as provided in Section 800.430(a) or in any way fails to substantially comply with material terms and conditions of the contract. If the Department determines that noncompliance cannot be cured then the Department shall terminate the contract upon thirty days written notice.

 

c)         If the State exercises its right to terminate the contract, then all amounts loaned or granted shall be repaid to the State. If, for whatever reason, the loan recipient exercises its right to terminate the contract, then all amounts loaned shall be repaid to the State.

 

Section 800.430  Material Breach

 

a)         Recipient:  

            Material breach under the contract will occur in the following instances:  

 

1)         any sale or disposition of the rail facility (track and materials) which is not approved in writing by the Department;

 

2)         failure to maintain the property at the level to which it was rehabilitated, improved or constructed, as provided in Section 800.330;

 

3)         failure to use the property for rail service, as provided in Section 800.330;

 

4)         filing of an application for abandonment under 49 U.S.C. 109 (1985) or Ill. Rev. Stat. 1985, ch. 95˝, pars. 18C-1701 et seq. in the Interstate Commerce Commission or the Illinois Commerce Commission (92 Ill. Adm. Code 1520); and

 

5)         failure to comply with any portion of the contract involving the rights or obligations of the parties.

 

b)         Department:  

            Material breach under the contract will occur when and if the Department fails to make any payment due to the recipient within a maximum of ninety days of receipt of a properly prepared invoice and any necessary documentation of work from the recipient.

 

Section 800.440  Force Majeure

 

In the event that the recipient or a contractor is delayed, hindered in, or prevented from the performance of any act required by the contract by reason of any of the following: 

 

a)         strikes, lockouts, labor troubles;

 

b)         unduly harsh weather conditions, not including foreseeable and ordinary adverse weather conditions such as rain and snow, which prevent the normal performance of the rehabilitation project;

 

c)         inability to procure materials;

 

d)         failure of power;

 

e)         riots, insurrection, or war; or,

 

f)         any Act of God;

 

the time of performance of such delayed party may be extended for a time period equal to such delay.

 

Section 800.450  Dispute or Disagreement

 

The Chief of the Bureau of Railroads of the Department shall act as referee in all questions or disputes arising under the terms of a contract.  In the event a recipient is aggrieved by the decision of the Bureau Chief, the recipient may appeal in writing to the Secretary, completely outlining the nature and extent of the question or questions appealed together with any supporting documentation. Department shall not delay resolution of any such dispute or disagreement beyond 90 days. In the event that the recipient is aggrieved by the decision of the Department, the recipient shall have the right to seek appropriate remedies at law or in equity.

 

Section 800.460  Amendments to a Contract

 

a)         Amendments to loan or grant contracts are considered in three instances:  

 

1)         when the Department and the recipient determine, through a field inspection by their engineer(s), that the construction or rehabilitation to be performed under an agreement exceeds that which is necessary to achieve the benefits of the project;

 

2)         when the Department and the recipient find that construction or rehabilitation fails to meet that which is required to achieve the project benefits; or

 

3)         when the Department and the recipient find that alterations and technical adjustments to the terms and conditions of an agreement would mutually benefit the signatories to the agreement and would not jeopardize the benefits underlying the project.

 

b)         The amendment will detail the precise terms and conditions and/or engineering alterations which will be necessary.