Press Release: AAF Doomed to Financial Failure
Posted on February 18, 2015
STUART, Fla.—All Aboard Florida (AAF) will likely generate losses of $100 million annually, according to a new economic analysis by a former White House economist. The report, which was commissioned by Citizens Against Rail Expansion in Florida (CARE FL), a coalition of concerned community leaders, organizations and neighbors in the Treasure Coast and South Florida regions, only raises more questions about the rail project.
“For months now, homeowners and residents in the communities CARE FL represents have repeatedly expressed their concerns about the proposed rail project and the adverse impact it will have on the communities along the way,” said Bill Ward, Chairman of CARE FL. “We cannot have 32 trains rumbling through our communities on a daily basis, causing gridlock on our roadways and waterways as well as creating barriers for first responders. The project not only impacts the character of our downtowns, but it will also erode the quality of life that we all enjoy.”
The report, conducted by John Friedman, Associate Professor of Economics, International Affairs and Public Policy at Brown University, further concluded that AAF would have to charge $242 for a one-way train ticket between Miami and Orlando to service its debt load.
AAF has consistently refused to say how much it would charge for tickets, or how much debt it expects to accrue in constructing the 220-mile high-speed rail system, which will also support significantly expanded freight rail traffic. Nor will AAF say how it expects to service that enormous debt load.
Despite AAF’s best efforts to not disclose the details of its financial plan, however, some information has been released. This constitutes one of the core strengths of the Friedman Report, whose financial assumptions are based in part on AAF-generated numbers, culled from publicly released documentation by AAF and other government documents.
Among the report’s findings:
- All Aboard Florida will more likely generate an average ticket price of $34. Dr. Friedman notes that AAF trains will arrive at the Orlando airport rather than downtown, making for longer and more expensive trips owing to travel between the airport and final destinations.
- All Aboard Florida will generate annual losses of more than $100 million and will be unable to service its large debt burden.
Even under optimistic projections, annual losses could be expected to reach more than $100 million, added Dr. Friedman. “AAF has no way to pay the resulting annual deficit, except perhaps by non-train-related business such as real estate profits,” Dr. Friedman concluded.
- All Aboard Florida’s taxpayer subsidies will be $50 to $73 million annually. The majority of that—$37 to $60 million—is the result of the tax-exempt nature of the Private Activity Bonds (PABS) permitted by the U.S. Department of Transportation. AAF will also benefit from another $13 million of annual subsidies from the state of Florida and local governments in the form of a state‑funded station in Orlando and the cost of safety upgrades and maintenance along the rail line.
CARE FL has also shared the findings of the report with the U.S. DOT’s Peter Rogoff, Under Secretary of Transportation Policy.
“CARE FL urges the U.S. DOT to review the findings presented by Dr. Friedman, a former staff member to the Administration, and based on his projections, carefully consider AAF’s provisional PAB approval and the cost impact it will have on taxpayers,” said Brent Hanlon, Treasurer of CARE FL.
The report was commissioned and paid for by CARE FL, which opposes construction of the AAF rail line for many reasons. Among them: negative impacts on quality of life along the rail lines, negative impacts on safety and first responders, interruptions for boaters on local waterways, and the economic harm that will result for decades as a result of these and other negative consequences.
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Dr. John Friedman will be available to speak to press by phone from 11:00 to 11:30 a.m., Wednesday, February 18. To schedule an interview with Dr. Friedman, or to speak with a member of CARE FL in connection with the report, please contact Hill+Knowlton Strategies at 850-222-4100.