All Aboard Florida’s New Financing Kept Suspiciously Secret, Attorney Says
Posted on October 18, 2014
By Nancy Smith
Few Floridians know All Aboard Florida (AAF) has found “a super-secret” alternative to financing most of its proposed $1.6 billion high-speed passenger rail service — and even fewer know how it will affect taxpayers within AAF’s Miami-Orlando corridor, according to Washington, D.C., attorney Stephen Ryan.
Ryan, representing Treasure Coast-based Citizens Against Rail Expansion in Florida, told reporters Friday AAF has had its new financing method since Aug. 20 but kept it under wraps until Oct. 7.
“Why?” asks Ryan. “Why would they keep the public in the dark?”
AAF’s latest financing plan is through tax-exempt bonds issued by state or local governments. Known as Private Activity Bonds, or PABs, these instruments are typically used for projects with significant private involvement.
AAF is pushing for immediate approval. In fact, the first critical vote is next week, Oct. 21, when the Brevard County Commission is scheduled to meet and vote on the Brevard PAB.
Said Ryan, “The PAB approach is a disservice to Florida citizens. So is AAF’s effort to push Brevard County to conduct an immediate vote. What’s the hurry?”
He said, “We think it boils down to this: AAF is afraid of the impending election next month and with it the possibility that election results may reduce state and local support.”
In replying to Sunshine State News’ questions, an unnamed All Aboard Florida spokesperson acknowledged in written answers that there is indeed a rush. “We would like to market the bonds in November and December, so a vote from the Brevard County Commission on Oct. 21 allows us to meet that deadline.” The answer made no reference to midterm elections.
“We are looking toward moving into construction on the West Palm Beach-to-Orlando segment once the Environmental Impact Statement process is completed, and the PAB funding timeline allows us to meet this schedule.”
The RRIF funding approach is also deeply flawed, Ryan explained, because it would force taxpayers to fork over huge subsidies to support AAF’s $1.6 billion request.
“We don’t know how much it would cost the public should AAF borrow the money via PAB — and AAF and government agencies cooperating with it aren’t saying.”
What we do know, said Ryan, is that taxpayers have not been presented with information detailing how much PAB funding would cost in terms of lost tax revenue, “which is the natural byproduct of any tax-exempt bond.”
Passenger trains, historically, don’t make money, so the issue is hugely important and urgent, he said.
When asked what happens with these bonds if there is a default — who would have to pay and whether the taxpayers of Brevard would be responsible for them? … AAF said this:
“There is no risk to the local, state or federal government or taxpayers from this financing mechanism. The state of Florida, federal and county governments are fully indemnified in this transaction and all bonds are purchased by private investors who must perform their own due diligence.
“Repayment of the bonds,” Ryan claims, “will be an obligation of All Aboard Florida and no other private or public entity. The government does not provide a guarantee for the bonds or provide any rate subsidy.”
Brevard County commissioners could not be reached for comment Friday afternoon.
Ryan, who is the head of McDermott Will & Emery LLP’s government strategies practice, is convinced the PAB financing bid is “just another example of AAF trying to manipulate the public. Ditto for RRIF.” He called both “financial rip-offs cloaked in slick marketing doubletalk”
Brevard is being offered a significant inducement to vote “yes” for this funding — crossings maintenance for eight years, he said.
“But what happens in the ninth year? Who pays then? Brevard taxpayers,” he said. “Oh, this is such a bad deal, especially for the communities that don’t even get a train stop out of it.”