YOUR OPINION: Monique Miller On ‘All Aboard Florida’

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PART I: Hedge Fund Railroad, The Truth about ‘All Aboard Florida’

In 2007, Fortress Investment Group, a multinational, financial investment firm, which, as of December 2013, has over $61 billion in assets under management, purchased two Florida-based companies: Flagler and Florida East Coast Railway.

Flagler is largely a holding company for real estate, which includes a railroad corridor that runs along Florida’s east coast, from Miami to Jacksonville. Florida East Coast Railway operates rail service, transporting freight between the Port of Miami, Port Everglades and Jacksonville.

your-opinion-join-the-multimedia-political-discourseFrom these and other investments, Fortress now owns a massive shipping, infrastructure and rail conglomerate called Florida East Coast Industries (FECI), LLC. Among the companies under this umbrella is All Aboard Florida, which is FECI’s only consumer business.

All Aboard Florida is a high-speed passenger rail service between Orlando and Miami that is scheduled to begin operating in 2015.

Initially, the service was going to offer many stops along the way, but as the company’s plans crystalized, many along the rail corridor have learned that the train would merely be going through, rather than to, their area.

FECI owns the rail lines and rights of way along the proposed route for the new passenger service. Flagler acquired the land for the rail corridor in the late 1800s and, as Florida’s coastal communities developed, they local governments were granted the right to build and maintain road crossings to traverse the corridor’s train tracks.

Today, this arrangement is still in place, so, provided their projects meets building code and land-use requirements, it’s perfectly within FECI’s right to expand and upgrade its rail service. However, as the launch of the passenger service approaches, Flagler’s old arrangement is causing new problems.

County and city taxpayers are responsible for upgrades and maintenance to the rail crossings. When the regional planning groups approved this project, they understood that passenger trains would be stopping in their area, bring tourists and providing a valuable service to their residents.

Then, FECI disclosed that the trains would only be stopping in Miami, Fort Lauderdale, West Palm Beach and Orlando. The cities and counties in between were left with large, ongoing costs and no benefits.

Despite growing anger and frustration in areas that will not benefit from the 32 high-speed trains going by each day, there is little recourse available, if the facts about FECI and Flagler’s legacy arrangement are true. Or is there?

All Aboard Florida makes a point of describing itself as a “private company”, perhaps as a means of preempting challenges to its property rights. However, a private company, whose projects are not privately funded, is not the same thing and does not enjoy the same privacy rights as a private company.

As it turns out, despite FECI’s enormous wealth, the vast majority of their projects and those that their projects depend on to be successful are highly subsidized by federal, state and local government taxpayers. For example,

• It’s hard to have a successful passenger rail service without a train station. The passenger line’s terminus in Orlando will be entirely paid for by Florida taxpayers to the tune of $230 million. (1)

• According to Progressive Railroading, In November 2013, the U.S. Department of Transportation awarded a $14 million Transportation Investment Generating Economic Recovery (TIGER V) grant to FDOT to cover a portion of the project for FECI. (2)

• Because the railroad needs to connect to other public transportation to be useful to consumers, FECI’s value is dependent on its ability to link to South Florida Rapid Transit Authority (SFRTA) lines at South Florida stops. Fortunately, the taxpayers spared FECI from having to make that investment as well by committing $600 – 800 million of their own money to expand SFRTA and connect the two lines. (3)

• In an attempt to offset some of the costs to local governments along the rail corridor for the rail crossing upgrades, the Florida legislature allocated $10 million in the 2014 – 2015 budget. Now all Floridians are helping to pay for rail service most cannot use. Unfortunately, the upgrade estimates for just one county,Broward,  are over $13 million, so the small appropriation from Tallahassee is not going to have much of an impact on the cost for Broward and the other five counties involved. (4)

• All About Florida, as its own entity,  a limited liability corporation (LLC), has applied for federally subsidized Railroad Rehabilitation & Improvement Financing (RRIF) loan for about $1.5 billion in taxpayer money.  These loans do not require the borrower to provide collateral. (5)

PART II: Was It Ever About Passenger Rail? Connecting the Dots…and the Ports

The Florida Chamber Foundation recently published an update to their 2010 study called “Made for Trade: Florida Trade and Logistics 2.0.” The original study asked Florida’s Governor, Legislature and business community to address an opportunity presented by the widening of the Panama Canal. The updated report offers specific goals and priorities for Florida’s infrastructure and transport supply chains.

