BRADENTON, Fla. – The owners of Florida’s private passenger train project plan to issue $1.15 billion of private activity bonds by Dec. 31 if, the tax bill pending before Congress restricts or terminates the use of PABs.
The Florida Development Finance Corp. scheduled an emergency meeting for Monday to approve All Aboard Florida’s request that it serve as the conduit issuer for the bonds, executive director Bill Spivey said Friday.
“They are trying to do this by the end of the year,” Spivey said, “to try to preserve the ability to issue the bonds as much as they can.”
The House version of the tax bill killed private activity bonds, while the Senate version allowed them to continue. The final reconciliation between the two reportedly kept PABs, but details were unclear Friday afternoon.
The bonds will finance portions of the intercity passenger train project between West Palm Beach and Orlando, which is being called the “north segment.”
Spivey did not know if the U.S. Department of Transportation had allocated PABs from its capacity, as the agency had done for $600 million of bonds that were issued last month. The allocation did not come from Florida’s PAB volume cap, according to Florida Division of Bond Finance Director Ben Watkins.
“Unfortunately, we cannot comment,” a USDOT spokeswoman said on Friday, when asked if All Aboard Florida received a new federal allocation for the $1.15 billion.
If no allocation is available for Monday’s meeting, Spivey said the board will be asked to give a conditional approval to the deal, which means the bonds can’t be issued until an allocation is received.
On Friday, All Aboard Florida did not comment about the upcoming bond deal but did say that the U.S. Department of Transportation had issued a Record of Decision for the passenger rail project between Miami and Orlando. The Record of Decision is the final step in the National Environmental Policy Act process.
According to a notice of the FDFC meeting, which will be held in Jacksonville, bond proceeds will be held in escrow. Spivey said he thought that might be to preserve the tax-exempt status of the bonds.
“This escrow portfolio of securities, consisting of only U.S. Government Securities and Agencies, and related cash flow from escrow securities, would be the sole source of payment to the north segment bondholders,” the FDFC’s financial advisor said in a memo about the deal Friday afternoon.
Congress was expected to release the final tax bill late Friday. Some people said they believe it will preserve issuance of PABs, although it may eliminate the ability of muni issuers to carry forward for up to three years any unused allocations of PABs. It is not clear if the bill will address federal PABs, which are not subject to state volume caps.
The FDFC issued $600 million of PABs on behalf of All Aboard Florida Nov. 30. Several traders said nearly $3 billion in orders were received from qualified institutional investors for the start-up venture that received a speculative rating of BB-minus from Fitch Ratings.
Morgan Stanley priced the deal at par as a bullet maturity in 2047 to yield 5.625%. It included a 10-year PUT date.
The bank will also price the $1.15 billion of PABs.
Attorneys for Martin and Indian River counties, and the group Citizens Against Rail Expansion in Florida, jointly signed a letter questioning why FDFC’s meeting was slated to be held hundreds of miles away from the project.
“We respectfully request that the meeting be relocated to somewhere within the corridor of the proposed project,” the attorneys wrote. “It is highly prejudicial to conduct a meeting concerning the issuance of $1.15 billion in bonds 150 miles from the closest point of the proposed project.”
Citing a court case ruling, they said “FDFC must consider the interests of the public in having a reasonable opportunity to attend.”
Spivey said the meeting location was chosen because two FDFC board members live in or near Jacksonville, and the agency often holds meetings away from areas affected by the proposed financing.
As a courtesy, Spivey said he personally provided notice of the meeting to Martin and Indian River counties and several state lawmakers because they oppose the project. St. Lucie County has also objected to it.
When FDFC first approved being the conduit issuer in 2015, he said the bond resolution has said that bond proceeds would be spent only for portions of the project located in Miami-Dade, Broward, Palm Beach, Brevard and Orange counties. All Aboard Florida is using private dollars in the opposing counties, he added.
“No bond proceeds are being spent in the three counties that are in opposition to this,” he said. “I think that’s the point people don’t understand.”
On Friday, Spivey said due to the distance of the meeting, FDFC made available a call-in number for people who want to monitor Monday’s proceedings. The number is posted on FDFC’s website.