NEW YORK TIMES - BEN PROTESS, JESSICA SILVER-GREENBERG and RACHEL ABRAMS
Since the 2008 financial crisis, Fortress and other private equity firms have rapidly expanded their influence, assuming a pervasive, if under-the-radar, role in daily American life, an investigation by The New York Times has found. Sophisticated political maneuvering — including winning government contracts, shaping public policy and deploying former public officials to press their case — is central to this growth.
Yet even as private equity wields such influence in the halls of state capitols and in Washington, it faces little public awareness of its government activities, The Times found.
Along a 200-mile stretch of Florida’s eastern coast, FORTRESS IS EMBARKING ON ITS BOLDEST PROJECT YET: the nation’s only purely private intercity passenger railroad.
The project, All Aboard Florida, is expected to take five years and nearly $3 billion to build. At speeds reaching 100 miles an hour, it plans to eventually carry passengers from Miami to Orlando, with stops in Fort Lauderdale and West Palm Beach.
And if trains start rolling next year, as planned, and prove successful, the project may provide a template for private investment in public infrastructure for years to come.
Yet this ambitious private project hinged on the blessing of government officials.
The administration of Gov. Rick Scott of Florida conditionally agreed to lease out state property to All Aboard Florida, which plans to share the track with an existing freight train company. Federal regulators, after some initial concerns, concluded that the railroad’s safety plans met their standards. And a state-authorized nonprofit approved tax-free bonds that can help finance All Aboard Florida’s business.
Fortress, which owns both the passenger train and the freight rail, secured these victories through a mix of negotiations, public support, political power and a revolving door between the government and the private sector.
Documents obtained through public records requests pull back a curtain on the lobbying that shaped the project. The documents, many previously unreported, spotlight the role played by Governor Scott’s aides.
The governor’s former campaign manager teamed up with one of his former policy advisers to coordinate All Aboard Florida’s media strategy and meetings with the governor’s administration. They found a receptive audience, including an aide to Governor Scott who texted a Fortress employee, “Let me know if I can be helpful.”
Fortress stands to benefit from the project in several ways.
The firm owns All Aboard Florida’s parent company, as well as the freight train operator sharing the track, which means it would profit from All Aboard Florida’s success. Fortress also controls land around the track, where it is developing rental housing. And even if the passenger rail flops, Fortress might benefit from All Aboard Florida’s track upgrades, which would enable its freight operator to carry more cargo at quicker speeds.
(Fortress disputes this point, arguing that the upgrades are not needed to improve its freight operations.)
Not everyone will benefit.
Track running through Stuart, Fla., one of the coastal towns along the route of the nearly $3 billion rail project.CreditJason Henry for The New York Times
Along Florida’s Treasure Coast — oceanfront counties that include some of the state’s richest and poorest areas — some residents worry that the train will disrupt their lives. In one county, the sheriff argued that the trains, 32 each day, “could have life-threatening implications” if they stranded patrol cars on one side of the tracks as trains passed. A hospital executive warned about ambulances idling at crossings. Two counties sued to halt the tax-free bonds.
Some residents also express a deeper concern: The train is literally passing them by. Towns without stops will get the headaches of rail traffic rumbling through, without the economic benefits.
In Gifford, a low-income community pockmarked with abandoned homes, residents say they already live on the wrong side of the tracks. Fortress’s freight trains park there to exchange crews, delaying traffic and prompting local outcry.
Fortress sees it differently, arguing that the freight trains stop there because it is safe to do so. Mr. Edens, who said the passenger line was open to adding more stops, remarked that “the handful of opponents of the project are focused on their own narrow self-interests, not the greater good.”
While critics say All Aboard Florida is unnecessary — a small number of Amtrak trains already travel from Miami to Orlando — Mr. Edens said it had the potential to revitalize local economies because mass transit is “one of the real cornerstones of economic growth.” He called it a “real guidepost for how we can actually bring passenger trains back to the United States.”
Concerns that the new trains could cause traffic delays are unfounded, he said, citing data estimating that All Aboard Florida trains would take 45 seconds to clear crossings. All Aboard Florida said that it would be the only railroad in the country to operate “in full compliance with the latest and most stringent” federal safety requirements, and that it would help reduce car travel in the state.
“We’re talking about seconds,” Mr. Edens said, adding that it was “not a meaningful” amount of time.
William D. Snyder, the sheriff of Martin County, disagreed. “In my business, seconds absolutely matter,” he said.
The train’s opponents dispute some of All Aboard Florida’s data about how long the trains will block intersections, saying the company’s assessment is based on best-case assumptions. Bob Solari, a commissioner in Indian River County, said that All Aboard Florida did not in “any meaningful way protect the people and property of the Treasure Coast.”
The safety concerns, however, did not ruin the railroad project, thanks in part to some political arm-twisting.
All Aboard Florida took shape after Governor Scott rejected $2.4 billion in federal stimulus money for high-speed rail between Orlando and Tampa, saying it made Florida taxpayers liable for losses. That decision, in 2011, effectively helped clear a path for an alternative train, though All Aboard Florida was still in its infancy at the time.
Adam Hollingsworth was one of the governor’s aides involved in the decision to reject the stimulus money, emails show. At the time, he was a volunteer policy adviser. Months later, he went to work for one of All Aboard Florida’s sister companies.
To push for the Fortress railway, Mr. Hollingsworth initially coordinated with Susan Wiles, Governor Scott’s former campaign manager. The railway also retained a lawyer who had previously worked for a government agency from which it needed a permit.
This team’s background was helpful to All Aboard Florida, records show.
The day before Mr. Edens of Fortress was to meet with the governor’s office, Mr. Hollingsworth texted a staff member. “You met Wes at the gov’s Christmas party,” he reminded her, referring to Mr. Edens.
After the meeting, Mr. Hollingsworth wrote the aide: “Thank you! I am glad you and the gov were favorable inclined.”
Mr. Hollingsworth followed up when All Aboard Florida was about to announce its plans publicly. The aide responded, “Great news!”
About four months later, Mr. Hollingsworth resumed working for the governor’s office, as chief of staff. Ethics rules prevented him from having further involvement with the train.
Mr. Hollingsworth did not respond to requests for comment. Ms. Wiles praised him, saying he had honored his recusal. All Aboard Florida said it “did not need nor use Adam” beyond the scope of his duties, noting that it hired Ballard Partners, a prominent Florida lobbying firm.
A spokeswoman for Governor Scott added that the state did not finance All Aboard Florida.
Still, the company has benefited from government support. In addition to various regulatory approvals, All Aboard Florida has applied for funding from the federal railroad agency. And it accepted about $9 million in federal funds.
In the future, it hopes to fund itself through bonds approved by the Florida Development Finance Corporation, a state-authorized nonprofit. The bonds are tax-exempt, but All Aboard Florida, not the government, is responsible for repaying them.
Last year, the nonprofit’s board approved the bonds, which All Aboard Florida has yet to issue. Here, too, lobbying was at work.
Before the board held a crucial hearing on the bonds, an All Aboard Florida representative emailed one of the board’s new members a reminder to submit the paperwork by close of business the next day “in order to get confirmed by the Senate.”
The email added, “Can I help with this?”
READ THE WHOLE ARTICLE HERE: http://goo.gl/hlVu0D