FECI was one of the sponsors of the Chamber’s report, and it did not mention anything about the need to increase passenger rail in Florida. So why would a huge, multinational investment firm suddenly be so interested in creating passenger rail service between Miami and Orlando? After all, consumer travel services are a notable departure from FECI’s primary business.

It is worth pointing out that compared to the alternatives, FECI would have a much easier time selling the local governments along their rail corridor on the idea of passenger service as a reason to upgrade the tracks and infrastructure.

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After all, the promise of FECI trains bringing hordes of tourists to coastal towns would be irresistible to even the most cautious elected official. In reality, however, passenger rail has been notoriously unprofitable in modern times. People simply don’t take trains in a country that is built for cars when just about everyone owns at least one car.

Suspicious of FECI’s claims about the viability of another passenger train, Florida NOT All Aboard, a Martin County-based group that is against the project, asked for the feasibility study conducted by FECI. Despite the efforts of many, no one has been able to gain access to the study. This, again, raises suspicion that FECI has ulterior motives.

Another way to gauge FECI’s intensions is to look at where it is spending its money, in the context of its current operating environment.

There are a number of infrastructure projects happening in south Florida right now:

1. To make way for larger boats coming through the Panama Canal to dock in the Port of Miami, there is a massive dredging project underway. Florida taxpayers are contributing at least half of the $220 million project, while Miami-Dade is footing the rest of the bill. (6)

2. In order to bring freight rail service right to the Port of Miami, two projects were needed:

a. The FEC/Port of Miami project, which extends the rail lines, will be funded with a $22.8 million Transportation Investment Generating Economic Recovery (TIGER) grant from the U.S. Department of Transportation; $10.9 million from FDOT; $10.9 million from FEC; and $4.8 million from the port. (7)

b. A $1 billion tunnel is needed to allow the trains to get across to the Port of Miami. Who paid? Florida taxpayers did, and will be doing for many years to come. The State of Florida paid for half of the design and construction costs while Miami-Dade and the City of Miami are paying the other half. Additionally, instead of collecting tolls, which would align the costs with those using the tunnel, the State of Florida decided to use statewide funds to pay a foreign company that was hired to operate and maintain the tunnel over the next 30 years. (8)

3. According to a Broward County News Release in October 2013, Port Everglades will soon be more accessible by rail, too, “[Costs for the Port Everglades Intermodal Container Transfer Facility (ICTF)] will be covered by an $18 million intermodal system grant from the Florida Department of Transportation (FDOT); $5 million equity contribution from FECI; $30 million loan that FECI has applied for through a state infrastructure bank; and $19.8 million in land value that the port is contributing through a “nominal” lease rate.” (9)

Perhaps not coincidentally, the only company that provides intermodal freight rail service to those ports is FECI. Their website boasts of their ability to ship anywhere within the continental U.S. from Port Everglades within four days.

Given their monopoly position at the two ports, one wonders why taxpayers are expending their precious resources to build this infrastructure instead of the multi-billion-dollar corporation that stands to benefit so substantially from it.

PART III: The Quietest Bill Passage of the Legislative Session: HB 7175

Toward the end of the last legislative session in Tallahassee, HB 7175 was passed. Most people have not heard anything about this impressive, 128-page “Transportation Bill”. Perhaps, trains, planes and automobiles are not the most exciting topics, but, due to the rarity of its occurrence, bipartisanship usually gets attention. This Bill was not only bipartisan, it was unopposed. Not a single legislator in either house voted against it.

A unanimous vote on a 128-page bill?  It must be good, right? Well, it depends who is asking.

Some of the language in the Bill’s summary looked similar to a report by the Florida Chamber, referenced in the previous segment of this article (Made for Trade: Florida Trade and Logistics 2.0). Upon closer inspection, it is clear that the Chamber’s report, which was, in-part, sponsored by FECI, significantly influenced the contents of HB 7175.

First, it’s important to understand the businesses that comprise FECI.

According to their website, they have the following affiliate companies:

• Flagler, a full-service commercial real estate company.

• All Aboard Florida – privately owned, operated and maintained intercity passenger rail.

