A federal court has allowed a neighborhood association in Florida to file an amicus brief supporting Indian River County’s appeal of private activity bonds for a privately owned passenger train.
The Indian River Neighborhood Association
“If this court interprets the relevant provisions as required by law, the tax-exempt interest on the PABs will be impaired and, under the applicable bond documents, the trustee for the PABs will be obligated to notify the bondholders of a determination of taxability,” said the association’s filing. “That would, as a practical matter, bring Phase II of the AAF Project to a screeching halt.”
Peter Seed, a board member of the association, said Monday that the heart of his group’s argument is that the USDOT exceeded its authority in defining the passenger train as a surface transportation project under Title 23, the federal code defining projects eligible for credit assistance.
“It’s not the prerogative of the U.S. Department of Transportation to interpret that language in a way that makes no common sense,” said Seed, a retired public finance attorney from Vero Beach in Indian River County.
Seed also said the private nonprofit association, of which there are more than 1,000 members, opposes the train because of the risks it presents to residents.
“The association since 2014 has joined with other groups in Indian River County in opposing this higher speed passenger train project because of the dangers it creates [and] the disruptions it creates,” he said.
In May, the train company said that it had begun work on the $4 billion second phase of its passenger train system between West Palm Beach and Orlando.
That phase includes Indian River County, where the higher-speed train will pass through the county at speeds up to 110 mph without stopping. The first phase of the project, between Miami and West Palm Beach, began operating last year.
To finance portions of the project, the U.S. Department of Transportation’s Build America Bureau has approved three separate allocations of tax exempt bond authority for AAF-Brightline totaling $2.7 billion.
Of those allocations, $950 million of bonds remains to be sold on behalf of the company by the Florida Development Finance Corp., as the conduit issuer.
In January, Indian River County filed a notice stating that it would appeal the denial of the county’s motion for summary judgment in a federal district court lawsuit it filed to challenge the project’s PABs and federal agency environmental approvals.
The appeal followed U.S. District Judge Christopher Cooper’s Dec. 24, 2018 ruling granting motions for summary judgment filed by the USDOT and All Aboard Florida.
In doing so, Cooper agreed with arguments under which USDOT interpreted federal laws in order to qualify the company for the bond financing.
The Indian River Neighborhood Association argued in its 72-page friend-of-the-court brief that the district court’s order should be reversed, in part because the court misinterpreted eligibility requirements for a project qualified to receive USDOT bond allocations.
The threshold issue, the association’s brief said, is whether the AAF project is eligible for private activity bonds and whether the interest on those PABs are tax exempt under Title 26 of the Internal Revenue Code defining exempt facility bonds.
“If the AAF project is not eligible for tax-exempt interest on the PABs, the project will not be feasible and AAF would abandon it,” the association said.
Appellate Judges David S. Tatel, Patricia A. Millett and Neomi J. Rao accepted the association’s brief on June 3.
Part of the work on the West Palm Beach-to-Orlando segment is being financed with $1.75 billion of unrated tax-exempt private activity bonds that were issued on April 2.
The deal, which closed on April 18, is also funding or reimbursing costs on the first phase between Miami and West Palm Beach. Some $600 million of bonds refunded debt issued in 2017.
A date for the sale of the remaining $950 million of PABs has not been released.
