U.S. Sen. Marco Rubio has raised questions about Brightline’s plan sell up to $1.75 billion in tax-exempt bonds to help pay for the construction of its passenger rail service connecting South Florida to Orlando.
In a letter sent to the U.S. Department of Transportation on Tuesday, Rubio, R-Florida, said “it is not clear” whether Brightline’s express trains meet the federal requirements to qualify for the tax-exempt, private activity bonds.
The bond sale is key to Brightline’s ability to finance the construction of the second leg of its project, which includes new rail lines and safety upgrades between West Palm Beach and Orlando.
“When federal financing mechanisms are utilized, it is critical that the utmost transparency is provided to taxpayers,” Rubio wrote in the letter to federal Transportation Secretary Elaine Chao. Brightline’s “project has raised questions regarding whether federal financing was appropriately used. I urge the Department of Transportation to provide clarity as to the standards applied to determine tax-exempt funding mechanisms.”
Brightline has already sold $600 million in tax-exempt, private activity bonds to help pay for its Miami to West Palm Beach service. Trains began operating between West Palm Beach and Fort Lauderdale in January, and service is expected to be extended to Miami in the coming weeks.
The company last year also won approval from the U.S. Department of Transportation to sell an additional $1.15 billion in tax-exempt bonds to help finance its second phase between West Palm Beach and Orlando. Brightline executives have said the bonds provide a lower-cost alternative to other financing options.
“Brightline, the nation’s only privately owned, operated and maintained intercity passenger rail system, is already solving mobility problems for southeast Florida and is poised to disrupt the nationwide transportation discussion and help transform the state’s infrastructure,” a Brightline spokesperson said Tuesday. “ By the federal statutory definition, Brightline qualifies and in combination with $1.5 billion of our own investment has created thousands of jobs and economic impact throughout the state of Florida.”
An amendment to Internal Revenue Code set aside $15 billion at the federal level for private activity bonds to pay for transportation projects, including high-speed trains that move up to 150 mph. Brightline’s trains will operate at a maximum speed of 125 mph.
Instead, federal transportation officials determined Brightline qualifies for the bonds because it fits the definition of a surface transportation project.
In his letter, Rubio called on transportation officials to answer a series of questions about its decision, including whether other rail projects have qualified for the bonds.
Rubio’s letter came days after members of a congressional oversight committee raised similar questions about Brightline’s use of the bonds.
Private activity bonds are designed to help private developers finance projects by giving them access to tax-exempt interest rates — lowering their costs.
Opponents of the Brightline project have alleged the bond amounts to a taxpayer subsidy for the rail service.
Brightline officials, however, have argued neither taxpayers nor federal, state, or local governments would be on the hook for the money if the project failed.
Brightline’s President and Chief Operating Officer Patrick Goddard told members of the congressional committee on Friday that the company is also seeking a federal Railroad Rehabilitation & Improvement Financing loan to help pay for the project. If the bonds aren’t sold, the loan money could be used to help pay for Brightline’s extension north to Orlando.