• South Florida Logistics Services –offers a wide range of logistics services and solutions.

• Parallel Infrastructure – a leader in third-party Right of Way (ROW) management services.

A quick visit to Parallel Infrastructure’s website offered more detailed information about third-party Right of Way management services, and there were very obvious “parallels” with the broad subjects covered in HB 7175.

The parallels between the Products + Services Offered by FECI and  Section of HB 7175


FECI:         Real Estate portfolio (property adjacent to right of way)

HB7175:    Modifies the terms & conditions under which DOT may sell or lease properties acquired for rights of way that are not needed.


FECI:          Right of Way Management

HB7175:     Revises the way DOT can acquire properties for use in right of way


FECI:          Outdoor Advertising

HB7175:     Revises provisions related to outdoor advertising 


FECI:          Wireless Communications

HB7175:     Allows DOT to factor future revenues from leases from wireless communications facilities and use those revenues to invest in additional transportation infrastructure projects.


FECI:           Transportation (Rail) Projects

HB 7175:     Relaxes reporting requirements for transportation projects. 


FECI:            Transportation Infrastructure

HB7175:       Revises mitigation system for environmental impact of infrastructure projects.   Revises the use of DOT assets to generate revenue streams, which can be reinvested in infrastructure projects. (10)


It is concerning that the same agency, FL DOT, which has the right to confiscate property, under eminent domain, now also has the right to use that property to generate new revenues for the State of Florida. And those revenues are to be used for additional transportation projects, including the confiscation of additional property. Assuming FL DOT’s primary objective is to serve the interests of Florida’s citizens, this situation presents a conflict of interest.

There were two other significant components to HB 7175. It creates a strategic airport initiative, which allows the DOT to provide up to 100% of the cost of airport projects needed by Enterprise Florida or Space Florida.

It also requires the DOT to consult with “Enterprise Florida” before making and approving economic development transportation project contracts. Enterprise Florida was one of the main contributors to the Florida Chamber’s transportation report, and the strategic airport initiative was a direct recommendation in the report.

Weren’t elected officials supposed to be looking out for the best interests of Floridians up in Tallahassee? It appears the citizens need to hire a lobbyist away from the Chamber of Commerce.

Monique Miller

Monique Miller

These public-private ventures are costing the people a fortune, but a few, handpicked companies are making out nicely.

Monique Miller is a Republican candidate for Florida Senate in District 16. She is a strong advocate of property rights and free-market economics. Concerns about All Aboard Florida’s high-speed rail project led her to investigate the matter. For more information about Miller log on to Miller4Senate.com

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REFERENCES

1. Source: http://www.miamiherald.com/2014/02/21/3951531/gov-scott-backs-project-with-ties.html
2. Source:http://www.progressiverailroading.com/passenger_rail/article/South-Florida-rail-upgrades-to-provide-more-freight-transit-travel-options–39706
3. Source: http://www.progressiverailroading.com/passenger_rail/article/South-Florida-rail-upgrades-to-provide-more-freight-transit-travel-options–39706, Accessed: 5/17/2014
4. Source: http://www.miamiherald.com/2014/05/15/4119900/unexpected-cost-could-slow-miami.html#storylink=cpy, Accessed 5/19/2014
5. Information Presented at Brevard County Commissioners’ Meeting on May 13, 2014
6. Source: http://www.miamidade.gov/portmiami/press_releases/2013-11-21-deep-dredge-construction-moving-forward.asp, Accessed: 5/18/2014
7. Source: http://webapps.broward.org/newsrelease/AdminDisplayMessages.aspx?intMessageId=4824 , Accessed 5/18/2014
8. Source: http://webapps.broward.org/newsrelease/AdminDisplayMessages.aspx?intMessageId=4824 , Accessed 5/18/2014
9. Source: http://www.miamitodaynews.com/2014/03/05/port-tunnels-readied-open-may , Accessed 5/18/2014)
10. HB 7175 – Transportation Bill (Source:http://www.myfloridahouse.gov/Sections/Documents/loaddoc.aspx?FileName=PCB%20EAC%2014-01.DOCX&DocumentType=Proposed%20Committee%20Bills%20(PCBs)&Session=2014&CommitteeId=2706, Accessed 5/16/2014)

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