[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EXAMINING TAX EXEMPT PRIVATE ACTIVITY
BONDS FOR ALL ABOARD FLORIDA'S BRIGHTLINE PASSENGER RAIL SYSTEM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
GOVERNMENT OPERATIONS
OF THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
APRIL 19, 2018
__________
Serial No. 115-109
__________
Printed for the use of the Committee on Oversight and Government Reform
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
http://oversight.house.gov
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U.S. GOVERNMENT PUBLISHING OFFICE
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Committee on Oversight and Government Reform
Trey Gowdy, South Carolina, Chairman
John J. Duncan, Jr., Tennessee Elijah E. Cummings, Maryland,
Darrell E. Issa, California Ranking Minority Member
Jim Jordan, Ohio Carolyn B. Maloney, New York
Mark Sanford, South Carolina Eleanor Holmes Norton, District of
Justin Amash, Michigan Columbia
Paul A. Gosar, Arizona Wm. Lacy Clay, Missouri
Scott DesJarlais, Tennessee Stephen F. Lynch, Massachusetts
Virginia Foxx, North Carolina Jim Cooper, Tennessee
Thomas Massie, Kentucky Gerald E. Connolly, Virginia
Mark Meadows, North Carolina Robin L. Kelly, Illinois
Ron DeSantis, Florida Brenda L. Lawrence, Michigan
Dennis A. Ross, Florida Bonnie Watson Coleman, New Jersey
Mark Walker, North Carolina Raja Krishnamoorthi, Illinois
Rod Blum, Iowa Jamie Raskin, Maryland
Jody B. Hice, Georgia Jimmy Gomez, Maryland
Steve Russell, Oklahoma Peter Welch, Vermont
Glenn Grothman, Wisconsin Matt Cartwright, Pennsylvania
Will Hurd, Texas Mark DeSaulnier, California
Gary J. Palmer, Alabama Stacey E. Plaskett, Virgin Islands
James Comer, Kentucky John P. Sarbanes, Maryland
Paul Mitchell, Michigan
Greg Gianforte, Montana
Vacancy
Sheria Clarke, Staff Director
William McKenna, General Counsel
Caroline Nabity, Counsel
Cameron Connor, Legislative Assistant
Sharon Casey, Deputy Chief Clerk
David Rapallo, Minority Staff Director
------
Subcommittee on Government Operations
Mark Meadows, North Carolina, Chairman
Jody B. Hice, Georgia, Vice Chair Gerald E. Connolly, Virginia,
Jim Jordan, Ohio Ranking Minority Member
Mark Sanford, South Carolina Carolyn B. Maloney, New York
Thomas Massie, Kentucky Eleanor Holmes Norton, District of
Ron DeSantis, Florida Columbia
Dennis A. Ross, Florida Wm. Lacy Clay, Missouri
Rod Blum, Iowa Brenda L. Lawrence, Michigan
Bonnie Watson Coleman, New Jersey
C O N T E N T S
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Page
Hearing held on April 19, 2018................................... 1
WITNESSES
Mr. Grover Burthey, Deputy Assistant Secretary for Policy, U.S.
Department of Transportation
Oral Statement............................................... 5
Written Statement............................................ 8
Mr. Patrick Goddard, President and Chief Operating Officer, All
Aboard Florida/Brightline
Oral Statement............................................... 12
Written Statement............................................ 14
Mr. Robert Crandall, former CEO, American Airlines
Oral Statement............................................... 31
Written Statement............................................ 33
Chief Dan Wouters, Division Chief Emergency Management, Martin
County Fire Rescue
Oral Statement............................................... 39
Written Statement............................................ 41
Mr. Dylan Reingold, County Attorney, Indian River County
Oral Statement............................................... 47
Written Statement............................................ 49
APPENDIX
Florida 8th District Crossing Location Photographs submitted by
Mr. Posey...................................................... 78
Hearing Follow-up Response submitted by Mr. Burthey, Department
of Transportation.............................................. 85
Response from All Aboard Florida to Mr. Meadows, Questions for
the Record 87
Response from Mr. Goddard to Mr. DeSantis, Questions for the
Record......................................................... 95
EXAMINING TAX-EXEMPT PRIVATE ACTIVITY
BONDS FOR ALL ABOARD FLORIDA'S BRIGHTLINE PASSENGER RAIL SYSTEM
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Thursday, April 19, 2018
House of Representatives,
Subcommittee on Government Operations,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 10:06 a.m., in
Room 2154, Rayburn House Office Building, Hon. Mark Meadows
[chairman of the subcommittee] presiding.
Present: Representatives Meadows and Connolly.
Also Present: Representatives Mast and Posey.
Mr. Meadows. The Subcommittee on Government Operations will
come to order. And without objection, the chair is authorized
to declare a recess at any time. And the chair notes the
presence today of Congressman Bill Posey of Florida and
Congressman Bryan Mast of Florida.
We appreciate both of you and your interest in this
particular topic. We welcome your participation.
I ask unanimous consent that Congressman Posey and
Congressman Mast be permitted to fully participate in today's
hearing.
Mr. Connolly. No objection, Mr. Chairman.
Mr. Meadows. I thank the gentleman from Virginia. So
without objection, it is so ordered.
I am pleased to hold this oversight hearing to examine the
use of tax-exempt private activity bonds for All Aboard
Florida's Brightline project.
It is a pleasure to welcome the local stakeholders and
experts on this issue. I thank you all for joining us here
today.
And as you know, this committee is charged with uncovering
and exposing waste, fraud, and abuse within the Federal
Government. And as some of you may have seen in the news, the
safety of the Brightline train issue raises grave safety
concerns. And tragically, some 6 people have been killed by
Brightline trains since they began trial runs last year.
And so due to some of the public safety concerns, some of
my colleagues, including Congressman Mast, have raised these
concerns related to the eligibility of a private sector entity
like Brightline to receive Federal assistance. And so as
stewards of the taxpayer dollars, we take these concerns
seriously.
In 2017, All Aboard Florida applied for two allocations of
a tax-exempt private activity bond totaling $1.75 billion.
These bonds would be used to fund its Brightline passenger rail
project. And after reviewing the request, DOT approved both
applications and deemed the bonds eligible for tax-exempt
status.
However, questions remain as to whether the project was, in
fact, eligible to receive this type of funding. And this is
especially concerning for a number of reasons.
So, obviously, we'll get to hear some of the testimony
today as it relates to the Title 23 funds and when those were
received for this particular issue, because that's one of the
components, certainly, of getting the private activity bond.
And additionally, I look forward to the testimony from all of
you.
But with that, I would like to yield the remaining time for
my opening statement to the gentleman from Florida, Mr. Mast.
Mr. Mast. Thank you, Mr. Chairman, for holding this
hearing, for your work on rooting out waste, fraud, and abuse
in the Federal Government.
I could tell you one of the issues that I do hear about
most frequently from my constituents are the physical and
economic danger that are posed by the Brightline expansion into
the Treasure Coast.
There are numerous issues that deserve scrutiny when it
comes to this expansion. On February 15, my committee of
Transportation and Infrastructure had the opportunity to ask
the National Transportation Safety Board, also the Federal
Railroad Administration, about many of these issues. And the
FRA indicated that they are also very concerned about these
safety issues, including the deaths, some of them by suicide,
that have been as a result of this train.
Now, let me just start by saying, I am a supporter of
private activity bonds. There are numerous important project,
good projects that Congress has specifically intended to
provide the option of private activity bonds for. There's a
list of them up on the board right there.
Airport, docks, wharfs, mass commuting facilities,
facilities for furnishing water, sewage facilities, solid waste
disposal, residential projects, furnishing electronic and
energy and gas, heating, cooling facilities, hazardous waste
facilities, environmental enhancements of hydroelectric-
generating facilities, and qualified public educational
facilities, green building and sustainable design projects.
There are two additional categories. The first is high-
speed intercity rail facilities, which Congress defines as a
railway using vehicles that are reasonably expected to be
capable of obtaining a speed in excess of 150 miles per hour.
In other words, if Brightline wants to use tax-exempt bonds,
they have to have the capability to run their trains in excess
of 150 miles per hour. But they don't.
So Brightline has, instead, sought to circumvent this
congressional intent by claiming that they qualify as a
highway. We'll get into the theory of this claim in this
hearing, but I do think we can all agree that based on any
common understanding of the word ``highway,'' this train does
not meet that definition.
I do believe that if Congress had intended to provide
private activity bonds for a passenger train traveling 80 to
110 miles per hour, as Brightline does, then Congress would
have laid that out. They would have just said so. And any other
interpretation is an affront to the American taxpayer.
And in that, I thank you for the time to speak Mr.
Chairman, and I yield back.
Mr. Meadows. I thank the gentleman.
In my remaining 35 seconds, I would like to thank the
ranking member. As many of you know, we are not actually voting
today, and what that normally means is that everybody is out of
town almost immediately. And so the ranking member was gracious
enough to continue on with this hearing. And I would like to
personally thank him.
And I recognize him for his opening statement.
Mr. Connolly. I thank the chair for ever being gracious.
And I'm very well aware of the fact that for some of our
colleagues, this obviously has great impact. And so we wanted
to make sure that that was a possibility today. But I thank the
chair.
As a former local government official, I recognize some of
the aspects of this issue in this hearing. In fact, it almost
feels like I'm back in my old boardroom in Fairfax County.
What we have here is a local dispute between a new
transportation facility, in this case Brightline passenger
rail, and the communities that object to building the facility
in their backyards. That's the kind of dispute I dealt with
countless times as the chairman of one of the larger counties
in the United States.
No case is ever easy, but what we always hope for is a
resolution that balances the interests of the community with
the need to make necessary transportation improvements. And
that's what I hope ultimately happens in this case.
