Re: All Aboard Florida RRIF Loan
Summary: In 2013, All Aboard Florida — Operations, LLC made a preliminary application for a $632 million loan from the Federal Rail Administration (FRA) under the Railroad Rehabilitation and Improvement Financing (RRIF) Program pursuant to 49 CFR Part 26. The bid was cancelled two weeks later due to "a change in acquisition strategy for this requirement," according to the FRA website. What this meant exactly is unclear. The actual loan application does not appear to be publicly available. Word abounds that a new loan — of an undisclosed amount — has been applied for from the FRA, to help pay for All Aboard Florida's $1.5 billion passenger rail project, but neither the amount of this loan nor its specifics appear to have been made public yet. Could the new loan be for $1.5 billion? It could, since RRIF frequently notes its willingness to fund 100% of a rail project, and All Aboard Florida's latest projections of its project cost are $1.5 billion. Florida politicians, meanwhile, appear to be pressuring Rail officials at Congressional meetings about the industry to engage in more All Aboard-like private ventures into rail, as examples below show. Nonetheless, a $1.5 billion loan would massively outsize previous RRIF loans, the largest of which was a $563 million loan to Amtrak in 2011. 1
Key Facts: On its website, the Federal Railroad Administration (FRA) announces it will approve or disapprove a request for an RRIF loan within 90 days after receipt of a complete application. 2 Yet comments during Congressional meetings that RRIF often takes longer than this period, is not largely staffed (only 6 people) and often drags its feet considerably before officially considering a loan request to have been submitted. Other notes: o
An environmental impact statement is required for this program, which All Aboard Florida completed October 31, 2012, after having FRA review and comment on previous draft versions. 3
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FRA evaluations on RRIF loans analyze:
1 The Role of Innovative Finance in Intercity Passenger Rail," July 9, 2013, Committee on Transportation and Infrastructure," July 9, 2013, file:MCIDocuments%20and%20Settings/Administrator/My%20Documents/Dropbox/Misc%20 %20%E4%BB%BB%E4%BD%95%20-%20ren4he2/A11%20Aboard%20Florida%20Board%20%20Daniel%20Webster%20Inn%20Fin.pdf. 2 "Railroad Rehabilitation and Improvement Financing Program," https://www.cfda.govt ndex?s=progra- , P, mode=f -, rm&tab=core&id=ab95c9c6b78d794572af8614b6ad890e. 3 "ENVIRONMENTAL ASSESSMENT AND SECTION 4(F) EVALUATION FOR THE ALL ABOARD FLORIDA PASSENGER RAIL PROJECT WEST PALM BEACH TO MIAMI, FLORIDA," October 31, 2012, file:///C1Documents%20and%20Settings/Administrator/My%20Documents/Downloads/EnvironmentalAssessment AAF P assenger Rail Proiect from WPB to Miami.pdf.
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(1) the financial viability of the project, including the plan of finance (capitalization plan) and its assumptions;
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(2) the financial projections of the borrower and other relevant parties to the overall transaction;
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(3) the business plan including all projections for revenue, ridership studies, financial modeling, and assessment of future ability to meet all repayment obligations;
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(4) project risks, including construction risks, the reasonableness of the applicant's revenue and expense forecasts, validation of ridership studies, project schedule and project costs; and
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(5) cost/benefit analysis regarding the overall cost versus the public benefits derived from the project.
A July 11, 2013 Department of Transportation Credit Council Meeting Agenda lists a "$670 Million RRIF
Loan application from All Aboard Florida — Operations, LLC." 4 -
On August 8, 2013, All Aboard Florida officially submitted a presolicitation notice for a $632 million RRIF
loan to provide new passenger rail (Department of Transportation Solicitation Number: DTFR53-13-R00121). 5 The Presolicitation notice means the project might not bid ultimately. Indeed, two weeks later on August 22, 2013, All Aboard Florida's presolicitation notice was cancelled due to "a change in acquisition strategy for this requirernent." 6 -
Signs of a new loan application having been made are not apparent or public yet.
The 2012, $84 million RRIF loan to the Alameda Corridor Transportation Authority, ACTA, in California, took 33 month to be passed. This is said to be on the long side of loan applications. Length of time to decide the loan was blamed on it being filed in the wake of the 2008 recession, and questions on the RRIF Committee's part about the financial.'
In a July 2013 hearing at Congress' Committee on Transportation and Infrastructure, it was mentioned that eight RRIF loan applications are currently pending. 8 Roughly six employees are mentioned to be working at RRIF. Two loans were passed in 2012, three in 2011, two in 2010, and three in 2009. John L. Mica, Congressman from Florida, seemed to be shaming the RRIF process at the meeting — "Not a very productive shop," he observed caustically of RRIF — while pushing the government to involve the private sector in American rail:
"DOT CREDIT COUNCIL MEETING," July 11, 2013, http://www.dot.govisites/dot.dev/files/docs/agenda-for-cc-meeting-711-13.pdf. 5 "Numbers Emerge on (Mostly) Private Passenger Rail in Florida," October 3, 2013, 4
http://nextcity.org/daily/entry/numbers-emerge-on-mostly-private-passenger-rail-in-florida. 6
w.fbo.Rov/index?s=opportunity&mode=form&id=c3197aaa764e6b9662abadO2c4ada045&tab=core& cview=1. t' "The Role of Innovative Finance in Intercity Passenger Rail," July 9, 2013, Committee on Transportation and Infrastructure," July 9, 2013, file:MCIDocuments%20and%20Settings/Administrator/My%20Documents/Dropbox/Misc%20 %20%E4%BB%BB%E4%BD%95%20-%2Oren4he2/A11%20Aboard%20Florida%20Board%20%20Daniel%20Webster%20Inn%20Fin.pdf. 7
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Ibid.
