Florida passenger train owners want more time to issue private activity bonds
The private owners of Florida’s Brightline-branded passenger train system have asked federal officials for more time to issue $1.15 billion of private activity bonds, as work continues on the 235-mile Miami-to-Orlando project.
When the PAB allocation was granted in December, the U.S. Department of Transportation told Brightline's owner, All Aboard Florida, that it must sell the debt by May 31.
“AAF/Brightline has submitted a request for an extension which the department is currently evaluating,” a DOT spokesman said Friday. “No decisions have been made.”
AAF plans to use the second PAB allocation it has received on portions of its rail service between West Palm Beach and Orlando, a 168-mile second phase on which the company has said it will begin construction this year.
The company has also applied for a low-interest Railroad Rehabilitation and Improvement Financing loan from the Federal Railroad Administration.
All Aboard Florida did not respond to a request for comment.
The privately held subsidiary of Florida East Coast Industries LLC has already issued $600 million of PABs to finance portions of phase one, the 66.5 miles between Miami and West Palm Beach.
The company is expected to file its response to a federal lawsuit the week of May 21, a suit that for a second time challenges federal environmental studies and permits to build the passenger train project.
The suit, which also attempts to block issuance of the PABs, was filed in February by Martin County, Indian River County, Citizens Against Rail Expansion (CARE), and Indian River County Emergency Services against the USDOT and the FRA.
AAF, which has been granted intervenor status in the suit, and USDOT are expected to request that the complaint be dismissed.
The lawsuit, an action filed under the Administrative Procedure Act, contends that the approval of $1.15 billion of PABs for phase 2 of AAF’s project must be set aside because it was “arbitrary, capricious, an abuse of discretion, in excess of statutory authority and otherwise contrary to law.”
The PAB allocation violates requirements of the Internal Revenue Service because it does not fall into one of 15 specified categories the IRS code allows for the issuance of tax-exempt private activity bonds, the suit argues. One of the 15 categories is high-speed intercity rail facility.
To qualify as a high-speed intercity rail facility, federal statutes say the passenger train must reach speeds in excess of 150 mph between stops. The suit claims the train will be capable of attaining a maximum speed of 125 miles per hour in some areas and 110 mph along the Florida East Coast Railway corridor, which the AAF will share with slower freight trains.
Because the project is not a high-speed intercity rail facility, the USDOT and FRA approved the bonds for the project based on the theory that it is a “qualified highway or surface freight transfer facility,” the complaint said. “But the project is a passenger railroad. It is neither a highway nor a freight transfer facility.”
If the project is considered a highway or freight transfer facility, it must have received funds under Title 23 of the Federal Highway Administration. “On information and belief, the AAF project has not received a single dollar of Title 23 funds,” and the bond approval must be vacated, said the suit.
The company has argued that it did benefit from Title 23 funding in recent appearances before Congressional committees, where federal lawmakers raised questions about how the project qualified for PABs as well as safety issues.
The Florida Development Finance Corp. issued phase one bonds in December. The 30-year deal attracted $3 billion in orders, and sold with a yield of 5.62%. The bonds were rated BB-minus by Fitch Ratings.
Brightline began operating between West Palm Beach and Fort Lauderdale in January, while work was still under way completing the MiamiCentral train station.
On May 11, AAF took state and federal dignitaries and media on tours of on its recently completed segment service to Miami.
The company plans to extend service to Miami beginning Saturday, with eight round trips weekdays and seven round trips on weekends.