As Federal overseers, we also have a responsibility to
ensure that projects using government funding or financing
mechanisms are held to high safety standards and, in fact, meet
the statutory terms of the program as set by Congress.
This hearing appears to focus on a local dispute which is
currently subject to litigation. The witnesses are the parties
to the litigation, and the testimony they're offering tracks
closely with their legal briefs.
Of course, we're not a court of law here, and nothing that
happens here will affect the eventual outcome of the litigation
itself, nor is this hearing intended to do so, nor should it.
However, I think the hearing raises some issues that should
be relevant to President Trump, though perhaps not in the way
my friends on the other side of the aisle intend.
I believe we can all agree the country's infrastructure is
in an appalling state of disrepair. The state of our
infrastructure is so bad that the American Society of Civil
Engineers gave the country an overall D-plus, D-plus. Although
our rail systems scored a B, the Society stated that, quote,
``U.S. rail still faces clear challenges, most notably in
passenger rail, which faces the dual problems of aging
infrastructure and insufficient funding.''
The dispute at the center of the lawsuit is how a major
passenger rail infrastructure project in Florida is funded. The
project is privately owned and operated. It's funded by private
investors who receive tax exemptions for the income they earn
from their investments in the railroad. The financing vehicle
is called private activity bonds, PABs.
Two Florida counties and a group of homeowners in Florida's
Treasure Coast want to stop the project. They're saying, in
effect, ``Not in my backyard,'' and they have gone to court to
contest the appropriateness of the use of PABs for this
infrastructure project.
Here is why this Florida dispute should matter to President
Trump. President Trump's infrastructure plan abandoned the long
tradition of public funding of major infrastructure projects.
Instead, he relies significantly upon the private sector to
finance the cost and upgrading of infrastructure. As is the
case with this passenger rail project in Florida, PABs are a
key part of the financing option that the Federal Government
uses to incentivize private sector investment in
infrastructure. The Trump plan depends upon them.
So it's not too much of a stretch to say that if this
hearing and the accusations of crony capitalism based on
government-supported financing mechanisms can in fact stop a
private passenger rail project in Florida from using tax-exempt
bonds intended to incentivize private investment in
infrastructure, then President Trump's plan to rely on those
some instruments, that is to say PABs, for infrastructure
projects across the country could also be stopped in a similar
way.
In a way, then, it's the Trump infrastructure plan that's
also before us today.
Isn't it ironic that the loudest critics are likely to be
in the President's own party and probably believe in private
ownership and private investment of infrastructure, just not in
this backyard.
I have no opinion one way or the other about whether this
passenger train should be built in Florida or whether the
mechanism used to finance it is appropriate. I am, however,
skeptical that the Nation can rely entirely on these private
instruments of finance to repair and improve our aging
infrastructure. And I'm doubtful that the President's privately
funded infrastructure plan will ever be anything more than
another campaign promise.
I have a suspicion this hearing will shine the light on the
Achilles' heel of that infrastructure plan because it will
demonstrate that private financing alone is not a panacea,
something that will become more clear every time someone in
this hearing attacks Brightline for taking advantage of
existing tax-exempt bonds.
So I think in many ways this hearing is more than about a
rail line in Florida. It actually sheds light on how we're
going to approach the whole issue of our Nation's
infrastructure, which is so critical. And for that, I thank the
chair for bringing us together to do that just that.
With that, I look forward to hearing the testimony.
Thank you, Mr. Chairman.
Mr. Meadows. I thank the gentleman for his opening remarks.
I'm pleased to introduce the witnesses. We have Mr. Grover
Burthey, deputy assistant secretary for policy at the
Department of Transportation.
Welcome.
Mr. Patrick Goddard, president and chief operating officer
of Brightline All Aboard Florida.
Welcome, Mr. Goddard.
Mr. Robert Crandall, former chairman and CEO of American
Airlines.
Welcome, Mr. Crandall.
Chief Dan Wouters, division chief of the Emergency
Management of Martin County Fire Rescue.
Welcome, Chief.
And Mr. Dylan Reingold, county attorney for Indian River
County.
Welcome.
And pursuant to committee rules, all witnesses will be
sworn in before they testify, so if you would please stand and
raise your right hand.
Do you solemnly swear or affirm that the testimony you are
about to give is the truth, the whole truth, and nothing but
the truth, so help you God?
All right. You may be seated.
Please, the record will reflect that all witnesses answered
in the affirmative.
In order to allow time for discussion, I would ask that you
please limit your testimony, your oral testimony to 5 minutes,
but your entire written testimony will be made part of the
record.
And as a reminder, there is a clock in front of you. And so
as you're looking at that clock it should have a countdown. But
as it turns yellow, that means you need to prepare your closing
remarks. And as it turns red, it'll start with a gentle tap and
a harder gavel if you continue to go beyond the 5 minutes.
But with that, if you'll remember to press the red talk
button, that will turn red when you press it.
You're recognized, Mr. Burthey, for 5 minutes.
WITNESS STATEMENTS
STATEMENT OF GROVER BURTHEY
Mr. Burthey. Chairman Meadows, Ranking Member Connolly, and
members of the subcommittee, thank you for the opportunity to
testify today.
My name is Grover Burthey, and I'm the deputy assistant
secretary for transportation policy in the Office of the Under
Secretary at the United States Department of Transportation.
In my role at the Department, I oversee both the Office of
Infrastructure Finance and Innovation, as well as the Build
America Bureau, the entities with historical and current
responsibility managing the private activity bond allocation
process.
As you are aware, private activity bonds, or PABs, are a
category of bonds issued by State or local governments to
private investors. The interest on State or local bonds is
normally not subject to Federal taxation. But if State or local
bonds are used to fund a private project, the interest is only
tax-exempt if the bonds fit into one of several categories,
including the category of exempt facility bonds at issue here.
Private activity bonds are a valuable tool in facilitating
private investment in transportation infrastructure. Extending
tax incentives to privately financed projects or facilities
that are similar to those enjoyed by publicly financed projects
or facilities helps to level the playing field and encourages
increased private investment in transportation infrastructure.
Section 142 of Title 26, the Internal Revenue Code, defines
several different categories of exempt facilities, including
multiple categories of transportation facilities which may be
financed using PABs.
Many of these categories are subject to annual volume caps
set by the statute and administered at the State level, while
others are not limited in volume at all. Airports, docks and
wharves, mass commuting facilities, and high-speed intercity
rail facilities all fall into one of those categories with a
volume cap.
Qualified highway and surface freight transfer facilities,
a category established in 2005 by SAFETEA-LU legislation, is
unique in that it is subject to a nationwide volume cap of $15
billion, which the Secretary of Transportation is directed to
allocate in such a manner as the Secretary determines to be
appropriate.
From enactment until today, approximately $8.25 billion of
this volume cap has been issued, while an additional amount of
approximately $2.8 billion is currently allocated.
The statute authorizing this category, 26 U.S. Code 142(m),
defines qualified highway or surface freight transfer facility
to mean, among other things, any surface transportation project
which receives Federal assistance under Title 23. The
Department has consistently understood this language to mean
any surface transportation project which receives assistance
from Title 23, not limited to highways, is eligible for private
activity bond issuance.
All Aboard Florida originally applied for an allocationof
$1.75 billion in PAB authority for both Phase 1 and Phase 2 of
their project, later named Brightline, in August of 2014.
Brightline Phase 1 is a passenger rail service from Miami to
West Palm Beach, and Phase 2 would extend the service to
Orlando International Airport.
The application indicated that in the time since the
planning process for the All Aboard Florida project had begun,
the Florida Department of Transportation has spent Title 23
funds improving railway-highway grade crossings along the
project corridor.
Based on these expenditures, the Department determined that
the All Aboard Florida project was a surface transportation
project which receives Federal assistance under Title 23, and
it therefore qualified for a private activity bond allocation
under 26 U.S. Code 142(m)(1)(A).
The Department issued an allocation letter in December of
2014. The Department acted subsequently to extend that
allocation twice.
In September of 2016, All Aboard Florida submitted a new
application requesting a $600 million application for Phase 1
of the Brightline projects. It simultaneously requested that
the existing $1.75 billion allocation be withdrawn. In November
of 2016, the old allocation was withdrawn and the new
allocation was granted.
$600 million in private activity bonds were subsequently
issued for Phase 1 in December of 2017. These bonds help fund
construction of new stations and track infrastructure. On
December 5 of 2017, All Aboard Florida applied for an
allocation of $1.15 billion in private activity bond authority
for Phase 2 of their project. This allocation was granted in
December of 2017 and has an expiration date of May 31, 2018.
Thank you again for the opportunity to testify today
regarding the Department's private activity bond allocation
process to the All Aboard Florida Brightline project, and I
look forward to your questions.
[Prepared statement of Mr. Burthey follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Connolly. Nineteen seconds, pretty good for government
work, Mr. Burthey.
Mr. Meadows. Thank you for your testimony.
Is it Goddard, is that correct?
Mr. Goddard. That's correct.
Mr. Meadows. I don't want to pronounce it wrong the whole
time. So 5 minutes, Mr. Goddard. Thank you. You're recognized.
STATEMENT OF PATRICK GODDARD
Mr. Goddard. Thank you, Chairman.
Chairman Meadows, Ranking Member Connolly, and members of
the subcommittee, thank you for the invitation to participate
in this hearing. My name is Patrick Goddard, and I'm the
president and chief operating officer of Brightline.
As many of you know, Brightline has revived the legacy of
Henry Flagler, who introduced passenger rail to Florida over
100 years ago. We launched our service in January between Fort
Lauderdale and West Palm Beach, and Miami is set to begin
operations in the coming weeks.
Early works to Orlando are also now underway, which will
connect major economic engines for the third-largest State in
our country. In doing so, we have created employment for over
10,000 people.