"When the private sector comes in, they can make money. If you work with them and give their o
some incentives and they have an opportunity to return. But the Soviet style thinking [of passenger rail being dominated by the federal government] prohibits us from moving forward into the 21st century."
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To gauge the FRA's stance toward All Aboard Florida's loan, the questions and answers between Junior U.S. Senator from Florida Marco Rubio, and Anthony Foxx, Secretary of the Department of Transportation which oversees the Federal Railroad Administration, during Foxx's Nomination Hearing May 22, 2013, are worth noting: 9
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Marco Rubio, Junior U.S. Senator from Florida. If you are confirmed, a priority for DOT should be encouraging private sector initiatives and projects for all modes of transportation. With the funding issues facing transportation, the private sector must play a role in meeting our transportation challenges, and DOT will need to encourage public-private partnerships and private sector investment. One area of concern with respect to high costs is passenger rail. Currently, in Florida, there is an example of a private sector initiative to provide passenger rail: the All Aboard Florida project. If confirmed, will you commit to supporting private sector initiatives? Will you commit to reducing regulatory barriers and implementing expedited reviews of projects where the private sector is putting forth a viable project that will reduce the burden on tax-payers?
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Anthony Foxx, Secretary of the Department of Transportation: There is little doubt that private investment can play a critical role in expanding our Nation's transportation infrastructure. Public-private partnerships (PPPs) can offer an innovative new delivery approach for some of our country's most complex and challenging projects when they are appropriately structured, when they provide better value as compared to traditional public sector delivery approaches, and when the underlying projects are well-aligned with public policy objectives. DOT's recent experience demonstrates that, when creatively utilized, the flexibility afforded by Federal credit assistance can be a powerful catalyst for PPPs, including complex projects involving multiple public and private sector stakeholders. The multi-modal TIGER program has also shown that many transportation infrastructure projects that have both public and private benefits and can be built quick-ly and effectively when the public and private sectors share the cost. The Crescent Corridor project, a multi-billion dollar collaboration between Norfolk Southern, the Federal Government, and several Southern States including North Carolina, will improve efficiency of freight moving through the Southeast, reducing carbon emissions and congestion on the interstate. It's a great example of how public and private investment can work together to improve our infrastructure. The President's Rebuild America Partnership proposal recognizes the important role private sector investment can play in transportation infrastructure. It strengthens existing programs such as TIFIA and
"NOMINATION OF MAYOR ANTHONY FOXX TO BE SECRETARY OF THE U.S. DEPARTMENT OF TRANSPORTATION," May 22, 2013, nttp://www.gpo.gowfdsysipkg/CHRG-113shrg8S820/pdf/CHRG-113shrg85820.pai.
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Private Activity Bonds and introduces America Fast Forward Bonds to ensure that we continue to incentivize private investment in transportation infrastructure. If confirmed, I will support these efforts wholeheartedly.
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Junior Senator Rubio. If you are confirmed, I encourage you to look closely at Amtrak's operations and find opportunities for the private sector to increase revenues so the burden on taxpayers can be lessened. One such area would be at finding a private sector partner to increase non-rail revenues along the corridor. An example is in my state—the All Aboard Florida passenger rail project is trying to meet this need. Will you look at reducing Amtrak's losses a priority during your tenure?
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DOT Secretary Anthony Foxx. I am committed to delivering cost-effective transportation facilities for the American people and maximizing the benefits of public investment in Amtrak. I also support the President's Rebuild America Partnership proposal, which recognizes the important role private sector investment can play in transportation infrastructure. But while these partnerships have the potential to assist agencies in meeting significant funding challenges, they are not a panacea and we must also maintain a robust Federal program which encourages and incorporates appropriate private investment.
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Florida Republican U.S. House of Representatives Congressman Daniel Webster, posing questions to John Porcari, U.S. Transportation Deputy Secretary, at the July 9, 2013 "Role of Innovative Finance in Intercity Passenger Rail" Hearing Before Congress. w
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Florida House Rep Daniel Webster: I had a question about something local to Florida. There is an innovative, groundbreaking private-sector project underway called All Aboard Florida. And it will bring not only modern passenger travel rail from Miami to my hometown of Orlando, but also be great for economic development and also just great employment opportunities as well. Are you aware of that project?
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John Porcari, U.S. Transportation Deputy Secretary: Yes, I am.
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Rep. Webster: I think it is probably the only green filled passenger rail project that will be completed here in the next few years. Is there anything that you believe DOT could do in order to help that project along and move it forward quickly and also without unnecessary delays?
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Trans. Dep. Secretary Porcari: Well, it is one of the RRIF loan applications that we are looking at right now. I would say it comes in with some natural advantages in the sense that for the most part it is existing right-of-way, and has, for at least a portion of the line, the environmental clearances that are required. So those are big pluses. I know, and you will hear more about it I
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"The Role of Innovative Finance in Intercity Passenger Rail," July 9, 2013, Committee on Transportation and Infrastructure:
file:///C/Documents%20and%20Settings/Administrator/My%20Documents/Dropbox/Misc%20%20%E4%BB%BB%E4%BD%95%20-%2Oren4heVA11%20Aboard%20Florida%20Board%20%20Daniel%20Webster%20Inn%20Fin.pdf
suspect on the second panel—but there are more—there are some right-of-way and other issues to be worked out. But overall, there is a real need. This is a great example of, for the most part, what would be continue to be a shared use corridor, where both freight and passenger activity can co-exist very well. I don't know of any show stoppers for the proposal. But I don't know enough of the details at this point to know that there might be some. But in general, we welcome the proposal. We know the need is great. And for a system that could serve in phases or all at once, Miami to Orlando would be a big boon to the State.