Private owners of Florida's passenger train project seek new bonding
Federal transportation officials are poised to approve a third allocation of private activity bonds to Florida’s privately owned passenger train project, after stripping funds from the California high-speed rail project earlier this week.
The Florida Development Finance Corp., a statewide conduit issuer, has scheduled a TEFRA hearing for March 1 in Tallahassee to approve $950 million of PABs under the Tax Equity and Fiscal Responsibility Act for Brightline, which will become Virgin Trains USA this year.
The FDFC board is expected to approve a bond resolution in a meeting scheduled for 3-5 p.m. in Jacksonville on March 11, according to executive director Bill Spivey. Bond proceeds will fund portions of the project from Miami to Orlando.
Brightline, which would not comment on the new financing, filed an application for the PABs with the U.S. Department of Transportation. The USDOT did not respond to calls or emails requesting confirmation of the award.
“If an additional USDOT allocation has not been received and if the increase is approved by the FDFC board then the additional USDOT allocation with be a contingency item for approval” at the March 11 meeting, Spivey said.
The new bonding is being considered while Indian River County has two lawsuits pending against Brightline — one appealing a federal suit the county lost challenging the legality of the PABs and another in state court challenging Brightline’s use of the county’s more than 30 at grade railroad crossings.
Dylan Reingold, the county’s attorney, said he is “dismayed” that the FDFC board would conduct proceedings for the issuance of almost $1 billion of PABs at a location 150 miles from the closest point of the proposed project in Orlando. The FDFC is headquartered in Winter Springs, about 15 miles north of Orlando.
“I will be requesting that the meeting be conducted somewhere along the corridor of the project,” Reingold said. “If the change in location is not made, I will file an injunction.”
When asked why Jacksonville was chosen, Spivey said, “Having a meeting in Orlando was our first priority, but this is the only date and time that we could find in coordinating both the calendars for our board members and the timetable of the applicant, while adhering to public notice requirements.”
Last week, Virgin Trains USA delayed an initial public offering after financial reports showed that the start-up project has a negative cash flow.
Ben Porritt, senior vice president of corporate affairs for the company, said that as the IPO was being explored as “a number of alternative financing sources became available that allow us to keep the company private and meet our growth strategies.”
“We will continue to fund our project…through a combination of debt and equity,” Porritt told The Bond Buyer Wednesday.
Brightline sold $600 million of PABs in 2017. The FDFC approved another $1.15 billion in August, though those bonds haven't been issued yet.
If the USDOT approves the $950 million in new PABs, the privately owned Florida project will have received the highest amount of PABs ever awarded by the agency — a collective $2.7 billion, according to the Build America Bureau’s website.
Virginia has received the next-highest amount of PABs, $2.48 billion, for five different road and tunnel projects. Texas has received the third-highest amount of PABs, $1.56 billion, for three projects.
Susan Mehiel, who heads up a new grassroots anti-train organization called the Florida Alliance for Safe Trains, said it isn't clear how much the Virgin/Brightline project will ultimately cost.
“For a number of reasons, including mounting debt, inflated ridership projections and the fact passenger rail is never profitable, Wall Street had no interest in investing in the Virgin Trains USA project,” Mehiel said, referring to the postponed IPO. “It makes no sense for taxpayers to subsidize the project through $2.7 billion in private activity bonds to say nothing of the costs to local communities for retrofitting over 120 grade crossings.”
Florida Gov. Ron DeSantis, a Republican who was backed by President Trump in last fall’s election, hasn’t indicated whether he supports the Brightline/Virgin project. DeSantis has met with Trump several times since his election.
On Tuesday, the Trump administration terminated a $929 million dollar federal grant to the California High-Speed Rail Authority, according to a USDOT letter. The termination led some to believe the move was political since California and 15 other states sued Trump over a national emergency to fund a border wall.