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HomeMy WebLinkAbout2014 - Article regarding private activity bonds Cathy Testa From:Kate Pingolt Cotner <kcotner@ircgov.com> Sent:Thursday, October 16, 2014 3:48 PM To:Joseph Griffin Subject:FW: Article regarding AAF and private activity bonds Attachments:Minutes FDFC BOD 2014-08-20.pdf Dear Joe, As a follow-up to my earlier email, I have attached the minutes from the Florida Development Finance Corporation Board of Director's meeting that took place on August 20, 2014. At this meeting, the Board voted to approve Intent Resolution No. 14-16 which was included in AAF’s application it submitted to U.S. DOT for an allocation of private activity bonds. Thank you, and I hope you are having a great week! Kate From: Kate Pingolt Cotner Sent: Thursday, October 16, 2014 1:31 PM To: Joe Griffin Subject: Article regarding AAF and private activity bonds Good afternoon, Joe- It was such a pleasure meeting you yesterday. I am not sure if you have seen this article or not. If not, I hope you find it to be informative.  Thank you, and I hope you are having a great day! Kate Kate Pingolt Cotner, Esq. Assistant County Attorney Indian River County 1801 27th Street Vero Beach, Florida 32960-3365 kcotner@ircgov.com Phone: (772) 226-1406 Under Florida law, e-mail addresses are public records. If you do not want your e-mail address released in response to a public-records request, do not send electronic mail to this entity. Instead, contact this office by phone or in writing.  Before printing this e-mail, think if it is necessary. Think Green! 1 Florida Passenger Train Sponsors Seek $1.75B in Private Activity Bonds by Shelly Sigo OCT 8, 2014 1:26pm ET BRADENTON, Fla. - All Aboard Florida, the $3.2 billion private passenger train service proposed between Miami and Orlando, applied for one of the largest private activity bond allocations ever sought from the Federal Highway Administration. All Aboard requested a $1.75 billion allotment in August, and hopes to sell tax exempt private activity bonds in November and December to partly finance the 235-mile-long project, the company told The Bond Buyer. If an allocation is approved and the bond are sold, it also may be the first completely privately owned and operated transportation project to receive some of the $15 billion in exempt facility bonds authorized by Congress under the Safe, Accountable, Flexible, Efficient Transportation Equity Act. The FHA had authorized $10.2 billion in PABs as of Sept. 17. Of that amount, the largest, single federal PAB allocation has been $1.3 billion for a $2.45 billion light-rail project in Maryland, which could be eclipsed by the Florida passenger rail project. A $2 billion allocation had been awarded earlier this year to Florida's Ultimate I-4 project, but the concessionaire working with the state opted to use bank financing instead of PABs. To date, most - if not all - FHA private activity bond allocations have had a public sponsor and used the financing as part of a public-private partnership. Maryland, for example, expects to select a private partner next year to design, build, finance, operate and maintain its 16.2-mile commuter line. All Aboard Florida doesn't have a public partner in development or financing of its project. Florida officials including Gov. Rick Scott have denied that any direct state funding will go toward the rail project. In communities along the controversial train route, particularly the congested east coast, there will be publicly funded maintenance costs for improved rail crossing safety. At Orlando International Airport, where a $1.1 billion capital improvement plan has received some state funds, All Aboard is leasing property for its train station as part of a long-planned intermodal transit facility that will also serve local commuter rail. AAF, whose parent company is Florida East Coast Industries, hasn't announced its finance team publicly. "All Aboard Florida successfully secured private financing for the first phase of the project earlier this year," said Michael Reininger, president and chief development officer of All Aboard Florida. "We have therefore determined to pursue private debt financing for the remaining capital needed." Reininger also said that investors in the tax exempt bonds to be sold are "private entities, therefore, this financing mechanism poses zero risk to the local, county, state or federal governments." 2 "The $1.75 billion of bonds will be marketed and sold to private investors in the capital markets," he said. "Repayment of the bonds will be an obligation of All Aboard Florida, and no other private or public entity." AAF also applied for a $1.6 billion low-interest loan from the Federal Railroad Administration's Railroad Rehabilitation and Improvement Financing Loan program that would be the largest of its kind. While All Aboard has often said that the project is being privately financed, opponents of the project concerned about its potential safety impacts have argued that the RRIF loan could be a liability for taxpayers. AAF said the RRIF loan application is still pending, but private activity bonds would be an alternative method to finance the project that would replace or substantially reduce the RRIF loan request. Kevin Thompson, spokesman for the Federal Railroad Administration, confirmed that All Aboard submitted applications for the RRIF loan and the bond