By Arnie Rosenberg TCPalm
More than 38,000 people have signed petitions to stop All Aboard Florida. Protests have reached the governor, members of Congress and the U.S. secretary of transportation.
Yet despite a groundswell against the proposed high-speed train, specifically on the Treasure Coast, All Aboard Florida has told the state it doesn’t know why any city, county or other local government would oppose issuance of tax-exempt bonds to fund its project, Scripps Treasure Coast Newspapers has learned.
All Aboard Florida avoids even mentioning the vehement opposition with a plan to cut off the Treasure Coast from any of the bond money, instead spending $1.3 billion of it in the other five counties along its 235-mile corridor.
It’s a subtle distinction in All Aboard Florida’s application to the Florida Development Finance Corp.
“AAF has received clear and consistent support from each county in which proceeds from the private activity bond will be invested,” the company wrote in its application for the bonds.
Where the application asks, “Are you aware of any reason why any local government unit (city, county, special district, etc.) would not want Florida Development Finance Corp. to issue bonds in connection with this transaction,” All Aboard Florida marked “No.”
The application — submitted Sept. 24 and signed by Michael Reininger, All Aboard Florida president and chief development officer — was obtained by Scripps Treasure Coast Newspapers under Florida’s public-records law. Reininger certified that “The information contained in this application is ... complete and accurate and presents fairly the condition of the applicant ... ”
Asked if the company had answered the question about opposition honestly, All Aboard Florida declined to comment.
Bill Spivey, Florida Development Finance Corp. executive director, said his agency asks about opposition “to make sure if there are any issues, we’re aware of it. Typically, bondholders want to know if there are any issues. We want to be fully apprised.”
Spivey also stressed his agency has “nothing to do with anything other than financing.” Issues such as zoning, development and land use — and other concerns that ignited a firestorm against the $2.25 billion project — are beyond the authority of the Florida Development Finance Corp., he said.
All Aboard Florida plans to spend more than $387 million to upgrade its rail right of way through Martin, St. Lucie and Indian River counties, according to an economic impact study commissioned by the railroad. Yet while its application to the state confirms no money from the private activity bonds would be spent on the Treasure Coast, the company won’t comment on how it would pay for construction here.
It also refused to explain why it chose to use the bond money only in Miami-Dade, Broward, Palm Beach, Brevard and Orange counties.
“We are a privately owned company and are not disclosing our capital structure,” the company said in a statement. “All Aboard Florida is fully financed to begin construction on the south segment (from Miami to West Palm Beach). Proceeds from the private-activity bonds; equity contributions from All Aboard Florida’s parent company, Florida East Coast Industries; and rolling stock financing will provide all the funding necessary to develop the project from Miami to Orlando.”
All Aboard Florida has asked the U.S. Department of Transportation to authorize the sale of $1.75 billion of tax-exempt private-activity bonds. The railroad would pay a fee to Florida Development Finance Corp. to be the “conduit issuer,” and would begin marketing the bonds before the end of the year, according to its application.
All Aboard Florida initially asked the federal government for a $1.6 billion low-interest loan, a part of its plan that has drawn some of the most strenuous criticism. However, if the tax-exempt bonds are approved, the loan “would either be completely replaced or substantially reduced, ” Husein Cumber, Florida East Coast Industries executive vice president, said last month.
In addition to buying locomotives, train cars, maintenance equipment and equipment for its stations, All Aboard Florida plans to use money from the private-activity bonds to pay off $405 million it borrowed through a bond offering in July, according to the bond application. All that money remains in escrow, according to the application.
Private Activity Bonds
All Aboard Florida wants to scrap its request for a $1.6 billion federal low-interest loan and instead borrow $1.75 billion by having the state issue tax-exempt public-activity bonds. How would that work?
The U.S. Department of Transportation must approve “allocation” of the $1.75 billion, meaning it authorizes the amount of bonds to be sold.
All Aboard Florida pays Florida Development Finance Corp. an issuance fee as the “conduit issuer.”
Florida Development Finance Corp.’s name is on the bonds, but the state of Florida is not financially at risk if All Aboard defaults. The state does not pledge its credit, any cash or anything else, and acts only as a financing conduit, not a lender.
Bond interest rate is set by a third-party underwriter, based in part on market conditions, before the sale.
With a bond sale this large, buyers typically would be institutional investors.
All Aboard would repay investors their principal plus interest. Term of the bonds has not been determined, but state law sets a maximum of 30 years.
Investors would be exempt from paying federal income tax on the interest earned.
Brevard and Miami-Dade County commissions last month voted to approve the amount of bond proceeds to be used locally. It was required because they are the only counties along the All Aboard Florida corridor whose interlocal agreements with Florida Development Finance Corp. include “bond caps.”