I'm excited to report that early ridership numbers are
higher than anticipated and support for our current service and
future expansion opportunities from consumers, elected
officials, and the business community has been nothing short of
overwhelming.
This model serves city pairs that are too short to fly and
too long to drive. It's working, and it will work in other
markets across the country.
There was never a more important time than now to build
this system that will benefit all of Florida and its visitors.
Today, 400 million trips are taken annually in this market
relying on roads and airways that are among the most congested
in the Nation. Driving speeds on the Interstate 95 highway in
south Florida currently average 34 miles per hour with no
capacity for improvement.
With 20 million residents and 116 million visitors,
enhanced mobility between these markets is vital to meeting the
growth trajectories in this region.
Brightline will eventually take up to 6 million trips off
our highways, giving residents and tourists a safer, more
reliable, and convenient means to travel around the State.
That said, I would like to address the topics that have
been brought to bear today.
First of all, Brightline is a private company and is
privately funded. Contrary to propaganda disseminated by some
of our opponents, private activity bonds are not government
funded and taxpayers are not at any risk whatsoever.
The Federal Government does not guarantee the bonds,
subsidize the interest rate on the bonds, or assume any
liability for the project's losses or cost overruns. Private
investors assume 100 percent of the risk and local governments
receive millions of dollars in new tax revenue.
In fact, it is estimated that Brightline will generate more
than $650 million in tax revenue to Federal, State, and local
governments, and there will be $6 billion in positive economic
impact over 8 years.
In addition to the PABs, which are collateralized by our
assets, we have invested over a billion dollars in equity,
which is at risk, not an insignificant amount of our own money.
Despite this investment, at our own risk and for public
benefit, might I add, we still face opposition from a minority
of narrow-minded residents of two counties along our corridor
who are willing to support passenger rail everywhere, it seems,
except in their own backyard.
The fact is, I concur with Mr. Connolly, President Trump's
infrastructure bill is what is actually on trial in this room
and as long as we allow a small group of obstructionists to tie
up courts and spend taxpayer dollars on frivolous lawsuits to
stand in the way of necessary progress.
On safety. Safety has been Brightline's priority since the
inception of this project back in 2012. APTA has published a
recent study demonstrating that train travel is 90 percent
safer than travel by car. With 700 deaths year-to-date on our
State's roads, I would say that percentage is far higher in
Florida.
Rail opponents to our north claim that recent incidents
validate their claim that passenger rail is unsafe. But they
choose to ignore the facts and the actual police reports
surrounding these incidents, a common theme of bending
information to suit their anti-progress narrative.
In every incident to date, all of the safety and warning
systems worked exactly as intended. These were all examples of
individuals circumventing the very equipment that was put in
place to protect them.
It's impossible to have a conversation about rail safety
without discussing opioids and mental health. Every person who
has died on our railroad has either chosen to end their lives
or been under the influence of drugs.
In every aspect of this project, Brightline has gone above
and beyond what is required by regulators and what is expected
of others in our industry.
Early ridership and guest feedback tell us we are bringing
a much-needed solution to south Florida. Not only are people in
the State excited about Brightline, but in January, your
colleagues Bill Shuster and Peter DeFazio took part in our
launch, tried our trains, and walked away overwhelmingly
impressed.
I welcome you and all members of this subcommittee to join
us in Florida and to see our impressive operation.
I thank you.
[Prepared statement of Mr. Goddard follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Mr. Crandall, I'm going to recognize you, and
I'll give perhaps one just caveat based on Mr. Goddard's
opening remarks.
Try to keep personalities out of it. And, Mr. Goddard, I
don't think it serves your case well when you call some of Mr.
Posey and Mr. Mast's constituents narrow-minded and
obstructionists. But that's mine.
The rest of the panel, I would just encourage you to try to
keep personalities out of it.
Mr. Crandall, you are recognized for 5 minutes.
STATEMENT OF ROBERT CRANDALL
Mr. Crandall. Thank you, Mr. Chairman, Ranking Member
Connolly, members of the subcommittee. Thank you for inviting
me. My name is Robert Crandall. I live in the Treasure Coast
region, and at one time I was chairman of American Airlines.
CARE Florida, where I have served on the steering committee
since 2014, is a coalition of Treasure Coast citizens and
organizations trying to preserve the character of the several
communities through which All Aboard Florida proposes to run 32
daily passenger trains at 110 miles per hour.
I'm here to answer a straightforward question. Should this
project be subsidized by Federal taxpayers? CARE Florida
believes the answer to that question as no, for three reasons.
First, the DOT's allocation of $1.15 billion in private
activity bonds, or PABS, to All Aboard Florida is improper,
unlawful and in direct contravention of congressional intent.
Second, because All Aboard Florida is unsafe as designed. And
finally, because in CARE Florida's judgment and mine, the
project cannot be financially successful.
I would like to spend the next couple of minutes addressing
the PABs and then add a word on financial viability.
All Aboard Florida portrays itself as a private enterprise,
but it has demonstrated an insatiable desire for taxpayer-
subsidized financing and is unlikely to be able to finance its
project without it.
In August of 2016, a U.S. District Court ruling on a DOT
allocation of $1.75 billion, the original allocation, cited
legitimate questions about All Aboard Florida's commitment to
completing the project without PABs.
First of all, and I quote the Court, ``PAB-based financing
is not just the current financing plan, it appears to be the
only financing plan.'' And I ask that that ruling be made a
part of this hearing record.
Mr. Meadows. Without objection, so moved.
Mr. Crandall. Unhappily, the U.S. DOT, in our judgment,
does not have the statutory authority to allocate PABs for this
type of passenger rail project. The Internal Revenue Code
allows the issuance of tax-exempt PABs only if the project to
be financed falls into 1 of the 15 specified categories on the
chart.
A high-speed intercity rail facility would qualify, but no
one, not AAF and not DOT, disputes the fact that AAF is not
high speed and does not qualify.
DOT has chosen, therefore, to approve PAB allocations based
on the theory that it is a qualified highway or surface freight
transfer facility. But AAF is a passenger railroad. It is not a
highway. It is not a freight transfer facility.
Nonetheless, DOT has allocated $1.15 billion, the largest
PAB allocation to date, claiming that AAF can be considered a
highway because once, years ago, the Florida Department of
Transportation spent $9 million in Title 23 highway funds to
improve highway rail crossings in the separately owned Florida
East Coast Railway corridor in which AAF will run.
In recent years, there have been several attempts,
occasions, on which the Obama administration or individual
Members of Congress have proposed to amend the statute to
include passenger rail projects that do not meet the current
high-speed definition. None of those proposals were ever
enacted, but the fact that they were proposed is a clear
admission that the authority does not exist.
In closing, I would like to comment briefly on AAF's
projected financing. In order to succeed, they must obviously
raise enough revenue to cover their costs.
Twice, in 2013 and in 2017, they have commissioned revenue
studies. In 2017, they proposed a study which increased the
2013 assumptions by doubling fares and thereby increasing,
according to this study, passengers by 52 percent and tripling
revenue.
Now, if anybody when I was running American Airlines had
told me that we could change a route from a loss to a success
by doubling our fares and would thereby triple our revenues, I
would have paid little attention.
We are glad this hearing is taking place. We are glad you
are watching. We hope you will decide to end this debacle.
Thank you very much.
[Prepared statement of Mr. Crandall follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you, Mr. Crandall.
Chief, you're now recognized for 5 minutes.
STATEMENT OF DAN WOUTERS
Chief Wouters. Thank you very much.
Chairman Meadows, Ranking Member Connolly, and members of
the subcommittee, thank you very much for inviting me to
testify here today on the All Aboard Florida passenger rail
project.
My name is Daniel Wouters. I'm a division chief for the
Fire Rescue Department in Martin County, Florida.
Martin County is located in the Treasure Coast region and
has 151,000 residents and 538 square miles. As the division
chief, I'm responsible for emergency preparedness, response,
and field operations in the county.
Within the Florida East Coast Railway in which the All
Aboard Florida high-speed passenger train project is proposed,
Martin County has 27 at-grade crossings. Currently, 10 to 14
freight trains pass through our region at speeds typically
between 30 to 40 miles per hour.
On the upgraded rails, All Aboard Florida and FECR plan to
run 32 high-speed passenger trains up to 110 miles per hour and
freight trains up to 70 miles per hour through our community.
The significant increase in the numbers and speeds of those
trains passing through our traffic-congested at-grade crossings
will negatively impact public safety.
The project will quadruple our railroad crossing closures,
resulting in additional delays for fire rescue. The
survivability of patients decrease each minute these services
are delayed. The potential for injuries and fatalities is real,
not hypothetical.
According to the FRA accident/incident overview from 2011
through 2017 in the FECR corridor, 107 fatalities and 191
injuries occurred, with 16 fatalities and 33 injuries in 2017
alone. If 32 high-speed passenger trains as well as additional
faster freight trains are added, statistically these fatalities
and injuries will increase based on the current trends.
In fact, this is already occurring. Since the start of the
AAF trial runs between West Palm Beach and Fort Lauderdale, the
All Aboard Florida trains have struck and killed five people
and injuring others in separate incidents, involving
pedestrians, bicyclists, and motorists.
When busy traffic occurs on roadways, motorists can
inadvertently get caught at traffic signals, resulting in them
stopping on the rails.
Two such incidents occurred on February 14 and March 10 of
2018. In one incident, a vehicle followed another onto the
tracks, which had inadvertently stopped, leaving it stranded.
In the second case, an elderly driver stopped for a red light
when the crossing guards came down. The two incidents I
referenced occurred in the span of less than a month on just a
46-mile short span.
