BRADENTON, Fla. - In the first challenge of its kind, a federal judge will hear arguments about whether the private All Aboard Florida passenger train project can benefit from $1.75 billion in private activity bonds allocated by the U.S Department of Transportation.
A joint hearing is scheduled Friday before U.S. District Judge Christopher Cooper on requests by Florida's Indian River and Martin counties for preliminary injunctions.
Both counties are seeking to block All Aboard from issuing the bonds.
The planned 235-mile train system, owned by Fortress Investment Group, will connect Miami and Orlando; it will pass through a number of counties, including Indian River and Martin, where no stops are planned.
Both counties object to various aspects of the $3.5 billion passenger train project, which has yet to receive final federal environmental permits.
The injunctions being considered Friday were requested in separate federal lawsuits each county filed in the U.S. District of Columbia challenging the $1.75 billion in PABs, the largest amount ever allocated by the USDOT.
The lawsuits are the first to ever challenge a PAB allocation, according to federal transportation officials.
Attorneys for All Aboard Florida have asked the judge to require that Indian River and Martin each post $50 million bonds if an injunction is granted.
"The requested injunction would do AAF significant damage, to the tune of at least $277 million dollars," the developer of the train system said in a recent court document.
AAF said the damage amount represents the increased cost of the project over the first 10 years if the developer is forced to finance the project with taxable bonds.
"That increase in cost would obviously be significant to AAF, but would not prevent it from moving forward with the project," court documents said.
Both counties asked the judge to allow them to post nominal bonds if an injunction is granted.
All Aboard applied for the private activity bonding last August after the Florida Development Finance Corp. agreed to be the conduit issuer of the debt.
The USDOT approved the allocation on Dec. 22 along with several stipulations, including one that requires the bonds to be issued by July 1. No reason was given for that deadline.
Even if the bonds are issued by July 1, the USDOT has prohibited All Aboard Florida from using any bond proceeds until 45 days after the release of a final environmental impact statement. There has been no indication when that federal clearance will be given.
The Florida Development Finance Corp. was scheduled to meet on May 28 so its board could consider the bond resolution for the All Aboard America project.
That meeting was cancelled, and the conduit issuer has not rescheduled it.
All Aboard Florida said that it requested the May 28 meeting be cancelled due to a scheduling conflict with Friday's federal court hearing.
In court records Thursday, AAF made public for the first time a ridership study in what it said was a response to "misstatements" made in a February economic analysis of the project by Dr. John Friedman of Brown University.
The ridership study, prepared by traffic consultant the Louis Berger Group Inc. in 2012, concluded that after a three-year ramp up period AAF could see 2.8 million riders annually on short distance trips between Miami and West Palm Beach, and 2.5 million riders who travel longer distances from south Florida to Orlando.
Annual fare revenue would range from $64.1 million for short-distance travelers to $229.4 million for riders who take the longer route.
The Berger study assumed that the fare for a non-business traveler riding between Miami and West Palm Beach would be as high as $17 and $22 for a business traveler. From Miami to Orlando, the cost for a non-business fare could be as high as $93.80 and for the business traveler $143.46.
Friedman's analysis, done without the AAF's ridership study, concluded that AAF would have serious problems generating enough operating profit to cover its debt.
AAF President Michael Reininger told the court that the Berger study establishes that the passenger train project is "much needed and the ridership and revenue estimates for the project are robust."