6.11 – The Palm Beach Post: Martin, Indian River lose All Aboard Florida legal fight over bonds

All Aboard Florida will be allowed to sell $1.75 billion in tax-exempt bonds to help pay for its express-passenger rail project between Miami and Orlando, a federal judge ruled Wednesday.

U.S. District Court Judge Christopher Cooper denied requests by Martin and Indian River counties for an injunction to block the bond sale, saying, in part, that the money was not linchpin to finishing the passenger rail line.

In a 21-page opinion, Cooper said the counties did not show that the rail project is dependent on the private activities bonds, or that their sale would influence the outcome of a federal environmental study examining the impact of the trains.

Martin and Indian River counties filed federal lawsuits this year against the U.S. Department of Transportation, challenging whether All Aboard Florida is eligible for the private activity bonds. All Aboard Florida is an intervenor in the suit.

Indian River County officials said they were “reviewing the order and analyzing our options.”

An attorney representing Martin County also said he was studying the ruling.

“We are studying the Judge’s decision. The bottom line of tonight’s order is the judge never reaches the merits of our claims,” said Steve Ryan, a Washington, D.C.-based attorney hired to represent Martin County. “The decision not to grant the injunction we sought does not end this case. It resolves only the first legal skirmish.”

All Aboard Florida plans to run 32 trains a day — 16 round trips — on the Florida East Coast Railway between Miami and Orlando. Service is expected to start in 2017. All Aboard Florida’s parent company, Florida East Coast Industries, owns most of the right of way and track that the trains will run on.

All Aboard Florida won preliminary approval from the Department of Transportation in December to issue the private activity bonds, which are purchased by individual investors at no risk to taxpayers. The Coral Gables-based company also faces a final approval to issue the bonds by the Florida Development Finance Corporation.

In All Aboard Florida’s case, the bonds would be issued by the Florida Development Finance Corporation and then sold to investors by the private rail company.

The corporation was set to vote on the bond sale this week but postponed the meeting because travel logistics “created uncertainty for convening a quorum,” a spokesman said.

All Aboard Florida is seeking the private activity bonds because they are cheaper for the project than if it used taxable bonds. Replacing the bonds with taxable debt would increase All Aboard Florida’s interest costs by as much as $630 million over the first 10 years of the project, court documents say.

“At the end of the day, one cannot but conclude that the additional interest costs that would result from the absence of tax-exempt (bonds) would cause AAF, as a reasonable investor, to think twice about proceeding with the project,” Cooper wrote in the order. “In the court’s view, however, the counties have not demonstrated, as they must, that these costs would significantly increase the likelihood that AAF would abandon the project after years of planning and over a billion dollars in investment.”

All Aboard Florida did not respond to a request for comment Friday.

In court documents, the company has said it would move forward with the rail project regardless of whether it receive the tax-exempt bonds. In a brief filed as part of the suit, All Aboard Florida said that denying the bonds will only push back its start date and increase the cost of building the rail line.

As part of their federal suits,the counties also argued that the U.S. Department of Transportation’s December approval of the bonds was unlawful because it was made before the completion of an environmental review by the Federal Railroad Administration. A draft of the environmental impact statement was released last year, but a final version has yet to be issued.

In his order, Cooper said that the counties had not shown the bond issue would “tilt the FRA’s ongoing environmental analysis towards AAF’s preferred routing of the railway.”