In 2017, our response vehicles crossed the railroad tracks
approximately 17,000 times responding to incidents as well as
transporting patients to area hospitals. Based on the estimated
increase in the rail traffic, there will be substantially more
delays if the All Aboard Florida project proceeds as planned
due to a lack of grade separation through our community.
In our downtown area, a nearly 100-year old single-track
bridge still exists. A parked freight train waiting to pass
another train could substantially cause delays to our downtown
community and impact public safety and response to hospitals.
Within the increased potential of collisions comes the
potential for devastating chemical releases. To make this
point, I would like to refer to a chart I have on the easel.
In 2015, Martin County conducted a vulnerability analysis
to examine the potential for an impact of a single rail car
crash resulting in a chemical release. This slide shows the
potential for catastrophe based on the rail corridor proximity
to the community.
If you'll notice in the shaded areas, the red areas are
where patients would have life-threatening injuries, in the
orange areas, serious, irreversible conditions, and the yellow
area where they would have effects as well.
I summarize by simply stating that this shows a potential
for significant harm to occur due to the track
s proximity to that of Martin County.
There are additional harmful impacts such as no pedestrian
crossings at 10 of the 27 at-grade crossings in Martin County.
All Aboard Florida has told the county that local taxpayers
will be responsible for 100 percent of those costs to add those
safety features.
As well, with the increase in the additional track, there
will be insufficient spacing at some locations for buses to
stop between the traffic light and the rail. Because of this,
it's essential that the installation of vehicle presence
detection as well as dynamic exit gates are installed at all of
the crossings.
Martin County is gravely concerned about the public safety
risks and the increase in the proposed All Aboard Florida
project.
Mr. Chairman, the FRA approved a $1.15 billion bond
allocation for this project based on a FEIS and the ROD that
contained critically deficient safety analysis and
recommendations. Given the track record for injuries and
fatalities within the rail corridor, the FRA's decision to
approve the project without the safety measures we have sought
is both startling and dangerous.
Thank you very much.
[Prepared statement of Chief Wouters follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you, Chief.
Mr. Reingold, you're recognized for 5 minutes.
STATEMENT OF DYLAN REINGOLD
Mr. Reingold. Thank you, Chairman Meadows.
Thank you Ranking Member Connolly.
Mr. Meadows. You may want to pull that a little bit closer.
We're getting older and our hearing is not quite as good as it
used to be.
Mr. Reingold. Thank you for allowing me to testify today.
My name is Dylan Reingold. I'm the county attorney for Indian
River County.
Indian River County is a small county located on the east
coast of Florida. It is south of Kennedy Space Center and north
of West Palm Beach. We have approximately 146,000 people who
live in Indian River County, mostly in the population centers
of the city of Vero Beach and Sebastian.
As you may know, All Aboard Florida's proposed Brightline
service will travel from Orlando to Miami, with stops in Fort
Lauderdale and West Palm Beach. It will then zip through Indian
River County and our 31 at-grade highway railway crossings and
near businesses and schools and residences at over 100 miles an
hour.
Please understand that safety is our biggest concern.
However, that issue will be addressed by other speakers today.
I will, therefore, focus upon the financial impact that All
Aboard Florida will have upon local governments like Indian
River County.
The higher-speed passenger rail project is subject to the
National Environmental Policy Act. In NEPA documents, the
Department of Transportation has stated that it expects Indian
River County to pay for the maintenance of safety improvements
at at-grade crossings for eternity.
Let me repeat that, because that is very important to my
community. The United States Department of Transportation and
the private company funded by a Japanese hedge fund expect
Indian River County and other local governments to pay for the
maintenance of those safety improvements at the crossings in
eternity.
We know where this theory originated. Indian River County
currently has license agreements with the Florida East Coast
Railway for the crossings within the jurisdiction.
The truth is FECR has these agreements with local
governments up and down the east coast of Florida. That is
because the railroad, which was built approximately about 1925,
existed long before the highways and roads that were necessary
to support a population that has since grown by 10,000 percent.
So Indian River County, like our sister communities to the
north and south of us, have funded this arrangement with FECR
for many years, which, may not necessarily be fair, represents
the status quo.
Now, All Aboard Florida is demanding to piggyback off these
arrangements and to change the terms of the deal. This cannot
be permitted. This is an unfunded mandate upon the local
governments.
First, All Aboard Florida is not an affiliate company, it
is not a sister company of FECR. It is a separate company.
Second, the speed of All Aboard Florida is nothing--well,
at least it was not contemplated when these agreements were
executed by the parties. The existing railway corridor in
Flagler's east coast railway time period has never had a
higher-speed passenger rail system. The original service was
slow, it had many stops. It ceased to exist in 1968. And the
evidence of this is that you have 159 at-grade crossings in
populated areas between West Palm and Cocoa.
To allow for the increase in speed is unconscionable. These
trains will travel at more than three times the average speed
of the current freight trains today. And the steep increase in
these speeds mandates the need for improvements at the highway
grade crossings.
While All Aboard Florida has recently offered to pay for
the installation of these improvements, it still expects and
demands that local governments, like Indian River County, pay
for the maintenance of these facilities forever. An initial
cost estimate performed by Indian River County estimated that
this will cost Indian River County approximately $8.2 million
through 2030, which is a significant sum of money for a small
county like ours.
In closing, I want to say that Indian River County prides
itself on being a fiscally conservative county. We keep our
taxes low. We limit the size of our government. But we won't be
able to limit the cost that we spend on the maintenance of
these facilities. That is because local governments like ours
have absolutely no control over the cost of the maintenance for
these facilities.
So in closing, I specifically want you to remember two
things. One, we are concerned about safety. And two, we do not
want the bills for these safety and maintenance costs to come
from the pockets of our constituents. That is unacceptable.
Thank you very much.
[Prepared statement of Mr. Reingold follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you, Mr. Reingold, for your testimony.
As a personal note, probably way before your time, some 40
years ago, when there was a younger, thinner, more agile
individual, I used to take highway 60 across from Brandon
Florida, to surf at Sebastian Inlet. And so that was my
indoctrination to Indian County.
I'll now recognize the gentleman from Florida that has been
a strong advocate, along with the gentleman to his left, Mr.
Posey, on this particular issue, the reason why we're having
this hearing, Mr. Mast, for a series of questions.
Mr. Mast. Chairman, I'm going to have to think about you
with surfer hair for a while now.
Thank you all for being here.
Mr. Goddard, I thank you for taking the time to be here for
this hearing. Just with a couple of for-the-record questions.
Do the All Aboard Florida trains currently operate in
speeds of excess of 150 miles per hour?
Mr. Goddard. No, they do not.
Mr. Mast. Thank you, sir.
Mr. Burthey, did the Department of Transportation approve
$1.15 billion in private activity bonds to All Aboard Florida
as a qualified highway or surface freight transfer facility?
Mr. Burthey. Yes.
Mr. Mast. Thank you. I'd like to think that if Congress
wanted to fund trains through the private activity bond process
outside of those that are high speed, those in excess of 150
miles per hour, they would have put that into the list of 15
eligible projects for private activity bonds.
Mr. Burthey, Section 142, Title 26, it does define
eligibility for private activity bonds: A qualified highway or
surface transfer facility is any surface transportation project
which has received Federal assistance under Title 23.
So I want to ask, did any Title 23 money go to the All
Aboard Florida project?
Mr. Burthey. Thank you for the question, Congressman.
In the application from All Aboard Florida that the
Department of Transportation received, All Aboard Florida
indicated that over 2012, 2013, and 2014 Title 23 funds were
used on the corridor. That was after the announcement from----
Mr. Mast. The corridor or the All Aboard Florida project?
Mr. Burthey. I'm sorry?
Mr. Mast. The corridor being FEC corridor or the All Aboard
Florida project specifically?
Mr. Burthey. The corridor on which the All Aboard Florida
trains will run.
Mr. Mast. So if All Aboard Florida did not specifically
receive funds, I would wish that the Department would withdraw
their award letter for private activity bonds.
But I would ask, was there actually moneys distributed or
deposited to All Aboard Florida specifically, that project?
Were there moneys distributed into an account for a surface
transportation project to All Aboard Florida?
Mr. Burthey. The Florida Department of Transportation
manages Title 23 funds in the State of Florida.
Mr. Mast. So are you saying not to the best of your
knowledge were dollars specifically put into an All Aboard
Florida account, they went to FDOT, Florida Department of
Transportation?
Mr. Burthey. We are not aware of any funds going to an All
Aboard Florida account; however, the application which the
Department of Transportation reviewed did indicate that funds
were used by the Florida Department of Transportation from
Title 23 on the corridor on which the All Aboard Florida trains
run, enabling it to be eligible for assistance under private
activity bond statute.
Mr. Mast. Thank you for that. And I think this is an
important point of what we're getting at here, and it has a
very broad implication for what goes on with private activity
bonds across the breadth of this country. This is the problem.
Congress has given a list of projects to provide private
activity bonds to. As it relates to rail, Congress said very
specifically high speed rail, over 150 miles per hour. You
said, for the record, that's not you. We're not disputing that.
Nobody is.
So what we're using here is this kind of doublespeak that I
think often ticks people off, where everybody is labeling this
train something that it's not. We're saying because it once, in
one section of the corridor, not even the same project, had
some infrastructure upgrades done to the project, that by that
rational an intersection was fixed somewhere on the rail, that
an entirely new project is subject to being eligible for
private activity bonds. And I think that's what we're getting
at here.
I would like to get to something else very quickly here.
Mr. Goddard, All Aboard Florida CEO Mike Reininger
testified in June of 2017 on the T&I Committee that I sit on.
He testified to me that All Aboard Florida is not publicly
funded at all, it is completely an investment of private sector
capital.
