The TC Palm: Analysis: Will sale of tax-exempt bonds blunt ongoing criticism of All Aboard Florida?

Posted on August 17, 2015

Lisa Broadt

Completing its tax-exempt financing could not only assure All Aboard Florida of its necessary financing but could help it take another contentious issue off the table, blunting a long-standing criticism by opponents.

The company’s request for a $1.6 billion federal loan — an original rallying cry for foes, who criticized the private company for seeking public money — could be “replaced or substantially reduced” by the private-activity bonds, the company has said, though for now, the application remains is pending, according to the Federal Railroad Administration.

While financial documents indicated a signature-ready project, All Aboard Florida’s progress in marketing and selling the private, limited bonds is unknown. The company remains tight-lipped on who would buy its bonds, when it could finish the sales-and-marketing process and what risks investors might face.

The bonds would be sold in denominations of at least $100,000 and only to qualified investors, according to financial documents from the Florida Development Finance Corp.

While no one is identifying the interest rate on the private offering, it likely would be well under the 12 percent offered to investors last summer, when All Aboard Florida had no trouble selling $405 million of high-risk bonds.

The company plans to use a portion of its $1.75 billion to pay off that $405 million and its projected $151 million in associated costs, according to financial documents.

All Aboard could begin spending the tax-exempt bond money as soon as Sept. 18 — 45 days after the final environmental report, as specified by the U.S. Department of Transportation — if it obtains its needed state and federal permits.

Progress in obtaining the federal loan, should All Aboard still seek any of the funding, would be tied to the progress of All Aboard Florida’s final environmental impact report, a 646-page document released last week that examines the $3 billion railroad’s impact on neighborhoods, environmentally-sensitive lands, historical sites and public safety.

When All Aboard Florida announced in 2014 that it would seek the private activity bonds as “alternative funding” to the federal loan, officials denied the change was a way out from under the harsh criticism of the federal loan request.

Still, the company apparently anticipated and hoped to head off opposition to the new funding.

In its bond application, All Aboard Florida specified the money would be used along the entire rail corridor except in Indian River, St. Lucie and Martin counties — an apparent strategy that allowed the company to state that: “AAF has received clear and consistent support from each county in which proceeds from the private activity bond will be invested.”

Treasure Coast critics were undeterred.

All Aboard Florida was not eligible, by law, for the private-activity bonds, the bond issuing agency was improperly constituted and the financing amounted to a government subsidy, critics have argued at various points during the yearlong battle than unfolded.

Litigation filed by Indian River and Martin counties against the railroad is ongoing.

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