Florida’s Bright­line Train Clears a Le­gal Hur­dle

The Bond Buyer - - Front Page - By Shelly Sigo

Two fed­eral de­ci­sions may clear the way for the pri­vate own­ers of Florida’s pas­sen­ger train sys­tem to is­sue $1.15 bil­lion of pri­vate ac­tiv­ity bonds and to pur­sue a low-in­ter­est fed­eral loan to fi­nance its pro­ject.

Fed­eral District Judge Christo­pher Cooper on Christ­mas Eve threw out a suit by In­dian River County that claimed the U.S. De­part­ment of Trans­porta­tion im­prop­erly ap­proved the bond al­lo­ca­tion for Bright­line, for­merly All Aboard Florida.

A fed­eral judge granted sum­mary judg­ment to Bright­line, clear­ing its own­ers to is­sue pri­vate ac­tiv­ity bonds.

Cooper granted mo­tions for

sum­mary judg­ment sought by the USDOT and Bright­line, which will soon be re­named Vir­gin Trains USA.

The com­pany also re­ceived more time to is­sue the PABs.

On Fri­day, the USDOT ap­proved a six­month ex­ten­sion of the Dec. 31 dead­line to is­sue the bonds, in­di­cat­ing that it will be the last time it will con­sider such a re­quest.

Bright­line ex­pects to sell the debt in Jan­uary “as a mar­ket ex­isted to sell the bonds and it was dif­fi­cult to pre­dict how long that win­dow of op­por­tu­nity would last,” the com­pany said in a court fil­ing.

“We ap­pre­ci­ate Judge Cooper’s well-rea­soned rul­ing,” said Bright­line Spokes­woman Ali Soule. “The court’s de­ci­sion adds mo­men­tum to our ef­forts of con­nect­ing Or­lando to South Florida. We re­main fo­cused on ex­plor­ing lo­ca­tions for a Bright­line sta­tion in the Trea­sure Coast and are en­cour­aged by the tre­men­dous amounts of sup­port we have re­ceived in the re­gion.”

In­dian River County may ap­peal Cooper’s de­ci­sion.

“We’re dis­ap­pointed [with the rul­ing] but we’re dis­cussing with out­side coun­sel our op­tions on how we move for­ward,” As­sis­tant County At­tor­ney Kate Cot­ner said Wed­nes­day. “There will be a pub­lic dis­cus­sion about it.”

The County Com­mis­sion, which re­cently hired an at­tor­ney to file a new law­suit to de­ter­mine if the county must fund im­prove­ments needed by Bright­line at rail­road cross­ings, holds its next meet­ing on Jan. 8.

Prior to the de­ci­sion giv­ing Bright­line more time to is­sue the bonds, a key Con­gres­sional player wrote to Trans­porta­tion Sec­re­tary Elaine Chao urg­ing her to ap­prove the ex­ten­sion.

“I thank the sec­re­tary for her quick ac­tion on this mat­ter,” Rep. Mario Diaz-Balart, R-Mi­ami, said Wed­nes­day. “She and the de­part­ment con­tinue to rec­og­nize the im­por­tance of Bright­line and the pos­i­tive im­pact its ex­panded ser­vice would have in Florida.”

Diaz-Balart, who is cur­rently chair­man of the House Trans­porta­tion, Hous­ing and Ur­ban De­vel­op­ment Sub­com­mit­tee, said he will con­tinue to work with Chao on the Bright­line pro­ject “to move it for­ward.”

In ad­di­tion to giv­ing the com­pany more time to is­sue the PABs, the USDOT said the bond ex­ten­sion would pro­vide Bright­line with time to com­plete its ap­pli­ca­tion for a Rail­road Re­ha­bil­i­ta­tion and Im­prove­ment Fi­nanc­ing pro­gram loan, ac­cord­ing to the Dec. 21 let­ter from the USDOT.

“The de­part­ment un­der­stands that the ex­ten­sion will pro­vide AAF/Bright­line with ad­di­tional time to com­plete the un­der­writ­ing of a po­ten­tial RRIF loan and close on sub­or­di­nate PABs and tax­able sub­or­di­nate bonds,” wrote USDOT Un­der Sec­re­tary of Trans­porta­tion for Pol­icy Derek Kan.

All Aboard Florida filed an ap­pli­ca­tion in July 2017 for a di­rect RRIF loan to fi­nance work be­tween Mi­ami and Or­lando, the Build Amer­ica Bureau’s web­site shows.

The web­site doesn’t in­di­cate the amount of the re­quested loan, although it says the cost of build­ing the route is $3.074 bil­lion.

The web­site says that an el­i­gi­bil­ity re­view has been com­pleted and a credit com­mit­tee is de­ter­min­ing if the com­pany will re­ceived an in­vi­ta­tion to file a for­mal ap­pli­ca­tion.

Bright­line, which has faced lit­i­ga­tion much of the time since it was granted three PAB al­lo­ca­tions, ap­peared to be warned that Fri­day’s USDOT’s ex­ten­sion could be its last.

