Florida passenger train project gets more time to issue private activity bonds
The owners of Florida’s privately owned Brightline-branded passenger train system have been given more time to issue $1.15 billion of private activity bonds to finance portions of the project.
The U.S. Department of Transportation on Thursday told All Aboard Florida that it now has until Dec. 31 to sell the debt to finance portions of the project’s second phase between West Palm Beach and Orlando.
“I understand that All Aboard Florida/Brightline is still coordinating several financing opportunities for the project, and is therefore requesting the provisional allocation be extended until Dec. 31, 2018,” Derek Kan, under secretary of transportation for policy, wrote to the company. “I am pleased to inform you that your request to extend your allocation…is approved.”
USDOT allocated $1.15 billion of PABs on Dec. 20, ordering the company to issue the bonds by May 31 or potentially lose the authorization.
Brightline President Patrick Goddard said in a statement that the company appreciated the extension.
“This [allocation] propels our project as we extend Brightline to Orlando, developing a transportation network that will benefit the entire state,” Goddard said. “Having recently launched service to Miami, Brightline has already created thousands of jobs and will drive millions in economic impact as we serve Florida’s residents and visitors.”
The company has also applied for a low-interest Railroad Rehabilitation and Improvement Financing loan from the Federal Railroad Administration.
“The fact that Brightline needed to request an extension underscores that their business model is questionable at best without taxpayer subsidies,” said Rep. Brian Mast, R-Fla., whose district includes part of Brightline’s route.
Mast also questioned AAF’s qualification for the bond allocation, which he said was granted by designating the project as a highway.
“The Department of Transportation’s continued disregard that Brightline is in fact not a highway is absolutely unacceptable,” Mast said. “We will continue working to hold both Brightline and the Department of Transportation accountable for their serious abuse of taxpayer dollars.”
Mast persuaded Rep. Mark Meadows, R-N.C., to chair a hearing in April on the legality of the PABs in his capacity as chairman of the House Oversight and Government Reform Subcommittee on Government Operations.
Meadows, Mast and two other Florida Republican lawmakers sent a letter to U.S. Transportation Secretary Elaine Chao on May 16 asking her to “suspend” the approval of the PABs until after the subcommittee completed its ongoing inquiry.
A bipartisan group of seven Florida lawmakers and a former congressman sent two letters to Chao supporting the use of PABs for the project.
"I am grateful to Secretary Chao for providing this extension to All Aboard Florida, allowing them to move closer towards the second phase of their Brightline rail system,” said Rep. Mario Diaz-Balart, R-Fla. “I look forward to the realization of a new transit option that will connect Southern and Central Florida."
The Florida Development Finance Corp. has already issued $600 million of bonds on behalf of AAF to finance portions of the first phase, the 66.5 miles between Miami and West Palm Beach. The bonds were sold in December.
AAF has said taxpayers are not at risk because the company has been authorized to use the debt, and that the federal government does not guarantee the bonds or assume any liability for the project.
Private investors assume 100% percent of the risk, the company has said, and “federal, state, and local governments receive millions of dollars in new tax revenue that result from the investment.”
In 2014, Mast said a federal district court judge in the first lawsuit challenging the project found that the cost to taxpayers for Brightline’s original $1.75 billion PAB allocation would be up to $600 million because bond investors would not pay income tax on the interest.
“Their continued claim that Brightline is ‘not publicly funded at all’ is factually incorrect,” Mast said.
The first federal lawsuit was eventually dismissed after AAF restructured its finance plan and received two allocations of PABs - one for $600 million and another for $1.15 billion.
A new federal suit was filed in February by opponents of the train project who are again trying to block issuance of the bonds.
The suit, which also challenges federal environmental studies and permits for the project’s construction, was filed by Martin County, Indian River County, Citizens Against Rail Expansion, and Indian River County Emergency Services against the USDOT and the FRA.
AAF has intervened in the case.
The lawsuit, an action filed under the Administrative Procedure Act, contends that the approval of $1.15 billion of PABs for phase 2 of AAF’s project must be set aside because it was “arbitrary, capricious, an abuse of discretion, in excess of statutory authority and otherwise contrary to law.”