allocation and referred all other questions to the railroad company. All Aboard is proposing to offer 235 miles of daily passenger service from Orlando to Miami, with stops in West Palm Beach and Fort Lauderdale. A draft environmental impact statement for a portion of the line is under review at this time, and public information meetings have been scheduled for October and November The Florida Development Finance Corp. has been asked to serve as conduit issuer for the private activity bonds if the federal government authorizes the allocation, said executive director Bill Spivey. FDFC is authorized statewide to issue industrial revenue bonds through interlocal agreements in the counties affected by the financed projects. The FDFC board gave preliminary approval to issue debt for All Aboard Florida on Aug. 20, so the resolution could be included in the company's federal application for the private activity bond allocation, Spivey said. The preliminary approval also started the process for necessary documents to be developed, and the deal still requires final authorization from the FDFC board, he said. AAF plans to make improvements in eight counties in order to build its new passenger service, but preliminarily, bond proceeds would be spent in only five of those counties, according to All Aboard's application to the FDFC for conduit financing. The FDFC's existing interlocal agreements with Brevard and Miami-Dade counties must be amended to allow for the amount bonds that All Aboard expects to issue, according to Joseph Stanton, a partner at the law firm Broad and Cassel, which represents the Florida Development Finance Corp. Brevard and Miami-Dade officials will be asked to amend the interlocal agreement later this month or in early November, said Stanton. "Our disclosure documents will clearly enumerate that sole payment for the bonds is revenue from the project," he said. Spivey said it is too soon to determine if the bonds will be publicly marketed, of if they will be sold in a private placement or limited offering. 3 "I think that we would want the bonds to be sold in minimum denominations of $100,000, and to institutional or accredited investors," he said, adding that similar structures are often required on other financings by the FDFC. All Aboard's application for conduit financing said the company is in discussion with rating agencies for the proposed issuance. The application also indicates that AAF plans to use $1.75 billion of privately placed fixed-rate bond proceeds in conjunction with $1.42 billion of other funds to finance land acquisition, construction, equipment and rolling stock. Some bond proceeds may be used to reimburse prior expenses, including the issuance of $405 million in high- yield notes that closed on July 1 with a 12% coupon. The note proceeds are currently held in escrow, according to the application. "Upon successful completion of an offering of private activity bonds by AAF or its affiliates, the proceeds from this $405 million debt financing will be returned to the holders thereof, and neither AAF nor any of its affiliates will receive any such debt financing proceeds," the application said. The company said it is currently in discussion with a number of "top-tier financial institutions" and expects to select its lead underwriter shortly. The privately owned and operated passenger rail service will be offered along a 235-mile corridor between central and south Florida with a total of 32 daily roundtrips. The service is expected to begin in the fourth quarter of 2016 between Miami and West Palm Beach, and in the first quarter of 2017 from West Palm to Orlando. Spivey said All Aboard's application for conduit financing helps the Florida Development Finance Corp. fulfill its purpose. FDFC has served as conduit issuer for charter schools, health care and independent living facilities, private airport and economic development projects, among others. "FDFC's mission is to undertake financings as a conduit issuer for economic development purposes," Spivey said. "If you look at All Aboard Florida's website, they've done some economic analysis and there are some significant near- and long-term benefits to these jurisdictions." In addition to creating thousands of jobs during construction and operation, the train is expected to result in an economic impact of $6.4 billion from rail line construction and operations, and transit oriented development, according to an AAF commissioned economic impact study by the Washington Economics Group Inc. The project would also result in an estimated $653 million in new federal, state and local tax revenue, the study said. 4 BOARD OF DIRECTORS MEETING WEDNESDAY, AUGUST 20, 2014 MINUTES Minutes of the meeting of the Florida Development Finance Corporation Board of Directors held on Wednesday, August 20, 2014, in the Enterprise Florida South Conference Room in Orlando, Florida. Directors Present Peter Tesch, Chairman (via phone) Rebecca Reynolds, Vice-chair William Jones (via phone) Frank DiBello Staff Present Louis Laubscher (via phone) David Rodriguez Bill Spivey Joseph Stanton, Esq., Broad & Cassel Jeff Larson, Larson Consulting Services Guests Present Charlie Sands, Kosan Associates Husein Cumber, Florida East Coast Industries, LLC P. Michael Reininger, Florida East Coast Industries, LLC Bruce Giles-Klein, Esq. Greenberg Traurig, P.A. John Wakefield, Ygrene Energy Fund Florida Stacey