BRADENTON, Fla. - The trustee for the defaulted Garcon Point toll bridge bonds in northwest Florida wants to sue the state if enough bondholders step forward to authorize the legal challenge.
Bank of New York Mellon said in a market notice this month that the Florida Department of Transportation has failed to live up to its agreement with the Santa Rosa Bay Bridge Authority, which issued bonds that were accelerated in 2013 after several years in default.
BNY Mellon has unsuccessfully asked the FDOT, after Bridge Authority members resigned, to step in and increase tolls on the controversial bridge to make debt service payments on $132.43 million of outstanding bonds.
"The trustee will file suit against FDOT provided it receives direction and satisfactory indemnity against the costs, expenses and liabilities, including attorneys' fees and expenses, that may be incurred in connection therewith from bondholders of not less than a majority in aggregate principal amount of the bonds outstanding," BNY Mellon said in a Sept. 8 notice on the Municipal Securities Rulemaking Board's EMMA filing system.
Without approval and indemnification from a majority of bondholders, "the trustee is unwilling to file suit," the notice said.
Several times this year, the trustee asked the FDOT to raise tolls on the 3.5-mile northwest Florida span often called "the bridge to nowhere," though it does provide a quicker route than alternative travel connections between Milton and Gulf Breeze in Santa Rosa County.
The FDOT operates and maintains the bridge, and collects the tolls through a lease-purchase agreement with the bridge authority.
In response to the trustee's latest request for a toll hike, FDOT general council Tom Thomas said in a May 8 letter that the agency "generally has no legal right, or ability, to set tolls on behalf of the authority, therefore, it is not clear to the department that it has any authority" to increase the tolls.
Since the bridge authority failed to increase toll rates, "it is our position that the department is now specifically required to raise the tolls," the trustee's attorney Warren Bloom at Greenburg Traurig said in a May 12 letter to Thomas.
"I hope the department will reconsider its position in this matter and promptly raise the tolls as requested," Bloom wrote. "As I think you would agree, the bondholders lend money to construct infrastructure that has benefitted the citizens of Florida (northwest Florida in particular) and are entitled to have their debt repaid according to the documents that govern the bonds."
Bloom also said that failing to fulfill the obligations "does little to encourage other private parties to invest in Florida's infrastructure."
The trustee hired FTI Consulting Inc., to study the necessary toll increases to pay debt service. FTI has recommended that transponder tolls increase to $4 from $3.75, cash transactions increase to $5 from $3.75, and that transponder discounts for heavy users decrease to 25% from 50%.
As of June 30, 2014, the Santa Rosa Bay Bridge Authority owed the FDOT $28.3 million for bridge expenses and a prior loan, which won't be paid until the bonds mature.
In 1996, the Bridge Authority issued $75.5 million of uninsured current-interest term bonds maturing in 2028, and $19.4 million of capital appreciation bonds maturing in 2022 to build the two lane Garcon Point toll bridge.
The bridge never met traffic projections and reserves were used to help make debt-service payments until the first payment default occurred in July 2011.