While All Aboard Florida remains tight-lipped about its financing strategy, two counties opposed to the intercity train project are weighing new legal challenges.

New lawsuits contemplated by Martin and Indian River counties that could delay the project have drawn criticism from Florida TaxWatch, a public spending think tank that says it believes the intercity train service is a much-needed transportation alternative to fight congestion.

A Brightline passenger train in testing in Miami
A Brightline passenger train travels through Miami during a test run for crew certification and training in August 2017. All Aboard Florida

At the same time, a deadline is looming for All Aboard Florida to issue $1.15 billion of private activity bonds to finance portions of its second phase, the 168 miles between West Palm Beach and Orlando.

Last month, AAF-owned Brightline - the nation’s first privately owned passenger train system in decades - began introductory service between West Palm Beach and Fort Lauderdale. The company continues working to expand service to Miami, to complete the first 66.5-mile phase of its project.

The threat of new lawsuits from the two counties, which one attorney said could be filed in a couple of weeks, come as the train’s private owners face a May 31 deadline to issue $1.15 billion of private activity bonds.

U.S. Department of Transportation Under Secretary for Transportation Policy Derek Kan gave the company a provisional tax-exempt bond allocation to finance portions of the project’s second phase on Dec. 20.

AAF Holdings LLC must issue the debt by May 31, Kan said in a three-page letter obtained by The Bond Buyer. He did not explain why the deadline was imposed.

“While the bonds may be issued in tranches, this provisional allocation will expire on May 31, 2018 and any portion of the PAB authority allocated for the project that has not been used for the issuance of bonds by that date will automatically return to the DOT’s remaining aggregate amount of PAB authority,” Kan wrote.

AAF can reapply for the $1.15 billion allocation if it expires before the bonds are issued, Kan said, but such a request would be reviewed without preference or priority over other projects.

The USDOT did not immediately respond to questions asking it to explain the May 31 deadline.

“We do not have any comment on our financing activities,” said a Brightline spokeswoman.

AAF has already issued $600 million of PABs for phase 1 between Miami and West Palm Beach. The Florida Development Finance Corp. issued the bonds in December. They were rated BB-minus by Fitch Ratings.

AAF has also applied for a low interest Railroad Rehabilitation and Improvement Financing loan through the Federal Railroad Administration to finance phase 2, but has declined to say whether it will use the loan program or PABs, or both.

Indian River and Martin counties, where the train will pass through without stopping as AAF constructs phase 2, are moving forward with new lawsuits challenging the passenger train project for a second time, officials said.

The counties both filed federal lawsuits in early 2015 after USDOT allocated $1.75 billion of bonds for the entire project.

They contended that the bond authorization violated the National Environmental Policy Act because the NEPA process was incomplete, and cited public safety and environmental issues among their concerns.

U.S. District Judge Christopher R. Cooper initially ruled that the bonds should have been considered in the NEPA process, but ultimately dismissed the suits in May 2017 after AAF withdrew its request for the $1.75 billion of PABs.

The company subsequently obtained a $600 million PAB allocation for its first phase, leaving phase 2 without any funding, a move that mooted the legal challenges.

Since that time, AAF secured a new PAB allocation for phase 2 and the NEPA process was completed Dec. 15, 2017 when the “record of decision” was released granting federal approval for construction from West Palm Beach to Orlando.

Cooper’s ruling dismissing the previous lawsuits said the counties could return to the federal court after a record of decision was issued, Indian River County Attorney Dylan Reingold said in an interview Friday. The county authorized him to file a new lawsuit in December.

“We’re looking at the record of decision closely and reviewing the final environmental impact statement” to determine potential claims for a new suit, he said.

About $500,000 is in the county’s budget for the litigation. The outside law firm Bryan Cave LLP is representing Indian River County, as it did the first time.

Martin County is consulting with Indian River County and the local anti-train group Citizens Against Rail Expansion, or CARE, according to Martin County Senior Assistant County Attorney Ruth Holmes.

“We are communicating on legal and technical issues,” said Holmes, who added that attorney-client privilege prevented her from discussing details further.

Attorney Stephen Ryan, a partner at McDermott Will & Emery LLP, continues to represent the county and CARE. County commissioners authorized attorneys to prepare a new complaint on Jan. 9. The county has about $100,000 left over from previous litigation to spend.

Brightline said in a statement that a number of legal challenges brought by the two counties have been unsuccessful.

“Such new litigation, if it is filed, would be nothing more than another parochial attempt to halt a project that is already benefiting the state of Florida,” the statement said. “Local leaders continue the wasteful spending of taxpayer dollars to stop Brightline rather than working with the company as Brevard County did to identify a potential future station location.”

AAF provided The Bond Buyer with a report released last month by Florida TaxWatch, an organization that says its mission is to provide “high quality, independent research and analysis” on state and local government taxation, expenditures, policies, and programs.

The 24-page report, called “Derailing Brightline – The Cost of Taxpayer-Funded Lawsuits,” says because of Florida’s fast-growing population and pressured transportation system “there is strong public support for improved intercity passenger rail service as a way to reduce highway congestion and provide travelers with an additional means of transportation.”

“Millions of taxpayer dollars have been spent to stop this privately-funded activity which is in the best interest of the state,” TaxWatch President Dominic Calabro said in the report’s cover letter. “These taxpayer-funded legal actions call into question the wisdom of trying to stop Brightline, instead of working with All Aboard Florida to identify and mitigate the local governments’ concerns.”

When the 235-mile project is completed, the TaxWatch report said, it will have a direct total economic impact of $915.6 million. In a footnote, the report cited a 2014 study by the Washington Economics Group Inc., a study that was commissioned by All Aboard Florida.

The counties, in an area of the state known as the Treasure Coast, have spent $6.8 million to “derail Brightline,” the report says.

Although Martin and Indian River counties are contesting the adverse impacts of the project on their environment, neighborhoods, and other important resources, the report said another reason the counties object to the project is that “Brightline will speed through the Treasure Coast region with no planned stops.”

“This is not about a stop. This needs to be very clear,” said Indian River County Attorney Reingold. “This is a project that is inherently dangerous and should not be in the place it is going to be at the speeds proposed.”

Officials in both counties have said the high-speed train will cut through heavily populated areas with numerous street-level train crossings where they believe more safety improvements are needed than those planned by All Aboard Florida.

Miami-Dade County Mayor Carlos Gimenez has also asked the Florida Department of Transportation to evaluate safety measures at AAF’s railway crossings, according to the Miami Herald.

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