Lawson, Ygrene Energy Fund Florida Dennis Hunter, Ygrene Energy Fund Florida Agenda I. Call to Order; Declaration of Quorum II. Sunshine Notice III. Public Comment IV. Approval of Meeting Minutes A. July 16, 2014 Meeting Minutes V. Current Business A. None VI. New Business A. Southeast Renewable Fuels, LLC i. Intent Resolution No. 14-15 B. AAF Holdings LLC i. Intent Resolution No. 14-16 C. Ygrene Presentation PACE bond financing VII. Other Business VIII. Adjournment Call to Order A quorum was present at 3:05pm and the meeting was called to order by Chairman Tesch. Sunshine Notice and Public Comment The Sunshine Notice was read by Bill Spivey. The meeting was opened for Public Comment and none was requested Approval of Meeting Minutes for July 16, 2014 Upon motion by Boardmember DiBello and second by Madam Vice-Chair Reynolds, the minutes of the meeting held July 16, 2014, were unanimously approved. Southeast Renewable Fuels, LLC Intent Resolution No. 14-15 Bill Spivey gave a brief overview of the project and financing structure. Boardmember Jones asked who would be the likely purchasers of the bond and if the technology was commonly used in the industry. Joseph Stanton replied that the given the non-investment grade policy, bonds would most likely be sold to large institutional investors. Charlie Sands stated that the technology is new to the US, but common in Brazil. Louis Laubscher asked if the company will be growing or buying the sweet sorghum. Mr. Sands replied that they have contracts with local farmers to grow and harvest the sweet sorghum. Upon motion by Madam Vice-Chair Reynolds and second by Boardmember DiBello, the Board unanimously approved Intent Resolution No. 14-15 for Southeast Renewable Fuels, LLC. AAF Holdings LLC Intent Resolution No. 14-16 Chairman Tesch declared the appearance of a conflict of interest on this matter and would abstain from voting. Bill Spivey explained that the item before the Board is a formal version of an informal declaration of intent signed by Mr. Spivey for the project. The purpose of this item was for inclusion in an application to the US Department of Transportation (USDOT) for a direct allocation of private activity bonds. AAF Holdings is in the process of submitting a FDFC application. Joseph Stanton added that Mr. Spivey has the authority to enter into a declaration of intent, but the one before the Board would give AAF Holdings comfort as part of their USDOT submittal. He introduced Husein Cumber, Michael Reininger and Bruce Giles-Klein as representatives of the project. Mr. Reininger gave a brief overview of All Aboard Florida project. There is an environmental impact study, which will be posted as a draft in a couple of weeks and public hearings will be held. He also spoke about the economic development impacts of this project including job creation, tax revenue generation and other economic activity through this private sector investment. Husein Cumber added that the current station locations for phase I are in areas that have not seen economic development opportunities in decades. Joseph Stanton stated that the allocation request in the intent resolution is a permission slip to issue bonds. It is not a loan from the Federal government. The conduit financing is to private investors. Upon motion by Boardmember DiBello and second by Boardmember Jones, the Board voted 3-0, with Chairman Tesch abstaining per declaration, to approve Intent Resolution No. 14-16 for AAF Holdings LLC. Joseph Stanton added that the Memorandum of Agreement was a part of the resolution and staff will begin this process as a next step. AAF Holdings LLC will come back before the Board for subsequent approvals. Ygrene Presentation PACE bond financing Bill Spivey introduced Ygrene as a PACE Provider in the state and gave an overview of the due Stacey Lawson gave a comprehensive operations, contractor and customer service provisions, funding process, program team and how the FDFC can partner with Ygrene in the financing process. As a legal point of clarification and due to the single program administrator reference in the current bond validation process, Ms. Lawson asked if additional program administrators would be able to access the bond capacity. Mr. Spivey stated that it has always been the desire of the Board that the state-wide program would be open to all Florida-based PACE Providers. s a permitted financing source and any exclusivity. Joseph Stanton stated the local jurisdictions determine exclusivity and opting into our program. Ms. Lawson added that most all programs are exclusive to Ygrene. Other discussion ensued regarding PACE as an emerging asset class for investors. Mr. Spivey recommended approval by the Board to move forward with Ygrene. In a non-voting capacity, the Board gave general comments and gave staff approval to work with Ygrene. Other Business Bill Spivey let the Board know that the Downtown Doral Charter School bonds closed. Mr. Spivey will be submitting of Florida for their conference in December. Mr. Spivey also discussed a recent conference call with leadership at the Council of Development Finance Agencies for a bond conference targeted for April 2015. rdth Next Meeting dates were determined to be September 3 at 9:00am and September 17 at 1:30pm. Adjournment Upon motion by Madam Vice-Chair Reynolds and second by Boardmember Jones, the meeting was adjourned without exception at 4:22 pm.