However, Brightline's private activity bond application
from December of 2017 reads: The project has received financial
assistance under Title 23, that is the Federal assistance, and
eligibility for private activity bonds under Title 26 mandates
that the financial assistance is, in fact, Federal assistance.
So my question would be, when the CEO, Mike Reininger,
testified before T&I in that time, was he lying to me when he
said that the Brightline project hadn't received any Federal
funding? Or was there a lie to the Department of Transportation
on the application in saying that private activity bonds are
eligible because they have received private assistance? That to
me sounds like two completely different answers.
Mr. Goddard. No, he did not lie. He do not lie to you. That
funding was relative to safety improvements.
Mr. Mast. And with that, my time has expired, and I will
yield back. Thank you.
Mr. Meadows. The chair recognizes the gentleman from
Virginia for a series of questions.
Mr. Connolly. I thank the chair.
I thank the panel for being here.
Mr. Burthey, we heard the testimony. Mr. Crandall says,
inter alia, that this is a misuse of PABs, and it's pretty
clear in the code this the a circumvention of that.
Chief Wouters talks about safety, that there are inherent
safety problems giving at-grade crossings, multiple at-grade
crossings, that put the public at risk, and were never
intended--never intended--for a train of this kind of capacity,
speed-wise, putting the communities at risk.
Mr. Reingold makes an argument that, as somebody who comes
from local government, I can sympathize with, that in effect,
whether by design or not, approving this project puts a
permanent unfunded mandate on local governments to maintain
whatever safety measures are put into place or not put into
place from now until the end of time.
Any of these concerns factor into the decisions at the
Department of Transportation about this project?
Mr. Burthey. Thank you, Congressman.
So to be clear, the Department of Transportation's
responsibility in providing an allocation for private activity
bonds is to determine statutory eligibility. And the Department
has historically interpreted any surface transportation project
that utilizes Title 23 funds to be eligible for the phrase
``qualified highway or surface freight facility.''
Mr. Connolly. Mr. Burthey, is it your testimony that upon
that examination, irrespective of these concerns, the
Department determined it was qualified?
Mr. Burthey. The Department determined that the application
met the statutory eligibility to being able to use private
activity bonds.
Mr. Connolly. So not to create the argument, because I
don't wish to have the litigation by surrogate here, but so you
take direct issue with Mr. Crandall's testimony that it most
certainly does not? Those are two pretty different
interpretations of the code.
Mr. Burthey. We do take issue with his interpretation. Our
interpretation is that by statute any surface transportation
project, which obviously a passenger rail train is a surface
transportation project, any surface transportation project that
utilizes Title 23 funding is then eligible as a qualified
highway or surface freight transportation project.
Mr. Connolly. Mr. Goddard, you heard the testimony of the
three folks to your left. What is the reaction of Brightline to
the substance of these concerns in terms of unfunded mandates,
safety, and for that matter, eligibility?
Mr. Goddard. Thank you, Congressman.
So we've been questioned on these issues for several years.
We've been through several lawsuits on PABs, on safety, on
whether or not we meet the criteria. We have prevailed up until
this point. We continue to engage in dialogue with our
opponents relative to these issues, and we seem to be talking
past each other.
Mr. Connolly. But I'm asking a different question. Holding
in abeyance for litigation and who is an opponent and all of
that, I'm familiar with lots of different passenger rail
systems, commuter rail, for example. And I'll take the western
suburbs of Chicago, one I'm quite familiar with. They don't go
110 miles an hour.
Mr. Goddard. Yeah.
Mr. Connolly. They have a lot of at-grade crossings, but
they also have safety provisions in place. And they can live
peaceably side-by-side. And in fact communities have grown up
around the stations and it's almost a way of life, but it
works. But it wouldn't work at 110 miles an hour, I don't
think.
So what is your substantive reaction to----
Mr. Goddard. Yeah.
Mr. Connolly. If I had, I think you said Mr. Reingold, 39
crossings?
Mr. Reingold. Ranking Member, we have 31.
Mr. Connolly. Thirty-one.
So if I'm a small county and I got 31 crossings, I have a
legitimate concern about safety. What are you going to do about
that? How can you help us address that, ameliorate that
concern?
Mr. Goddard. Again, safety, the safety of train travel has
been demonstrated, and, again, as substantially safer than
traveling by car.
I can tell you that passenger rail happens every day in
this country, all over this country. Our corridor meets the
sealed corridor requirements as determined by the FRA.
We don't actually set----
Mr. Connolly. Mr. Goddard, with due respect, that's a very
bureaucratic answer. I asked you, what are you doing to try to
ameliorate the concern in the case of Indian River County?
Mr. Reingold. Yes, sir, Indian River County.
Mr. Connolly. It's a legitimate concern. I'm worried about
kids. I'm worried about people.
Mr. Goddard. Sure.
Mr. Connolly. And so how is Brightline trying to ameliorate
that concern in a reasonable way?
Mr. Goddard. Sir, we have spent the last 4--about 4 years
ago, when we started this project, in conjunction with USDOT
and FRA, we went crossing by crossing with each municipality
all the way up the corridor to determine what was the properly
prescribed safety equipment to implement at each crossing--
crossing-by-crossing--to make sure that we implemented the
right safety equipment.
Furthermore, all of that safety equipment was implemented
at our expense, which is, again, above and beyond what is
required of us. So we feel that we have done more than is
required of us at every step of this process.
Mr. Meadows. You're still not answering the gentleman's
question. I mean, speak to the question.
Mr. Goddard. Okay. So we, again, we feel that we have met
the demands already of these groups. We've had discussions,
we've had dialogue with them, and we've met their demands.
So if there are additional discussions that my colleagues
would like to engage in relative to their needs, we're prepared
to have those discussions. But up until this point, we feel
like we've addressed all of the concerns.
Mr. Connolly. All right. I don't wish to impose, but if the
chair will just indulge one last question to Mr. Crandall,
because I was intrigued by your testimony, Mr. Crandall.
You've obviously done a lot of homework. You've heard the
testimony of Mr. Burthey that our review at DOT, this meets the
criteria. You want to just take a moment to perhaps rebut that
or give your elaborated view of why they're wrong?
Mr. Crandall. Thank you for the opportunity, sir.
Mr. Connolly. And then I yield back. I thank the chair.
Mr. Crandall. I think Mr. Mast has put his finger on the
issue. The rule is quite clear, and that is that a project
which has benefited or received funds under Section 23 might
then be eligible. But the fact is, All Aboard Florida has not
received such funds, as Mr. Mast, I think, quite aptly pointed
out.
Such funds have been used in prior years to improve the
crossing, the point where the road crosses the tracks, perhaps
to put paving, et cetera, et cetera, whatever what might have
been done. But it was a long time ago. And that's an entirely
different project for All Aboard Florida.
Thus, it is quite clear to me on the reading of the statute
that All Aboard Florida is not eligible. It is a railroad and
it isn't eligible under any of those 15 categories.
Mr. Meadows. I thank the gentleman from Virginia. The chair
recognizes the gentleman from Florida, Mr. Posey, for a series
of questions.
Mr. Posey. Thank you very much, Mr. Chairman, for holding
this hearing, and, Mr. Ranking Member, I want to thank you for
agreeing to it, and, Congressman Mast, I want to thank you for
requesting this hearing. You know, the proposed Brightline
service will run through the heart of many of my communities in
my district. Obviously, I have a lot of concerns and questions.
I have seen the data from the Federal Railroad Administration
Accident Database that shows that during the period of 2007 to
2018 there was an average of 13.5 rail crossing deaths per year
in Florida.
In the short time Brightline has been operating during
Phase I you have already recorded six such fatalities, almost
50 percent of the annual Florida average. This abysmal
performance suggests a serious safety deficiency and should be
immediately remedied. One of the questions I am going to have
for Mr. Goddard when I am finished here if you would write this
down now and remember to respond to it is I would like you to
share with me your firm's plan to mitigate the increased risk
to pedestrians and vehicles at rail crossings.
I read the summary of comments on safety in the 2015
environmental impact statement for All Aboard Florida pages 1
through 23 of that document. Quite a few residents worried
about the safety of grade crossings under the new train service
are evident. The Federal Railroad Administration's response was
completely puzzling. The most troubling was the response that
these safety concerns are covered by FRA safety standards, and
therefore, not subject to the National Environmental Protection
Act, so we have got to worry about protecting everything in the
doggone world except humans.
You know, Mr. Burthey, I appreciate you showing up today. I
have written your agency twice with some serious questions
about safety concerns, and I have received responses only from
the FRA, and I still get very, very poor service and response
from your agency at addressing some of the serious safety
issues that we have before us here.
You know, I am puzzled how your agency can possibly
consider a highway and a railroad the same thing. I mean, what
can you drive on a highway? A bicycle, a motorcycle, an
automobile, a truck. What can you drive on a railroad track? If
you don't have a train, it is no help to you, you know? Maybe
you can buy a ticket, you know, one way to----
Given that the NAPA requires the agency to assess the
impacts of the human environment, surely we don't intend to cut
off the process without mitigating for increased risk to
pedestrians and drivers. I am very puzzled about the rationale
for not analyzing and addressing safety in the environmental
impact statement, obviously, and at the end, Mr. Burthey, maybe
you can give us some further insight and wisdom on that.
Construction of Phase II of the project, which will bring
the train through my district, through Indian River County and
Brevard Counties has yet to happen. Many narrow-minded
residents, as you call them, Mr. Goddard, are understandably
nervous, especially those residents whose homes back right up
to the train tracks. There are schools and businesses that are
in close proximity to this train, and, Mr. Chairman, with your
indulgence, I would like to ask for unanimous consent to
include seven images showing how close in proximity this train
runs through my constituents' homes, schools, and businesses.
