All Aboard Florida: Boon or Boondoggle?

By Ann Henson Feltgen, BrowardBulldog.org 

A growing number of local and federal government officials want to put the brakes on the proposed passenger train between Miami and Orlando before some say it becomes one big boondoggle placed on the backs of Florida taxpayers.

At the core of their concerns are questions about All Board Florida, the private rail project pushing the proposal. The skeptics, including a number of elected officials, want to know more about the corporate interests behind the project, how it is to be financed and why most of the associated businesses are limited liability corporations (LLCs).

All Aboard Florida (AAF) says it plans to operate 16-round trip passenger trains between Miami and Orlando every day starting in 2016. Each of those 32 train trips would include seven cars and two locomotives for a total of 400 seats per train, the company has said. AAF is seeking a $1.5 billion federal loan to help finance the project.

Meanwhile, AAF is moving forward with plans to build downtown rail stations in Miami, Fort Lauderdale and West Palm Beach. Gov. Rick Scott also has pledged more than $200 million in state funds for the construction of another train station facility in Orlando.

AAF says its passenger service will be a boon for tourism, increase jobs, reduce road congestion and pollution and boost state and local tax revenues. But its plans have hit resistance from public officials along its route who want to know more about what’s happening.

Indian River County Commissioner Bob Solari is leading pushback in the Treasure Coast, where he says “our community is now solidly against this project.” He said he’ll continue his efforts at least until AAF and its sister and parent companies become more transparent about themselves and their plans.

“My greatest fear is that as bad as we think this project is, it will destroy our communities,” said Solari, of Vero Beach.  “Many people and I think that All Aboard Florida [and its family of companies] wants to get federal loans to build more tracks for their freight trains.”

On April 8, the Indian River County Commission unanimously passed a resolution indicating it was misled by AAF officials who “touted” proposed passenger rail service as “using solely private resources.” The resolution asked state and federal agencies to forgo low interest loans for AAF, “as such support would put the risk of the passenger rail service on the backs of the taxpayer,” and also to require the company to pay all projected costs, including the installation of quite zones and corridor improvements.

Sebastian County later passed an identical resolution, as did the town of Indian River Shores. Port St. Lucie and Martin County will consider the matter soon, Solari said.

On April 18, the Treasure Coast Regional Planning Council, of which Solari is a member, asked the U.S. Department of Transportation to double the public comment period from 45 to 90 days after it releases its Environmental Impact Statement on the project. A favorable impact statement would open the door for federal loans to AAF.

Elected officials in South Florida have largely been either silent about the rail project or, like Fort Lauderdale Mayor Jack Seiler, supportive of it.

Broward Commissioner Lois Wexler said the Treasure Coast’s complaints are likely rooted in frustration that All Aboard Florida has no plans to stop there.

“My sense is that they seem to want to have stops up there, and if they can’t have stops it becomes how can I obstruct,” said Wexler. “But the whole idea of All Aboard Florida is to get as quickly as possible to the population hubs in Orlando and South Florida.”

CONCERN IN CONGRESS

U.S. Representatives Lois Frankel and Patrick Murphy are Democrats who represent portions of South and Central Florida where the trains will run. Responding to complaints from constituents, they met with U.S. Transportation Secretary Anthony Foxx on April 7 to ask him to consider how the rail project will impact the quality of life for residents, as well as its effect on safety and the economy.

Murphy also wrote to Florida Gov. Scott in early April, citing his concerns, which include cost sharing for bridge upgrades to speed the raising and lowering of drawbridges, now that it was clear that state and federal money are involved. He urged a go-slow approach.

“If this project is to proceed it is critical that the State of Florida do everything in its power to guarantee that its citizens are unharmed,” Murphy wrote to Scott. “I know that if we come together on this, we can meaningfully preserve the safety and livelihood of our fellow Floridians.”

Murphy is scheduled to speak at an anti-AAF rally set for 10 a.m., Sunday, May 4, at the Flagler Park in Stuart.

COMPLICATED CORPORATE RELATIONSHIPS

Opponents are concerned by the lack of clarity about the various corporate interests involved in the rail project.

