Funding Still in Place for Florida High Speed Rail

(CN) - Fears that a high-speed rail project in Florida will bring little benefit while ravaging the area do not justify blocking $1.75 billion in funding, a federal judge ruled.

The case is one of many to challenge All Aboard Florida, a project by AAF Holdings to rebuild a railway that closed down in the 1970s after nearly a century of service.

Estimating that construction of the express railway between Orlando and Miami will cost more than $2.9 billion, not counting $600 million to buy land and easements, AAF has sought federal tax exemption and $1.75 billion in private activity bonds from a Florida development agency.

In separate federal challenges against the Department of Transportation over the tax-exempt bond funding, Martin and Indian River counties claimed that the project would bring dozens of trains through their sleepy coastal communities every day, depleting quality of life and disturbing archaeological sites and natural preserves along the Treasure Coast.

U.S. District Judge Christopher Cooper denied both counties an injunction last week.

"The court is mindful of the vigorous debate in Central and South Florida over whether the express railway should be built," Cooper wrote. "But the relative merits of the project are not for this court to decide. The court concludes that the counties have stumbled at the threshold of standing. They have not, in the court's view, met their burden at this stage of the case to establish that enjoining ... the [bond issuance] would significantly increase the likelihood that [All Aboard Florida] would abandon the project."

In trying to show otherwise, the counties had pointed to an application letter to the Department of Transportation in which AAF described the bonds as "the linchpin for completing our project" and "a crucial factor in ensuring our project is financed and completed."

For Cooper, however, AAF's plea does "not undermine its current commitment to the project."

"While the company likely regrets having described the bonds as the 'linchpin' of the project ... the court does not interpret AAF to have meant, as the counties suggest, that the [bonds] were a necessary precondition to completing the railway," the 21-page opinion states.

Indian River County Attorney Dylan Reingold said the county is examining its options in light of the ruling. Steven Ryan, an attorney for Martin County with McDermott Will, meanwhile said there are no immediate plans to drop the case.

"We want it heard on the merits," Ryan said.

Ryan stressed that Martin County is asserting the project was funded unlawfully, as it did not meet statutory criteria to qualify for the Department of Transportation's tax-exempt funding program.

The deadline for the bond issuance is listed as July 1 in court documents.

Ryan said that the Florida Development Finance Corp., the entity tasked with issuing the bonds, has postponed a prerequisite vote to move forward with the $1.75 billion funding package. The vote has been pushed back to the end of June, he said.

AAF's accounting expert estimated that if the tax exemptions are revoked, All Aboard would end up paying $420 million to $630 million in additional interest costs over 10 years, the ruling notes.

AAF president Michael Reininger has claimed the project can continue with or without the exemptions.

All Aboard's website has slated service to start in 2017, delayed a few months from previous estimates. Downtown areas of Fort Lauderdale and West Palm Beach are already being prepared for the anticipated influx of train traffic.

The planned express railway will not include any stations or stopoffs in Indian River, St. Lucie and Martin counties.

AAF maintains that the project will result in an economic impact of $6.4 billion, generating $653 million in federal, state, and local tax revenue, while also creating more than 10,000 jobs per year between 2014 and 2016.

The railway operation meanwhile will create 5,000 jobs on average per year through 2021, AAF says.

Claiming that any environmental impact will be carefully mitigated, AAF also predicts that the project will relieve traffic on Interstate 95, as well as air travel between Orlando and Miami.

The company is a subsidiary of Florida East Coast Industries, a century-old outfit once owned by American industrialist Henry Flagler.

Florida East Coast was bought out by hedge fund manager Fortress Investment Group in 2007. Last summer, Fortress took on more than $400 million in debt to finance All Aboard, at junk-bond interest rates.

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