This is a photograph of the crossing at Vero Beach looking
north. This one of downtown Melbourne. I can't imagine a high-
speed train going through there. This is one of Stuart. This is
St. Lucie crossing. This is downtown Vero Beach looking from
the east. And these are residents that setback up to the line.
Mr. Connolly. Without objection.
Mr. Meadows. I thank the gentleman.
Mr. Posey. Thank you. Shouldn't we open up the process to
reexamine the safety issues in collaboration with the public?
You know, we get a pledge maybe to do that today.
It is my understanding that All Aboard Florida plans to
have local governments like my constituents in Indian River
County pay for the maintenance of the safety equipment
necessary to operate as passenger and rail trains across
hundreds of at grades crossings. This is basically an unfunded
mandate from the Federal Government on local government,
something that we always swear that we won't do, and we
inadvertently sometimes end up doing that, and this would be a
horrible injustice.
And given that we are providing substantial support to AAF
and the requirements for new safety equipment due to Brightline
service shouldn't the capital and operating costs of safety
equipment be paid for by Brightline, the people who benefit
from it?
Mr. Chairman, let me tell you how I found out about
Brightline about this All Aboard Florida. For several years
representatives came through and said, look, we are going to
put in a high-speed rail. Here is our plan. We don't need any
government assistance. We don't need any government approvals.
We are doing this completely in-house. We are authorized
completely to do it. It is all on our own. We are just telling
you for informational purposes so you will know what is going
on through your district.
That went on for 3 or 4 years, and then I am asked to sign
a letter executed by Mr. Mast's predecessor putting them at a
high priority for a RRIF loan, and I go, well, I thought you
guys were doing it--well, yeah, our plans changed. Yeah, they
sure do change.
So when we had a transportation bill come through on the
floor I thought it would be appropriate to have a couple of
amendments, you know, one that you should have the approval of
at least majority of your local elected officials to do
something like this, and we should also limit the amount of the
loans. This would be--I think they were asking for $1.7 billion
at the time, the most humongous loan in the history of RRIF
loans, and, of course, follow the law because at that time they
hadn't gotten somebody to sandwich in a glitch fix for them
because they didn't meet the criteria for the money that they
were asking for.
Of course, I met with a lot of strong opposition. One of
their strongest supporters and advocates, a Member of Congress
who is now in Federal penitentiary, said twice shame on me for
asking the railroad to actually follow the law. And the floor
was flooded with colorful handouts of misinformation about the
rail, and of course, the amendments didn't pass. They should
have, but they didn't. I have correspondence from my local
officials asking them--they were asked by Brightline to write
nasty letters to the editor about me calling me narrow-minded
and some of the things to quote Mr. Goddard, and I just think
this attempt to do this is everything but straightforward and
upright.
I believe they tried to sell some bonds before, but they
couldn't sell them, and so now that has changed. You know, you
wonder how fast these trains travel through these little
villages? Even at 70 miles an hour the consequences can be
horrific based on how long it takes to stop one of these
doggone things, and, you know, I think we have been called
narrow-minded and not in my backyard people, and, you know, I
think a lot of people would support a rail if it didn't go
through the middle of their downtowns and our neighborhoods and
if it was actually safe, which this clearly is not.
My own experience and I think yours and other Members of
Congress we were recently in a train accident, and I was
advised by one, the reason for the accident even though the
guards work is the guys in the truck, one of whom lost his
life, were used to seeing coal trains coming around that corner
about 30 miles an hour, and they thought they would have plenty
of time to get across. They weren't, you know, accustomed to
having our Amtrak come through there at 60 to 70 miles an hour,
and the result was tragic just like it will be in many, many
communities in my district and Congressman Mast's district.
So, you know, I have heard a lot of talk about overwhelming
support for the project. Man, I sure as hell haven't seen that,
and I don't think it is was overwhelming support that you are
able to sell any bonds before. I don't think people are all
stooges, you know, and they are not that stupid to invest in a
train. We don't have any lines like this that make any money.
The Federal Government has to subsidize them.
The problem with the RRIF loan is after you guys would go
broke on passenger rail if that was your real agenda then what
collateral really usable collateral, safe collateral would the
Federal Government have? So my question to ask you right now
under oath is, Mr. Goddard, what is your real agenda here?
Mr. Goddard. Congressman, I am not sure which of your
questions to address first.
Mr. Posey. We can do the agenda question first so we don't
forget it.
Mr. Goddard. Our agenda is to improve mobility for millions
of visitors and residents of South Florida.
Mr. Posey. Is there a reason why somebody would get off an
airplane if they were going to Miami, they would get off an
airplane that could get them to Miami in an hour and get on a
train that would take them two hours to get there, and they
would have to do their luggage back and forth in a train? I
mean, is the model looked at that as being a realistic
expectation? And would somebody in Miami going to Orlando or
going past Orlando sacrifice an hour flight to get on a train
and unload and load?
Mr. Goddard. Our business case, which Mr. Crandall to my
left has made on many occasions is there are many corridors
that are from 200 to 350 miles apart that are too short to fly
and too far to drive. There are 400 million trips between
Central and South Florida on a daily basis, and, yeah, we
believe that we can capture a good share of those.
Mr. Posey. Well, if it just stayed in South Florida
obviously I wouldn't have an interest in this thing, but it is
not just in South Florida, it is in East Central Florida, which
affects our districts, and as I said before, if you were
following a path west to I-95 where there was less population
and weren't running through the middle of our downtowns and our
school areas and it wasn't a safety effect we would probably
think that was great idea, but, you know, do we want to
sacrifice--and I think the answer is no from my standpoint--the
safety of our local residents for your profit and convenience?
Mr. Goddard. So if I could respond to that, there was a
2015 report commissioned by Indian River County to study the
safety impacts of Brightline, and their own consultants
concluded that we can find no decrease in grade crossing safety
with the advent of All Aboard Florida. To Indian River County's
benefit, the additional capacity improvements, other additional
infrastructure, safety improvements, upgraded crossing warns
devices, which are regulated by the FRA, implementing
suggestions for quiet zones, fencing, pavement markings, a
public awareness campaign, and a finding of no additional
closure time with the additional trains, draws a conclusion
that there is no adverse safety impact to Indian River County
from All Aboard Florida. If the proposed upgrades actually
occur they will improve and update the safety factors that
exist today.
I would also like to add that, again, passenger rail
happens in this country every day, and, you know, in Detroit--
Detroit to Chicago that route has a similar number of grade
crossings as Brightline and runs at grade. St. Louis to Chicago
has 213 crossings that have been upgraded. Trains travel at 110
miles an hour through dense urban areas on those corridors, as
well.
Mr. Posey. Well, I submit to you that sometimes a picture
is worth a thousand words, and your remarks about this being
safe crossings in Indian River County and St. Lucie County
don't pass a straight face test.
Mr. Goddard. So if I may, Congressman, that is a picture of
where exactly?
Mr. Posey. This is Vero Beach crossing.
Mr. Goddard. So obviously we haven't made any improvements
there yet. We haven't actually begun construction on that
segment.
Mr. Posey. So, you know, like there is less than--room for
one car to back up over here, and of course, I have seen them
even for the little local trains backed way up over here. How
would you propose to make this crossing safe?
Mr. Goddard. Again, that is actually determined by the
Federal railroad authority and USDOT in conjunction with your
community leaders. So again, we over the last 4 years met with
your community and determined exactly how to do that. Sitting
here today, frankly, I'm not--you know, I don't have the answer
at my fingertips, but the net is there will be improvements on
there that comply with the FRA's sealed corridor guidelines and
our States and other municipalities.
Mr. Posey. You're going to require these local governments
to maintain these crossings forever, yet your train is not
going to stop in any of these communities. They get absolutely
no benefit whatsoever from your train, yet they're stuck with
the liability of it. You know, how do you possibly think that
that's fair and reasonable?
Mr. Goddard. So for those who may not--for those who may
not know, our right of way predates, you know, the communities
through which we travel. Correspondingly, there are decades-old
agreements between each municipality up and down the corridor,
as each community asked if they could put a road across our
railroad.
When we granted communities that right to transverse our
railroad we--the cost of creating the gates, the bells, the
whistles was actually--that burden was on the community.
Mr. Posey. Well, when you said, ``we,'' you didn't make
those agreements. Flagler made those agreements. You know,
you're an international hedge fund now. I mean, you had no dog
in the fight at that time, and those agreements are probably
100 years old. Obviously they were intended for not high speed
trains going through their little towns, but trains that would
actually stop in their towns, if necessary, and help promote
their commerce and passengers at one time.
Mr. Goddard. It sounds like you might like a stop.
Mr. Posey. You know, that wouldn't appease me. I know that
has been one of the latest, you know, things that they have
thrown out from saying absolutely, positively there will never,
ever, ever be a stop in this high-speed rail because then it
wouldn't be a high-speed rail. To appease some critics I
understand you have lately been saying, well, we might have a
stop in your town and we might have a stop in your town, but we
know that's not going to happen because then it would take a 5-
hour ride on a high-speed rail to get from Miami to Orlando,
and, you know five times longer than the airline flight.
Mr. Meadows. So go ahead, you can respond to that. We are
going to do a second round of questioning, but you can go ahead
and finish up on any response that you have, Mr. Goddard.
Mr. Goddard. Thank you, chairman. So just for the record it
is important to understand that there are longstanding
agreements, and, in fact, the responsibility to improve the
crossings are actually the municipalities, as well, although we
have actually taken on that financial responsibility up and
down the corridor. We have improved all of the crossings up and
down the corridor. We have done that on our dime. We have not
asked the municipalities to participate in that, but yes, they
do need to continue to pay the maintenance that they agreed to
pay.
Mr. Meadows. All right. I thank both the gentlemen from
Florida. We'll come back and let you ask a second round of
questions. The chair recognizes himself for a series of
questions.
