New PABs For Trains In Florida

The Bond Buyer - - Front Page - By Shelly Sigo

BRADENTON, Fla. – Pri­vate ac­tiv­ity bonds re­main in the mix for the sec­ond, more com­pli­cated phase of the All Aboard Florida pas­sen­ger rail project.

Bright­line, a sub­sidiary of All Aboard Florida, said that the U.S. Depart­ment of Trans­porta­tion on Fri­day ap­proved a $1.15 bil­lion pri­vate ac­tiv­ity bond al­lo­ca­tion for Phase 2 of the project from West Palm Beach to Or­lando.

The com­pany also said “all fi­nanc­ing op­tions” for Phase 2 are be­ing an­a­lyzed, in­clud­ing a low-in­ter­est fed­eral Rail­road Re­ha­bil­i­ta­tion and Im­prove­ment Fi­nanc­ing loan. The amount of the loan re­quest was not dis­closed.

“We are pleased to have this fi­nanc­ing op­tion avail­able,” Bright­line Chief Ex­ec­u­tive Of­fi­cer Dave Howard said in a state­ment an­nounc­ing the PAB al­lo­ca­tion. “We ap­pre­ci­ate the lead­er­ship of USDOT as they work to move ma­jor in­fra­struc­ture projects for­ward, cre­at­ing thou­sands of jobs and stim­u­lat­ing hun­dreds of mil­lions

of dol­lars in eco­nomic devel­op­ment.”

The com­pany closed last week on the sale of $600 mil­lion of PABs to fi­nance a por­tion of Phase 1 be­tween Mi­ami and West Palm Beach, it said. The bonds were sold by the Florida Devel­op­ment Fi­nance Corp., a statewide con­duit is­suer.

Howard called the ad­di­tional al­lo­ca­tion from USDOT “an­other ma­jor step for­ward for Bright­line’s Phase 2 ex­ten­sion to Or­lando,” now that all fed­eral ap­provals are in hand, an ap­par­ent ref­er­ence to the re­cent con­clu­sion of en­vi­ron­men­tal re­views for the Phase 2 seg­ment.

Re­gard­less of fi­nanc­ing op­tion the com­pany choses for the ex­ten­sion of ser­vice to Or­lando, project op­po­nents said they are con­sid­er­ing a le­gal chal­lenge.

At­tor­neys for Cit­i­zens Against Rail Ex­pan­sion in Florida, along with Martin and In­dian River coun­ties – who pre­vi­ously sued the USDOT over the project’s Phase 2 fi­nanc­ing – ac­cused USDOT of caus­ing con­fu­sion and ma­neu­ver­ing the re­lease of in­for­ma­tion to skirt re­quire­ments of the Na­tional En­vi­ron­men­tal Pol­icy Act, or NEPA.

In a Dec. 19 let­ter to USDOT Sec­re­tary Elaine Chao, they de­manded to know if the agency had ap­proved PABs and a Rail­road Re­ha­bil­i­ta­tion and Im­prove­ment Fi­nanc­ing loan. They also asked about the sta­tus of the ap­pli­ca­tions.

The at­tor­neys pointed to in­for­ma­tion on USDOT’s web­site sug­gest­ing that a RRIF loan was be­ing sought. The loan ap­pli­ca­tion, the web­site said, is what prompted the Dec. 15 re­lease of a “record of de­ci­sion,” a signed doc­u­ment grant­ing fi­nal fed­eral ap­proval of Phase 2 of the pas­sen­ger train project un­der the NEPA process.

The same week the record of de­ci­sion was re­leased, they said the Florida Devel­op­ment Fi­nance Corp. sched­uled an emer­gency meet­ing for Dec. 18 to ap­prove a $1.15 bil­lion PAB is­suance on be­half of the All Aboard Florida/Bright­line project. That meet­ing was can­celed af­ter Congress en­acted a fi­nal tax bill that al­lows con­tin­ued is­suance of PABs, un­like the ini­tial House bill.

“For the DOT to cre­ate am­bi­gu­ity that sows pub­lic con­fu­sion about the spe­cific pub­lic fi­nanc­ing pro­gram is ex­tremely trou­bling for those neg­a­tively im­pacted by the project,” they told Chao.

“Hol­i­day sea­son” ma­neu­ver­ing, the at­tor­neys wrote, also oc­curred on Dec. 22, 2014 when the USDOT is­sued an ap­proval let­ter that al­lowed AAF to sell $1.75 bil­lion of PABs to fi­nance Phase 1 and Phase 2 – an ap­proval that came prior to the re­lease of a record of de­ci­sion for Phase 2.

That led In­dian River and Martin coun­ties to file sep­a­rate fed­eral law­suits chal­leng­ing the bond fi­nanc­ing. Both coun­ties are in Phase 2 of the project but no train stops are planned.

The coun­ties cited numer­ous con­cerns in their suits about pub­lic safety and his­tor­i­cal sites, among oth­ers, charg­ing that those is­sues had not been ad­dressed to their sat­is­fac­tion in the en­vi­ron­men­tal re­view process.

As the suits pro­ceeded, U.S. Dis­trict Judge Christo­pher Cooper ruled that the coun­ties proved that the USDOT’s ap­proval of the $1.75 bil­lion of PABs should have been con­sid­ered in the NEPA process – a de­ci­sion that would have been prece­dent-set­ting.