“Any amount of un­used bond al­lo­ca­tion fol­low­ing an ini­tial bond is­suance will au­to­mat­i­cally re­turn to USDOT’s re­main­ing ag­gre­gate amount of pri­vate ac­tiv­ity bonds, and thus be avail­able for other el­i­gi­ble ap­pli­cants,” Kan wrote to Bright­line Vice Pres­i­dent Kolleen Cobb.

The most re­cent al­lo­ca­tion, $1.15 bil­lion to fi­nance por­tions of the route from West Palm Beach to Or­lando, was granted in De­cem­ber 2017 with the USDOT set­ting a May 31 to is­sue the debt.

With fed­eral lit­i­ga­tion pend­ing, the com­pany re­quested more time to sell the bonds. The USDOT gave the com­pany un­til Dec. 31, which has now been ex­tended a se­cond time to June 30.

Mean­while, an­other le­gal dis­pute is brew­ing over who funds high­way cross­ing im­prove­ments rec­om­mended by fed­eral agen­cies that re­viewed the pas­sen­ger train pro­ject.

In­dian River County com­mis­sion­ers voted unan­i­mously Dec. 11 to file a new law­suit seek­ing a declara­tory judg­ment to de­ter­mine if the county or Bright­line must pay for im­prove­ments needed at the county’s 32 at-grade high­way cross­ings.

Bright­line ap­proached In­dian River County in 2013 ask­ing that the FECR agree­ments be amended to make the com­pany, then known as All Aboard Florida, a third-party ben­e­fi­ciary. Bright­line has agree­ments to use FECR rail­road lines.

The county re­fused to amend the agree­ments, but the com­pany must make cap­i­tal im­prove­ments at cross­ings to sup­port its higher-speed in­ter­city pas­sen­ger trains.

Mur­phy & Walker, in pre­lim­i­nary re­search into the case, de­ter­mined that with­out amend­ments to the FECR agree­ments Bright­line can­not pass on its rail­road cross­ing main­te­nance and in­stal­la­tion costs to the county, com­mis­sion­ers were told at the Dec. 11 meet­ing.

A declara­tory judg­ment would de­fine the terms of the cross­ing agree­ments. In­dian River County has es­ti­mated it would cost it $8.2 mil­lion through 2030 to main­tain Bright­line’s safety im­prove­ments, In­dian River County At­tor­ney Dy­lan Rein­gold tes­ti­fied be­fore the House Com­mit­tee on Over­sight and Gov­ern­ment Re­form’s Sub­com­mit­tee on Gov­ern­ment Op­er­a­tions in April. The cross­ing agree­ments are in perpetuity.

The county, which has 146,000 res­i­dents, won’t be able to limit tax­pay­ers’ costs be­cause the county has no con­trol over the costs, he said.

Rein­gold also told the com­mit­tee that the county op­poses the higher-speed pas­sen­ger train “be­cause it is not safe and be­cause All Aboard Florida is seek­ing to pay its bills with tax­payer dol­lars from the pock­ets of our con­stituents.”

Although Bright­line has faced le­gal chal­lenges, the pas­sen­ger rail com­pany is forg­ing ahead with work on its se­cond phase be­tween West Palm Beach and Or­lando and plan­ning for its third phase from Or­lando to Tampa.

Pa­trick God­dard, pres­i­dent of the com­pany, told the Cen­tral Florida Ex­press­way Au­thor­ity Dec. 13 that ser­vice be­tween Mi­ami and West Palm Beach is “ramp­ing up very nicely” and ex­pe­ri­enc­ing strong growth.

God­dard said con­trac­tors have been se­lected to build the West Palm Beach to Or­lando seg­ment. It is es­ti­mated that con­struc­tion will take 30 to 36 months.

“We ex­pect the first train to roll into the new in­ter­modal ter­mi­nal fa­cil­ity at the Or­lando In­ter­na­tional Air­port in the fourth quar­ter of 2021 or the first quar­ter of 2022,” he said.

In late Novem­ber, the com­pany re­ceived ap­proval from the Florida De­part­ment of Trans­porta­tion and the Cen­tral Florida Ex­press­way Au­thor­ity to ne­go­ti­ate leas­ing the rights of way it needs to ex­tend pas­sen­ger ser­vice 88 miles be­tween cen­tral Florida and the west coast.

Fortress In­vest­ment Group LLC will re­tain ma­jor­ity own­er­ship of Bright­line, and its cur­rent man­age­ment team will re­main in place. The com­pany will tran­si­tion its con­sumer fac­ing brand to Vir­gin Trains USA dur­ing 2019.

Vir­gin Trains also filed a form S-1 reg­is­tra­tion state­ment Nov. 16 with the Se­cu­ri­ties and Ex­change Com­mis­sion an­nounc­ing its plan for an ini­tial pub­lic of­fer­ing of com­mon stock. The date of the IPO and amount of stock to be is­sued have not yet been dis­closed. ◽

A Christ­mas Eve court de­ci­sion cleared a hur­dle for Florida’s Bright­line to is­sue $1.15 buil­lion of pri­vate ac­tiv­ity bonds.

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