At the top of AAF’s corporate hierarchy is Fortress Investment Group, a hedge fund that purchased Florida East Coast Industries (FECI) for $3.5 billion in 2007. Florida East Coast Railway (FEC), an affiliate of FECI, operates freight trains throughout Florida. FEC is an independent company owned separately by Fortress, according to Florida Trend magazine.

FECI’s corporate tree “now includes 10 to 12 entities and nearly all are LLCs, from which company officials can simply walk away” without liability should serious problems develop, said Solari.

All Aboard Florida is not a single company. Rather, according to Dunn & Bradstreet, it is comprised of four Delaware based LLCs: AAF – Operation, AAF – Stations, AAF Northwest Sixth Street LLC, the site of Fort Lauderdale’s proposed downtown train station and AAF TOD (Transit Oriented Design), a development arm.

“Fortress is a private equity firm that has a slew of different companies,” he said. ”What they do is build up wealth over two to five years and then sell all of them as individual companies to the highest bidder. I doubt that Fortress will own two or three of these companies five years from now”

Solari met with Russell Roberts, vice president of FECI, on April 10 and presented a four-page letter outlining his concerns. In it, Solari posed more than a dozen questions about the company’s structure, finances and engineering that he termed “fair and reasonable.” He said he has yet to receive a response.

FREIGHT SIDE OF THE BUSINESS

Florida East Coast Railway’s principal business is moving freight, and much of that freight is shipped into Florida via ports that do business with its subsidiaries.

The expansion of the Panama Canal, due for completion next year, will increase demand for U.S. ports that can handle new, larger cargo ships. Miami, where deep dredging is ongoing, is one of those ports. Plans to deep dredge Port Everglades are awaiting a report due this fall from the U.S. Army Corps of Engineers, according to the Sun-Sentinel.

Landside, FEC is ramping up operations to greatly increase its freight train service. In January, the company announced it had ordered an additional 24 freight locomotives totaling $55.4 million. It also received a $30 million loan from the Florida Department of Transportation (FDOT) plus a grant of $18 million to help build a new $53 million Intermodal Transfer Facility at Port Everglades, according to FDOT. The company has said will invest $5 million from its capital budget.

FEC is the exclusive rail provider for the Port of Miami and Port Everglades.

AAF has applied for a $1.5 billion loan from the Federal Railroad Administration to help finance the purchase of passenger trains and to double track and realign existing tracks.

Those tracks are owned by FEC, which worries Solari.

“AAF only has an easement on those tracks,” Solari said. “If AAF goes bankrupt, FEC will have added $750 million in value to its rail system and every other Fortress company will have value added by the $1.5 billion loan.”

The company has refused requests by BrowardBulldog.org and Solari to make public its marketing plan or the studies upon which the company based its plan.

“They said no because they are a private company,” he said. “But once you start getting the government involved in a loan, you need to disclose information.”

However, plans put forward by AAF mirror the state transportation department’s 2006 Florida Freight and Passenger Rail Plan. That plan envisioned using FEC right-of-ways to provide service from Miami to Jacksonville, with a new rail line connecting Cocoa Beach to Orlando International Airport. It estimated 1.8 million riders a year from Miami to Orlando, using trains with seven passenger cars and two locomotives.

Solari said AAF officials have said the company expects initial annual revenue of $143 million. He said that given a 5.75 percent interest on a $1.5 billion loan, and other costs like salaries, there won’t be enough left to make it a viable operation.

“I don’t see how they can come close to making it,” he said.

Meanwhile, tens of millions of dollars in promised state funding to design and build an Intermodal Transit facility at the Orlando airport, which would serve as a station for AAF, will depend on whether Gov. Scott gets re-elected and whether future Legislatures approve earmarks Scott has pledged.

However, as the rail plans ultimately unfold, there is a two to four year time lag between the time a train is ordered and the date a manufacturer will deliver it.

“When you take delivery of them, you have to test them out and do certain things to certify the trains for passenger use,” Solari said. “It’s like airplanes — you don’t get them and fly.  It takes processes and time to become certified,” further delaying the start up.

AAF officials said the company is in contract negotiations with a U.S. manufacturer they declined to name. In a written statement, however, they said the trains would be “state-of-the-art.”

“They will be first of their kind and will employ the latest technologies available for the comfort of our passengers, efficiency of operations, and optimal environmental performance. In addition, they will be the only fully [Americans With Disability Act] accessible trains in the world.”