ALL ABOARD FLORIDA SOUNDS SEDUCTIVE, BUT DON'T BE FOOLED

Publish Date: 
Monday, May 2, 2016 - 10:15am

Peter Seed - www.tcpalm.com

Bob Webster's April 20 guest column about frequent queries on All Aboard Florida's impact is seductive.

But is he right? I think not.

My reasons:

  1. The All Aboard Florida project is, as a practical matter, a joint venture between AAF, Florida East Coast Railway and their parent company, Florida East Cost Industries. Florida East Coast Industries and its overseers, Fortress Investment Group, hold all the cards.
  2. All of the project improvements along the north-south rail corridor, including addition of a second track, crossing upgrades and positive train control, could easily increase FEC's capacity to haul freight by as much as 50 percent, even with the daytime addition of 32 passenger trains.
  3. The widening of the Panama Canal to accommodate greatly enlarged cargo ships will increase demand for freight hauling along the rail corridor. Northbound demand will occur for Pacific freight off-loaded at Port Everglades and the Port of Miami (where FEC has exclusive rail access). Southbound demand will occur for Atlantic freight loaded at those same ports for destinations in the Pacific.

Why? Because transshipment of such freight across the continent will no longer be cost effective.

No wonder Florida East Coast Railway and Florida East Coast Industries have made investments at the two ports to accommodate that expected demand.

As for the argument that AAF would never "spend $3 billion on an intercity express passenger service just to improve the FEC tracks for freight," bear this in mind:

Florida East Coast Railway and Florida East Coast Industries will have contributed as equity about $1 billion of that amount. If extension of service to Orlando is abandoned before additional financing for the project is secured, almost all of the equity could easily be allocated to the stand-alone intercity passenger service between Miami and West Palm Beach (including the three stations there).

If additional financing is secured through the issuance of $1.75 billion of tax-exempt bonds, AAF will in effect receive a federal subsidy over the 30 year life of the bonds of about $1.6 billion.

If, on the other hand, the passenger train service later goes belly up, neither Florida East Coast Industries, nor Florida East Coast Railway, nor AAF's transit-oriented real estate holdings, will be liable for one penny of that bond debt. That is what the draft Preliminary Limited Offering Memorandum disclosed when issuance of the bonds was first authorized last summer.

And, if as a result of default on the bonds, passenger train service is abandoned altogether, Florida East Coast Railway will enjoy exclusive use of the corridor between Miami and Cocoa. In that event, the freight-hauling capacity of the corridor would have at least doubled, and for a much longer useful life — all at a cost way less than what it would have had to incur "just to improve the FEC tracks for freight."

Peter Seed serves on the Executive Committee of the Indian River Neighborhood Association. Prior to his retirement in 1998, he practiced law as a public finance attorney for 30 years in Minnesota.