Their cases be­came moot when All Aboard Florida with­drew its ap­pli­ca­tion for $1.75 bil­lion of bonds and re­ceived a $600 mil­lion al­lo­ca­tion to fi­nance only Phase 1, which had al­ready re­ceived NEPA ap­proval.

Un­like the first phase, which up­graded an ex­ist­ing rail right of way, the sec­ond phase will re­quire 40 miles of new right of way to reach Or­lando.

“AAF and DOT have not yet re­vealed which type of pub­lic sub­sidy it is pro­vid­ing – a RRIF loan, PABs, or a com­bi­na­tion of the forms of sub­sidy,” at­tor­neys for the coun­ties and CARE FL wrote, adding that tax­pay­ers have been “left in the dark” in a crit­i­cal re­view process that could re­sult in new lit­i­ga­tion.

Com­pany of­fi­cials did not say what prompted Fri­day’s an­nounce­ment about the new bond al­lo­ca­tion and the fed­eral loan ap­pli­ca­tion.

USDOT did not re­lease any in­for­ma­tion about the fi­nanc­ings. Its web­site list­ing PAB al­lo­ca­tions has not been up­dated since Jan­uary, and still lists the $600 mil­lion al­lo­ca­tion as unis­sued.

Brent Han­lon, chair­man of CARE FL, said the or­ga­ni­za­tion has al­ways known that the rail­road would only be built us­ing gov­ern­ment sub­si­dies. CARE has long cited its be­lief that tax-ex­empt PAB fi­nanc­ing is a sub­sidy be­cause the fed­eral gov­ern­ment fore­goes tax­a­tion on the bond in­ter­est.

“We in­tend to go back to court and ad­dress the il­le­gal­i­ties of AAF’s pro­posal,” Han­lon said Fri­day, af­ter the com­pany an­nounced the new PAB al­lo­ca­tion. “The fight is far from over.”

The Florida Devel­op­ment Fi­nance Corp. has not resched­uled its meet­ing to au­tho­rize is­suance of the new bonds. On Dec. 18, FDFC Di­rec­tor Bill Spivey said in an in­ter­view that the fi­nanc­ing does not per­tain to In­dian River, Martin and St. Lu­cie coun­ties.

“No bond pro­ceeds are be­ing spent in the three coun­ties that are in op­po­si­tion to this,” Spivey said. “I think that’s the point peo­ple don’t un­der­stand.”

Op­po­nents of the in­ter­city pas­sen­ger train project have not said whether they are con­sid­er­ing lit­i­ga­tion in­volv­ing the bond fi­nanc­ing or the re­cent re­lease of the record of de­ci­sion.

A no­tice of the record of de­ci­sion will soon ap­pear in the Fed­eral Reg­is­ter, be­gin­ning a 150-day pe­riod dur­ing which le­gal chal­lenges can be filed, ac­cord­ing to the USDOT’s web­site.

Bills propos­ing to reg­u­late pas­sen­ger rail projects, tar­get­ing All Aboard Florida, are pend­ing be­fore the Leg­is­la­ture.

State Sen. Deb­bie May­field, R-Mel­bourne, filed SB 572, known as the Florida High­Speed Pas­sen­ger Rail Safety Act, which has passed one of three com­mit­tees. May­field’s dis­trict in­cludes por­tions of the coun­ties op- pos­ing All Aboard Florida.

May­field’s bill would im­pose new reg­u­la­tions on trains op­er­at­ing at speeds of 80 mph or more, in­clud­ing mak­ing their own­ers re­spon­si­ble for in­stalling safety mea­sures and cov­er­ing the cost of rail cross­ing main­te­nance. It would also re­quire ad­di­tional safety fea­tures for pedes­trian cross­ings.

“There is no doubt that we are go­ing to have high speed rail com­ing through the state,” May­field said at the Se­nate’s Com­mit­tee on Trans­porta­tion meet­ing Nov. 14. “The idea is to set this in place and in mo­tion so we aren’t com­ing back try­ing to fix a sit­u­a­tion that we have.”

Bright­line of­fi­cials op­pose the bill. May filed a sim­i­lar bill this year but it did not pass.

State Reps. Erin Grall, R-Vero Beach, and MaryLynn Ma­gar, R-Te­questa, have also co-spon­sored House Bill 525 ad­dress­ing re­spon­si­bil­ity for cer­tain high-speed rail costs.

HB 525, which has not been sched­uled for a com­mit­tee hear­ing, would make a high­speed rail sys­tem op­er­a­tor solely re­spon­si­ble for all main­te­nance costs as­so­ci­ated with the safety equip­ment in­stalled at pub­lic rail­road high­way-grade and pedes­trian cross­ings.

The mea­sure also states that no gov­ern­ment would be re­spon­si­ble for costs as­so­ci­ated with the main­te­nance ne­c­es­sary to op­er­ate a high-speed pas­sen­ger rail sys­tem un­less the gov­ern­men­tal en­tity “ex­pressly con­sents in writ­ing.”

All Aboard Florida plans to run 32 Bright­line-branded trains daily on the 235-mile­long route at com­ple­tion.

The pas­sen­ger train ser­vice will travel along ex­ist­ing tracks owned by Florida East Coast Rail­way from Mi­ami to Co­coa on the east coast. From Co­coa, new tracks will be laid to Or­lando In­ter­na­tional Air­port. q

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