Suit raises questions about All Aboard Florida’s Orlando link

A lawsuit to block All Aboard Florida (AAF) from developing passenger rail service between Miami and Orlando is raising questions about the Coral Gables-based company’s ability to extend the service from South Florida to Central Florida.

AAF, a wholly owned subsidiary of Florida East Coast Industries, LLC, is building three railroad stations in South Florida in Phase I of the development of its Brightline passenger rail service, scheduled to start operating next year.

Upon completion of Phase II of the railroad development, AAF plans to start running trains from South Florida north to the city of Cocoa, near Cape Canaveral, and west from Cocoa to Orlando.

AAF estimates the total cost of both phases will exceed $2.9 billion. Phase 1 is well under way in South Florida, where AAF is building downtown train stations in Miami, Fort Lauderdale and West Palm Beach.

But AAF has limited funds to start Phase II construction in Central Florida, according to disclosures arising from a lawsuit by Martin County and Indian River County, which are trying to block the development of the passenger rail service.

The counties allege that the U.S. Department of Transportation (DOT) violated the National Environmental Protection Act (NEPA) by approving the issuance of $1.75 billion in tax-free bonds to finance All Aboard Florida’s rail service development.

U.S. District Court Judge Christopher R. Cooper recently ruled that NEPA requires AAF’s planned rail service to undergo environmental reviews by multiple federal agencies, including the Federal Railroad Administration, U.S. Army Corps of Engineers, Federal Highway Administration and U.S. Fish and Wildlife Service.

But the judge also rejected a motion by DOT lawyers to dismiss the case brought by Marin and Indian River counties, and he suggested that AAF may be unable to complete Phase II of its rail service development without $1.75 billion of tax-free bond financing.

In 2014, the DOT gave conditional approval to a $1.75 billion bond offering to finance Phase II of AAF’s rail service development. One condition required completion of the bond sale by July 1, a deadline that has been extended to January 1, 2017. Another condition requires a NEPA review of AAF’s planned rail service and prohibits the use of bond offering proceeds until a final environmental impact statement is issued.

Without waiting for the results of a NEPA review, All Aboard Florida tried three times last year to find buyers for the bonds, offering different terms each time, but found none, according to court records.

AAF once told Judge Cooper it had  escrowed $405 million in debt financing from private investors to fund Phase II of its rail development, extending service Orlando. But AAF now says this amount is no longer escrowed for Phase II. [Florida Bulldog] – Mike Seemuth