Publish Date: 
Monday, December 24, 2018 - 10:15am

The Train Wreck Times by Susan Mehiel - Holiday Edition

WE HAVE MUCH TO CELEBRATE THIS HOLIDAY SEASON! Despite all of the so-called positive media they’ve drummed up and the votes by Martin County and CARE FL, AAF/Virgin is no closer to starting construction on the second phase of the project than they were when the year started…think about that for a minute.

Over the last few weeks, we’ve seen much in the press regarding the corporations’ finances and their future is not bright.  Railway Age has an in-depth analysis on the financials (as in-depth as one can get with the lack of transparency on the part of AAF/VT) and from the article:

“Virgin Trains… The railroad does not have an absolute right to the brand within the U.S., only a right of first refusal outside Florida and the Vegas expansion. Until the end of 2022, the railroad will pay Virgin the greater of a fixed fee and a percentage of our actual gross sales… Beginning in 2023, a percentage of gross sales on other routes will be added.”  

See article here.

So what was all of that talk about Richard Branson pouring money into AAF/VT? Looks like the cash is flowing the opposite direction. The article also quotes a Palm Beach Post report:  “Even if the IPO is successful, Virgin Trains will need billions more to pay for its ambitious expansion plans. Virgin Trains reportedly seeks to raise $100 million from investors in its stock offering.” We think that should read ‘only $100 million’ – it’s a drop in the proverbial bucket.

With the arrival of Virgin came the announcement of an Initial Public Offering or IPO stock offering to raise capital for construction.  From a blog site came the article - Virgin Trains IPO: Understand The Risks and the quote:

“…VTUS will have to pay a lot of interest expenses and may have to negotiate its debt soon. If debt holders are able to convert debt into shares, new shareholders will face stock dilution. With this in mind, the financial risk seems elevated. Waiting on this name until 2023 or 2024 seems smart.”

In other financial news, AAF/VT has asked the US DOT for an extension on the sale of $1.15 Billion in Private Activity Bonds beyond the December 31st deadline. We owe our Congressmen Mast and Posey a debt of gratitude for sending a letter to Transportation Secretary Chao (attached) recommending the agency not extend the sale. Siting the OPPAGA study by the state legislature on Florida Passenger Rail Safety, the congressmen reiterate the need for FL DOT to develop regulations to ensure public safety before any additional taxpayer subsidies are granted the railroad.

The Bond Buyer and TC Palm both ran stories on the letter.

As a review of the OPPAGA Study we list the most troubling findings in the report:

The high rate of severe injuries and fatalities on railroad right of ways including those of Sun Rail, Tri Rail and Brightline, now Virgin Trains.  “Florida’s severe injury rate is 1.5 times higher and its average fatality rate is 3.5 times higher than overall national rates…” (2009 – 2018)
Florida ranks 8th in the nation for its grade crossing index because rail operations take place in more population-dense areas than the US average. 
There is a gap in federal and state regulations governing higher speed rail.  While there are regulations governing trains operating at speeds up to 79 mph and over 125 mph, the standard for High-Speed Rail, neither agency has developed additional regulations governing higher-speed trains going 80 – 124 mph.

FDOT’s mandate on passenger rail oversight needs to be clarified and FDOT needs to promulgate regulations governing higher-speed rail to ensure proper maintenance, safety, revitalization, and expansion.

And don’t let it be said we’re giving up the fight! At the December 11th Indian River County Board of County Commissioners meeting, the Board voted unanimously to fund a new lawsuit against Florida East Coast Rail which argues… “AAF /Brightline nor FECR is entitled to seek County reimbursement of capital expenditures or maintenance costs incurred as a result of AAF/Brightline's higher speed passenger rail service.”

The foundation of the suit includes the fact the crossing agreements are with FECR and not AAF/Brightline so the county is not liable for AAF expenses. Nor could the county expect such expenses based on the existing crossing agreements when FECR discontinued passenger service in 1968.

We’ll be ringing in the New Year with a new organization to help coalesce our grassroots efforts throughout the state.  Along with our friends at Citizens Against The Train and Florida Not All Aboard, who remain committed as ever to the fight, we will redouble our efforts to demand the safest trains possible with no taxpayer subsidies.  Our mantra will remain – Move ‘em West!  And we will need your help now as much as ever to continue the fight against corporations putting profits over lives!

Until then, have a wonderful Holiday Season and a joyous New Year!

Susan Mehiel
M: 828-606-5369