Why Florida Brightline PABs are in dispute

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WASHINGTON -- All Aboard Florida is defending its use of tax-exempt private activity bonds to finance its Brightline passenger rail service in a letter to the chairman of a U.S. House oversight subcommittee.

The letter responded Monday to questions posed by Republican lawmakers at an April 19 hearing regarding the timing of federal Title 23 grants for railroad grade crossing improvements, proposals for their maintenance and the safety of those crossings.

The timing of the federal grants is an issue because that funding was used as a basis by the U.S. Transportation Department to authorize the use of tax-exempt PABs by the private owner for financing the proposed 235-mile passenger rail line between Miami and Orlando.

The project doesn’t qualify for high speed rail PABs because the trains will travel at less than 150 mph, but it did qualify under another category of PABs for highway or surface freight transfer facilities , lawmakers were told at the hearing.

That second category covers all surface transportation projects, lawmakers were told at the hearing by the House Oversight and Government Reform Subcommittee on Government Operations.

All Aboard Florida met the guidelines used by DOT because of the Title 23 federal funding for grade crossing safety improvements along the route.

Myles Tobin, general counsel for All Aboard Florida, said in Monday’s letter that planning for the Brightline project began in December 2011 before the award of $9 million in Title 23 federal funding for grade crossing safety improvements along the route.

Grover Burthey, deputy assistant transportation secretary for policy, testified at the hearing that the department sets no minimum for Title 23 funding in order for a project to qualify for PAB financing.

Similar approval was given in 2010 for $398 million in PABs to finance passenger rail service between Denver International Airport and Denver’s Union Station.

In addition, the Department of Transportation gave approval in 2014 to the use of $1.3 billion in PABs for Maryland’s Purple Line service in the suburbs of Washington, D.C.

All Aboard Florida, however, didn’t directly receive the Title 23 money, according to opponents of Brightline.

“Having read the All Aboard Florida letter does not change the testimony that they received at the hearing from the All Aboard Florida CEO and the Department of Transportation representative that not a single dollar of Title 23 money was spent with All Aboard Florida,” Steve Ryan, attorney representing Citizens Against Rail Expansion, said in an interview Tuesday.

“All Aboard Florida can argue all it wants that such expenditures on the corridor can somehow be equated with funds to All Aboard Florida as they claim in their applications, but it just isn’t so,” Ryan added.

The first $600 million in PABs for phase 1 of the project between Miami and West Palm Beach was approved in
November 2017. Phase 2 completing the service to Orlando received approval for $1.15 billion in PABs in December 2017 with an expiration date of May 31, 2018 for their issuance.

Because the PABs are exempt from federal taxes, the investors will save an estimated $250 million over the first 10 years on taxes, according to All Aboard Florida.

Indian River County, Martin County and Citizens Against Rail Expansion in Florida filed a lawsuit Feb. 18 against the U.S. DOT and Federal Railroad Administration that includes a claim that the PABs were unlawfully approved.

The lawsuit filed in the U.S. District Court for the District of Columbia also charges federal officials with ignoring or failing to consider environmental, public safety, maritime and environmental impacts the passenger rail service will have on Florida’s Treasure Coast communities.

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Private activity bonds Infrastructure Florida Department of Transportation Washington DC Florida