Bondholders dealt new blow in long-running Florida toll bridge bond default case
Bondholders contending with one of the longest uncured defaults by a state-created toll road authority in Florida are dealing with another blow after Hurricane Sally sideswiped the Pensacola area in the state's panhandle in September.
No revenue is coming in now because tolls on the Garcon Point Bridge have been suspended since Sept. 15 by the Florida Department of Transportation.
UMB Bank, trustee for the bonds, contends in an ongoing lawsuit that toll collections should have resumed when the hurricane emergency ended Sept. 16, and that there is concern FDOT will continue to suspend tolls while bridge repairs are being done.
The Garcon Point toll suspension order, which has been extended several times, is currently set to end Friday. FDOT did not respond to questions about whether tolls would be lifted for the duration of the repairs.
Toll revenue bonds issued to build the 3.5-mile, two-lane Garcon Point Bridge across Santa Rosa Bay have been in default since 2011 because the span never met traffic and revenue projections. The debt was accelerated in 2013.
The tolls were removed initially to allow for evacuations in advance of Hurricane Sally, and remained suspended afterward to give local drivers an alternate route around the nearby Pensacola Bay Bridge, which became impassable after three construction barges owned by Skanska USA broke free from moorings during the hurricane, knocking down some of the roadway and damaging piers.
FDOT says a damage assessment is still underway.
The Pensacola bridge repairs are expected to take at least six months, and during that time the bridge may remain closed to all traffic, according to a YouTube video posted by FDOT.
Meanwhile, on Oct. 15, the trustee filed a motion to amend the current lawsuit to add a claim challenging FDOT’s recent suspension of the tolls on the Garcon Point Bridge, Maria Cheng of MC Advisors LLC, a consultant for a group of bondholders, told The Bond Buyer in an email Monday.
"The new claim asserts that FDOT exceeded its legal authority in suspending tolls long after the passage of any emergency associated with Hurricane Sally," Cheng said. "The bondholders intend to prosecute this new claim as quickly and vigorously as possible.”
In 2018, UMB filed a lawsuit to force the FDOT to increase toll rates on the Garcon Point Bridge. On Dec. 4, 2019, Leon County Circuit Court Judge John Cooper ordered FDOT to increase tolls.
When tolls hadn’t been raised by February of this year, Cooper ordered FDOT to increase them.
That wasn't the end of the lawsuit.
UMB contends that bondholders are also owed toll revenues from the time a rate hike was first requested in March 2015. FDOT didn't raise tolls until after it was ordered to do so by the court.
"As a direct and proximate result of FDOT's intentional failure to timely adjust the tolls, millions of dollars in higher tolls were lost that could and should have been collected and paid to plaintiff for the benefit of the bondholders," UMB said in a second-amended complaint filed Oct. 15. "Plaintiffs reasonably estimate the forfeited tolls since the initial default are in excess of $75 million."
The trustee also is requesting that the court order FDOT to pay attorneys' fees and costs.
On Oct. 14, FDOT filed a motion for final summary judgment saying that the trustee didn't have the right to seek damages as a third-party beneficiary.
"While the trustee is unsatisfied that the tolls were not increased sooner, the trustee could have sued for specific performance sooner," FDOT's attorneys wrote. "Awarding damages would create a windfall to the bondholders who receive all tolls collected on the bridge, additional interest on the accelerated bonds, and the ability to request additional toll increases pursuant to the  prior order granting specific performance.
"Bondholders were on notice at the time of purchasing the bonds that toll revenue is the sole source of revenue to repay the bonds and lower than projected traffic on the bridge was a risk the bondholders accepted," they said.
FDOT also said the bond resolution for the Garcon Point Bridge project doesn't appear to provide for the payment of attorneys' fees and costs.
After FDOT filed the motion for final summary judgment, UMB requested the court allow it to submit a second-amended complaint to address the suspension of tolls.
The Garcon Point Bridge opened in 1999, after the Santa Rosa Bay Bridge Authority issued $75.5 million of fixed-rate, current-interest bonds and $19.5 million of capital appreciation bonds to finance its construction. Toll collections never met consultants’ projections and when reserves were exhausted, the debt went into default.
The debt, for which final maturity is in 2028, was accelerated Jan. 1, 2013, when the trustee declared all principal immediately payable as a result of the default.
According to the Pensacola News Journal, the Garcon Point Bridge typically averages 6,500 vehicles a day. When it became a detour after Hurricane Sally, traffic increased to more than 31,000 vehicles daily.
In its second-amended complaint, UMB Bank is seeking to have FDOT reimburse it for the lost toll revenues based on actual daily vehicle counts. In the past when tolls were suspended, UMB said the state has reimbursed the trustee based on historical traffic counts.
Skanska is being paid $430 million by the state to widen the Pensacola Bay Bridge, which runs between the cities of Pensacola and Gulf Breeze. The company was using several dozen construction barges on the project. The job was expected to be done later this year.
On Oct. 9, FDOT sent a letter to Skanska notifying the company that the state will pursue damages to recover lost toll revenue. The state is also seeking to recover costs for damages caused by the barges and equipment that impacted the Pensacola Bay Bridge and other property.
Skanska USA said on its website Wednesday that its barges and equipment were prepared for tropical storm-force winds that had been predicted, but the storm intensified and it became impossible for workers to safely make hurricane-level preparations.
Hurricane Sally displaced 27 barges, Skanska said, adding that to date the company has removed 15 of 23 barges that ran aground. Three of four barges the hurricane pushed under the Pensacola Bay Bridge have been removed.
“We continue to work closely and collaboratively with the Florida Department of Transportation, specialized engineers and all our stakeholders to expedite repairs of the damaged sections of the eastbound [Pensacola] bridge,” the company said.
Skanska is also involved in one of Florida’s largest public-private partnerships with FDOT — the $2.3 billion, 21-mile redevelopment of Interstate 4 through the Orlando area.
“The I-4 Ultimate project recently reached a major milestone, which was the completion of the I-4/State Road 408 interchange flyover bridges in downtown Orlando,” Skanska told The Bond Buyer. “The expected completion of the project is the end of 2021.”