Mr. Burthey would you agree that this does not qualify
under number 11 on the statute 26 U.S.C. Code. It is not a
high-speed rail project. Is that correct?
Mr. Burthey. Yes, sir, I would agree with that.
Mr. Meadows. Okay. Would you agree that it does not qualify
as highway under that same statute?
Mr. Burthey. The Department of Transportation does believe
that it qualifies under----
Mr. Meadows. So you're saying the Brightline rail project
is a highway, that's your sworn testimony?
Mr. Burthey. We are saying that the definition of a
qualified highway or----
Mr. Meadows. That's not what I asked you. Is it a highway
or not?
Mr. Burthey. It fits the definition under the statute.
Mr. Meadows. Well, it is interesting you say that because
the definition under your guidelines and under the code would
indicate that it is a surface transportation project. Now, I
serve--I happen to serve on the Transportation and
Infrastructure Committee. Secretary Chao would agree that
surface transportation are not rail, and so you're at odds with
your own Secretary on that.
Mr. Burthey. Again, our interpretation longstanding of the
statute is that any service transportation project, including
passenger rail, which utilizes Title 23 funds does qualify
under----
Mr. Meadows. So how much Title 23 funds does somebody have
to spend in order to qualify?
Mr. Burthey. The statute does not specify.
Mr. Meadows. So a dollar?
Mr. Burthey. Theoretically, yes.
Mr. Meadows. So do you believe that that was the intent of
Congress? I can tell you it wasn't. This is a softball answer.
The intent of Congress was not for a dollar of Title 23 money
to be able to qualify them for a PAB, and so, if you're going
forward, and as you go back to the Department of Transportation
if that's their interpretation that a dollar qualifies them,
then everything qualifies because anybody would spend a dollar
to say I can get some tax exempt money from the Federal
Government, wouldn't you think?
Mr. Burthey. Well, what I would say is that private
activity bonds are a very useful tool to minimize the Federal
dollars that are required at a project. So they enable us to
fund projects without having to----
Mr. Meadows. Listen, you're preaching to the choir here, so
let's dispense with that. I actually support private activity
bonds, and in the tax reform package in the House where it was
excluded I actually said I wasn't going to vote for it unless
we got private activity bonds back in there. As you know, it is
part of that. I see the critical tool that it is, but we must
also understand that Congress has a certain intent on how those
are to be used.
And when the Department of Transportation uses their wide
discretion and what qualifies and doesn't--it undermines the
very fact of why we have private activity bonds, and it makes
Members of Congress like me who have advocated for it say how
in the world can you say that one dollar in Title 23 funding
would qualify somebody for a PAB?
Is that your sworn testimony here today?
Mr. Burthey. Well, this project did receive more than one
dollar to be clear. It received----
Mr. Meadows. I'm asking----
Mr. Burthey. --several million dollars.
Mr. Meadows. Does one dollar qualify?
Mr. Burthey. Technically under statute under my
understanding, yes, it would.
Mr. Meadows. Okay. So your sworn testimony is that the
intent of Congress was that one dollar would qualify?
Mr. Burthey. I cannot speak to the intent of Congress.
Mr. Meadows. Well, but you're here to actually convey the
intent of Congress. That's the whole reason why you write rules
and regs are to take the laws that we pass and actually have
the intent of Congress to go forward.
Is there any scenario where you think that there was some
Member of Congress who said if you will put up a dollar of
Title 23 money that we'll allow you to do $1.75 billion in
private activity bonds? Do you think any Member of Congress
could go home and get reelected based on that kind of
rationale?
Mr. Burthey. Our responsibility is to consistently apply
the statute as it is interpreted by our Department and that
historically----
Mr. Meadows. So how do you do that consistently--that's
your word consistently--when there is not a standard of how
much money has to be put in in terms of Title 23? So somebody,
Mr. Goddard can come up--and listen, it is not my backyard and,
you know, they're not going to run high-speed rail to Western
North Carolina--well, but I guess under your scenario it would
qualify because if they have used--no, it has to be in the
State, right, so you're saying that anywhere in the State of
Florida they can run a high-speed rail because we have some
amount of money for a crossing that was paid some time ago. Is
that correct?
Mr. Burthey. Well, we are not saying that. What we are
saying----
Mr. Meadows. Well, where does it stop? It obviously doesn't
stop in Orlando, so where does it stop? Does it stop in
Jacksonville?
Mr. Burthey. So here specifically the Title 23 funding was
spent after All Aboard Florida announced their plans----
Mr. Meadows. For what? For what?
Mr. Burthey. For grade crossing improvements.
Mr. Meadows. For grade crossing improvements where?
Mr. Burthey. Along the tracks where the All Aboard Florida
trains will run.
Mr. Meadows. All along the entire corridor?
Mr. Burthey. I do not know the exact grade----
Mr. Meadows. I do. I'm asking a question that I already
know. So how much of this second phase of this was Title 23
funds used to improve crossings? Do you know that amount?
Mr. Burthey. All Aboard Florida's application indicated
that subsequent to their announcement of their project in 2012,
2013, and 2014, $9 million were spent.
Mr. Meadows. In this second phase?
Mr. Burthey. Along the second phase of the corridor.
Mr. Meadows. Okay. And where was that spent?
Mr. Burthey. Again, I don't know the exact grade crossings
but spent on grade crossings.
Mr. Meadows. You have 30 days to get that to this
committee. Do you have that? Is that a reasonable request?
Mr. Burthey. We do have the information, yes. I just don't
know----
Mr. Meadows. So is 30 days--I'm looking at your staff to
see if that--because it is really their work, not yours, so is
that adequate time?
Mr. Burthey. Yes.
Mr. Meadows. All right. So in 30 days you can get that to
us.
Mr. Meadows. So let me ask you a little bit further because
I do not see this as fitting the definition of surface
transportation and not not even under if you read even the
statute it doesn't seem to apply, and so at this particular
point I have a real concern that the intent of Congress is
being overwritten with the private activity bond measure here
because it is really all about we wanted cooperation between a
State and a Federal entity. And when we looked at this we
wanted that cooperation to take place, wouldn't you agree with
that, Mr. Burthey?
Mr. Burthey. Cooperation was with the State and the Federal
entity?
Mr. Meadows. Right.
Mr. Burthey. That makes sense.
Mr. Meadows. And so we want that cooperation, and so what
you're saying is is if we fix some kind of road that happens to
go over a rail that that automatically qualifies the entire
rail project that is going a different direction because a
freight transfer system is not what we are talking about here,
would you agree with that?
Mr. Burthey. So, for example, we would draw a line----
Mr. Meadows. Answer the question. Is this a freight
transfer?
Mr. Burthey. That is a passenger rail system.
Mr. Meadows. Okay. So under definition of 15 we now are
coming down to part of the definition is is this a surface
transportation issue or not, would you agree? That's the only
part of this statute that could possibly apply.
Mr. Burthey. The statute specifically says that whether or
not it is a surface transportation project which receives
Federal assistance under Title 23. And again, I reiterate the
statement I made before that our conclusion was that it did.
Mr. Meadows. All right. So would you suggest that this is
not a freight transfer facility? So that's the second part of
that----
Mr. Burthey. There's a distinction between applying that
specific phrase versus the statutory definition.
Mr. Meadows. That's correct.
Mr. Burthey. The statutory definition of a freight transfer
facility includes a surface transportation project which----
Mr. Meadows. Well, it actually--that's the third paragraph.
I mean, actually I have actually done a little bit of reading
here, and any facility for the transfer of freight from a truck
to rail or a rail to truck. It is obviously not doing that. Is
that correct?
Mr. Burthey. It is not doing that, but our definition is
under (m)(1)(A).
Mr. Meadows. So under (A) is any surface transportation
project that receives Federal assistance. So what you're saying
is is that you can give money to a highway and build a railroad
right on top of it? Because surface transportation--let me just
tell you, you know, you may want to say, well, this under the
definition--and we have got very high paid lawyers sitting
behind Mr. Goddard who would say well anything that is on the
surface actually would qualify, is that what you're saying?
Mr. Burthey. We are not saying anything.
Mr. Meadows. He is shaking his head yes, so
Mr. Burthey. It does need to be related to the project.
Mr. Meadows. So how is a railroad crossing on a road
necessarily being a fraction of the cost related to that?
Mr. Burthey. Well, obviously here, given all the safety
concerns that have been mentioned, improving grade crossings is
of the utmost importance.
Mr. Meadows. So what percentage of the project does the
Title 23 funding have to be?
Mr. Burthey. There is no percentage that's placed in the
statute.
Mr. Meadows. So everything qualifies for a PAB?
Mr. Burthey. Based on our statutory interpretation, yes.
Mr. Meadows. Okay. Well, then I would suggest to my
colleagues that I guess we need to change the law, and what is
going happen is--and I don't agree with that. I understand that
your interpretation is that. I think the intent of Congress was
very clear, and that was not the intent, but in doing that
perhaps the Secretary needs to look at the rules and regs
because you will have a real problem continuing on with private
activity bonds being there.
Mr. Goddard, let me come to you. You said that the
taxpayers are not subsidizing this. Was that your sworn
testimony?
Mr. Goddard. That's correct.
Mr. Meadows. All right. So that's one. I don't believe that
to be the case, but if that's this case, if the taxpayer has no
exposure, and it is of no consequence to the taxpayer, why
don't you get private funding for this?
Mr. Goddard. We certainly could.
Mr. Meadows. Well, why don't you?
Mr. Goddard. Because----
Mr. Meadows. Most of this hearing would go away if you did
that, so why don't you go ahead and get private funding. It
gets me out of it. It takes a problem off of my desk. And you
know what, why don't you go ahead and get your own private
funding? And you're saying that you can get the same private
funding at the same benefit without the taxpayer having any
subsidy in that?
