BRADENTON, Fla. - The developer of the private All Aboard Florida passenger train expects to complete the project even if it cannot benefit from $1.75 billion in tax exempt private activity bonds, according to documents filed in federal court Monday.
AAF's commitment to the project came in its response to a request for preliminary injunction sought by Florida's Indian River County. Both the U.S. Department of Transportation and All Aboard Florida said the county does not have standing to challenge the PAB allocation.
All Aboard said it plans to use other sources of funding, not bond proceeds, for work that it does in Indian River and Martin counties. Indian River filed a federal lawsuit challenging the bond allocation on March 31 and Martin filed a separate federal lawsuit on April 27.
Both counties are seeking preliminary injunctions to prevent the bonds from being issued while pursuing their suits. All Aboard said it could issue the bonds quickly if conduit issuer Florida Development Finance Corp. approves the bond resolution at a hearing on May 28. AAF said it would not close on the financing until after June 8.
Indian River lacks standing to bring its legal case because the USDOT's right to approve a PAB allocation is not subject to federal environmental reviews or the National Historic Preservation Act, the USDOT said in its filing Monday. Additionally, the legal challenge lacks merit because the county cannot show that the project would be stopped without the PAB financing.
AAF made arguments similar to those of the USDOT, and addressed the PAB allocation.
"Although federal tax-exempt financing is important to the project, AAF is committed to the project's success and intends to continue to move forward even if it ultimately is unable to sell tax-exempt bonds," All Aboard said in its brief.
AAF also said that it was incorrect for Indian River to have argued that the tax exemption on the bonds "amounts to a massive federal subsidy that makes the federal government responsible for the project's environmental effects."
"The tax exemption does not involve any commitment of federal funds," the AAF brief said. "The tax exemption merely allows private bondholders to avoid paying federal income tax on the interest payments they receive from AAF."
AAF said that if it could not take advantage of tax-exempt bond financing, that it would likely issue taxable bonds that would make its project more expensive to construct.
To analyze the added cost of using taxable bonds, the train company hired legal expert David Marcus, vice president of the economic and financial consulting firm Cornerstone Research.
"Based on my analysis, I conclude that issuing taxable bonds would increase the present value of the interest payments for the next 10 years made by All Aboard Florida by an amount between $277 million and $394 million," Marcus report said. "Issuing taxable bonds would lead to increased federal tax revenue over the next ten years with a present value of approximately $271 million to $294 million."
The increased cost from using taxable bonds "would obviously be significant to AAF, but would not prevent it from moving forward with the project," All Aboard said.
In addition to arguing against a preliminary injunction, AAF said that the cost of the 235-mile-long project - initially estimated at $2.6 billion - now exceeds $3.5 billion including $600 million in commitments for land and easements.
The passenger train route between Miami and Orlando with stops in Fort Lauderdale and West Palm Beach will cover 195 miles along the existing right of way owned by Florida East Coast Railway and a new 40-mile segment to Orlando that will be built. AAF and FECR are owned by Fortress Investment Group LLC.
Traveling by train is expected to take passengers three hours, "representing a time savings of roughly 25% to 30% as compared to existing travel options," AAF said.
Indian River County attorney Dylan Reingold said Tuesday that the briefs filed by AAF and USDOT are being reviewed, and the county's reply will be filed by May 18.
A hearing on the requests by Indian River and Martin counties for preliminary injunctions will be heard May 29.
