Rich Campbell: Alternative funding option for All Aboard Florida is bad news for Treasure Coast

Publish Date: 
Sunday, October 12, 2014 - 8:15am

By Rich Campbell, TCPalm

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The revelation this past week that All Aboard Florida wants to table a federal loan and seek private funds to finance the remainder of its rail project raises several questions, including:

Did the rail company — confronted by enormous public pressure on the Treasure Coast — just blink?

Is All Aboard Florida’s decision to supposedly forgo the loan a savvy public relations move?

Is this a diversion to take the focus away from the federal loan, which, technically, still remains in play?

“A lot of people are questioning the company’s motive behind this decision,” said K.C. Traylor, founder of the group Florida Not All Aboard, which opposes the planned high-speed passenger-rail service scheduled to begin operating, between Miami and Orlando, in early 2017.

Treasure Coast residents are gravely concerned about potential negative impacts related to the project. These include delays at train crossings and railroad bridges, safety issues and costs to local governments. And, one of the chief concerns reverberating throughout our region has been All Aboard Florida’s plan to seek a $1.6 billion federal Railroad Rehabilitation & Improvement loan for the project.

But, stop the presses! Michael Reininger, president and chief development officer for All Aboard Florida, told Scripps Treasure Coast Newspapers on Tuesday the company wants to shelve the federal loan and build the remainder of the project with Private Activity Bonds. These are bonds marketed and sold to private investors. For the bonds to be tax-exempt for investors, federal officials must approve the bond allocation.

“Investors (in private activity bonds) are private entities, therefore, this financing mechanism poses zero risk to the local, county, state or federal governments,” All Aboard Florida said in a news release.

“The marketplace will give us a good idea about the viability of the project,” said Carl Domino, an investment manager and Republican candidate for the U.S. House in District 18. Domino opposes All Aboard Florida.

“It’s not a government-guarantee borrowing,” Domino said.

Reininger insisted the move to alternative, private financing was not driven by public criticism.

I believe him. Admitting to public pressure would presuppose All Aboard officials actually care what Treasure Coast residents think about the project — and I’ve seen little evidence that they do.

If they cared, they wouldn’t build it — at least not as currently designed.

Domino’s opponent, Rep. Patrick Murphy, D-Jupiter, views All Aboard Florida’s new funding strategy with a bit of foreboding.

“This definitely changes the dynamic,” said Murphy, who also opposes the project. “Going into the private market would reduce the involvement of the U.S. Department of Transportation. The process would become less stringent for All Aboard Florida.”

Remember: This is not the first time All Aboard Florida has pursued private financing. The company sold $405 million in five-year bonds — at 12 percent — earlier this year to help finance the Miami-to-West Palm Beach link in the system.

Did All Aboard Florida blink? No. The rail company simply appears to be exercising its options to secure financing. If the company is now pursuing additional private funds, it likely means one of two things: 1) All Aboard Florida foresees problems securing the federal loan; or 2) It can get a better rate in the private marketplace.

Lest we forget, All Aboard Florida’s goal is to make money.

Is this a savvy public relations decision? Yes. Pursuing private funds takes the focus off the proposed federal loan, which, Reininger said, will remain on the table until the U.S. Department of Transportation decides whether to allow All Aboard Florida to use the Private Activity Bond program.

However, as Traylor points out, “The timing (of the revelation) is odd. With public hearings on the environmental impact statement approaching, the federal loan becomes less a matter of scrutiny if people are under the impression the application has been withdrawn.”

It hasn’t. It’s just in limbo pending the outcome of the private-financing proposal.

“If All Aboard Florida is able to raise private funds, I think (the project) will go through because of property rights in Florida,” said St. Lucie County Commissioner Frannie Hutchinson. “That has been part of my fear all along.”

As a Treasure Coast resident opposed to All Aboard Florida, I share Hutchinson’s concern.

We seem to have lost ground this past week. We’ve been decrying the possible use of taxpayer funds to finance the project, only to learn All Aboard Florida might have another option.