Mr. Goddard. Yes.
Mr. Meadows. Is that what you're saying, Mr. Goddard?
Mr. Goddard. No, chairman. So the reason why I would love
to alleviate you of this burden, however, the reason why we are
interested in a financial instrument such as PABs is it is a
cheaper cost of money. It is a less expensive cost of money.
Mr. Meadows. Well, then it is taxpayer subsidized, so
your----
Mr. Goddard. Sorry, so taxpayer subsidized--again, what is
your definition of taxpayer?
Mr. Meadows. In your sworn testimony--I asked you to
clarify it because I didn't think I heard what you said the
first time, and I didn't believe it the first time, and then
you reiterated it. There is a benefit to your company that
comes at the expense of the American taxpayer, is there not?
Mr. Goddard. There is a deferral of taxes to investors, but
the intent of the PABs----
Mr. Meadows. So there's a tax benefit to somebody--and let
me just tell you----
Mr. Goddard. There's a distinction between that and
receiving money from the government. This is a loan.
Mr. Meadows. I didn't say that you were receiving it.
Listen, I'll say this nicely because I have already criticized
you for some of your opening remarks. I will say this, that
what happens is PABs by their very design are designed to be a
tool to make it more affordable for us to do projects with the
Department of Transportation. In doing that we have to
recognize that there is a Federal component to that. Would you
recognize that there is a Federal component to private activity
bonds in that that there is a deferred ability under tax law. I
can give you the IRS code if you want.
Mr. Goddard. I am not an attorney, Chairman Meadows. I run
the company. We have attorneys who understand these matters far
better than I do. You have heard Mr. Burthey's testimony. I
feel that I don't have an awful lot to add in this context.
There's a--we have been to court three times on this
matter, and I think that we, again, to the extent that we are
now in a new lawsuit on this I don't wish to comment further.
Mr. Meadows. Well, that's not an option that you have, Mr.
Goddard. You're here under sworn testimony, and that's the
reason why I'm--it is not a criminal conviction. We can't bring
any criminal charges towards you here today, but you do have
the responsibility to uphold the truth in your testimony and
answer the questions.
Mr. Goddard. So to the best of my knowledge--I mean, you
have heard Mr. Burthey speak about the PABs, and USDOT
determined we are eligible. Our legal term has looked at the
issue. They also agree that we qualify. We believe we qualify
because we receive Section 130 funds.
Mr. Meadows. And section--Title 23 funds.
Mr. Goddard. Title 23 funds. And----
Mr. Meadows. Fine, I got your testimony. So Mr. Reingold,
you're saying over 2030 that it is going to cost your county 8
point something million. Is that correct?
Mr. Reingold. $8.2 million, Congressman.
Mr. Meadows. Is that high, Mr. Goddard?
Mr. Goddard. Honestly, I'm not sure.
Mr. Meadows. Okay. So are you stopping in Indian River
County?
Mr. Goddard. No.
Mr. Meadows. Okay. So he is going to have to maintain
railroad crossings so that you can get people from one area to
another, and it will go through his county--and, listen, I'm
all about commerce, and I realize that it is always in
somebody's backyard, so I don't know that I have a whole lot of
sympathy about it not being in my backyard. These two guys do.
But here's my concern, and it is with unfunded mandates. If
you're asking his county and his city to support the
maintenance ongoing, and I would see that as a tangential cost
to your particular operation, would you not?
Mr. Goddard. Again, we have existing agreements in place
that, again, I don't know what the material increase is from
prior to Brightline----
Mr. Meadows. So if you're asking their county to spend $8
million for a new railroad crossing maintenance, do you not see
that they wouldn't have to do that unless you were coming
through their county? That's an easier question.
Mr. Goddard. Well, they wouldn't have to do that--I mean,
again the road crossings--the road crossings, this is our
private property. We are trying to run our business on our
private property.
Mr. Meadows. And what I'm saying is----
Mr. Goddard. There is a requirement----
Mr. Meadows. I get that. Listen, there's no one--in fact, I
can tell you, I'm the most conservative on private property
rights of anybody on this dais, I promise you being from
Western North Carolina. And at the same time if you're going to
do railroad crossings and you're going to ask them to maintain
something that they don't get a benefit from, do you not see a
problem with that?
Mr. Goddard. I can see how--potentially.
Mr. Meadows. Okay. So here's what I would ask you.
Mr. Goddard. What I would say though, if I may, chairman.
We have actually spent the money on improving those grade
crossings. So we did not turn around and ask----
Mr. Meadows. I don't disagree, and I have heard that--and
let me just tell you, you're going to find that I will be
willing to look at the truth in every argument, and I get that
because I can see your counsel when the chief was talking about
how they were having to spend the money for all these railroad
crossings and I could tell your counsel in the back he was
shaking his head and saying that--don't ever play poker, by the
way--but in doing that, in doing this here's what I'm saying is
there are legitimate safety concerns the chief has made and for
you to----
Mr. Goddard. I would love to address those.
Mr. Meadows. Well, I know where you're going. In your
opening statement you talked about the opioid crisis.
Mr. Goddard. No, no, no, no, no. I think there are other--
there are other actually--there's actual real misinformation,
there's actually like a misstatement of some facts there. Like
I would love to have a conversation with the chief.
Mr. Meadows. We will have a second round. I will give you
the opportunity, and if I haven't you can remind me and nudge
me to give you the opportunity for rebuttal and I'll be--but
here is my concern. If you're asking this county and more
specifically their taxpayers to fund the maintenance of
railroad crossing in perpetuity and they don't benefit, it has
to be at least a cost consideration for this project, and in
doing so, and I know you're shaking your head no----
Mr. Goddard. Just we have agreements in place. This
passenger rail is not a new phenomenon.
Mr. Meadows. You have a lot of things in place that may be
in jeopardy, Mr. Goddard, so let me just suggest to you, let me
suggest to you that you come back to this committee with how
you're going to address these types of concerns. Are you
willing to do that in the next 45 days?
Mr. Goddard. Certainly.
Mr. Meadows. All right. So you're going to come back to the
committee on how we are going to address the ongoing
maintenance concerns that may happen with--and obviously Mr.
Reingold is here for his county, but as we look at some of
those other counties if you would do that, that would be very
helpful.
With that I'm to go ahead and recognize the gentleman Mr.
Mast for a series of questions.
Mr. Mast. Thank you again, Mr. Chairman. Mr. Goddard, does
FEC have agreements in place or does Brightline have agreements
in place with Indian River County, with Martin County, with St.
Lucie County?
Mr. Goddard. FEC.
Mr. Mast. Is FEC Brightline?
Mr. Goddard. No. FEC is not Brightline.
Mr. Mast. So then is there new upgrades to these crossings
that has to occur as a result of the Brightline crossing, not
as a result of the FEC project?
Mr. Goddard. So I think it is important to clarify
Congressman that All Aboard Florida owns the perpetual right
and permanent easement to run passenger service on the FEC
railway between Miami and----
Mr. Mast. FEC is not Brightline though?
Mr. Goddard. That's right.
Mr. Mast. And the agreements are with FEC?
Mr. Goddard. That is correct.
Mr. Mast. The new infrastructure is as a result of the
Brightline project, the new expensive infrastructure that Mr.
Reingold's county will have to pay for the upkeep of?
Mr. Goddard. It is shared infrastructure.
Mr. Mast. Got it.
Mr. Goddard. It's shared infrastructure.
Mr. Mast. And on all of the safety upgrades that were
conducted throughout the entire corridor of train I do read on
all of them it does say FEC crossing, FEC crossing, FEC
crossing for everything, and so it is in that I want to get to
the truth in testimony for what I was able to question your CEO
on transportation and infrastructure or the truth on the
Department of Transportation application and get where we left
off before.
As I said, All Aboard Florida's CEO Mike Reininger he
testified June 23, 2017, in transportation and infrastructure
to me to a question that I asked that All Aboard Florida is not
publicly funded at all, but we have been having this entire
argument throughout this on whether there is even one dollar of
public funding that has gone to this project, which would allow
it to qualify even as a highway or a freight transfer facility,
and we have gone back and forth.
Is there one dollar, is there not one dollar, is there a
limit to it? The testimony to me on transportation and
infrastructure was is not publicly funded at all, it is a
completely--it is completely an investment of private sector
capital.
So I will ask one more time. Your answer before was he did
not lie to me. That was your answer before he did not lie to me
when he said it is completely private. So on the application
was there not truth on the application where you're saying
there was public funding used, which would enable you to get
these private activity bonds?
Mr. Goddard. The funding that was received through Section
23 was for what is now the shared infrastructure, and it was
intended to improve safety crossings and the safety of
crossings throughout the corridor.
Mr. Mast. So you maintain there is public funding in this?
Mr. Goddard. There has been public funding granted to the
corridor.
Mr. Mast. So it was not truthful when you testified to me
on transportation and infrastructure.
Mr. Goddard. Well, again, this was--so there's a
distinction between, I suppose, the--I'm not sure of the timing
of the funding honestly, Congressman. I don't know exactly when
the timing was. I would need to get back to you.
Mr. Mast. Please get back to me.
Mr. Goddard. Whether the funding preceded the inception of
All Aboard Florida or not, I'm not certain.
Mr. Mast. Please get back to me on that.
Mr. Burthey, I want to get to you. So it sounds to me, and
I heard you use the word ``indicated,'' ``indicated,''
``indicated'' probably at least three or four times as we were
talking about the application of FEC Brightline All Aboard
Florida, whichever company it was, and it sounds to me as if
from their testimony thus far the Department of Transportation
did base the eligibility of the decision for private activity
bonds on All Aboard Florida's self-reported acceptance of Title
23 funds.
That whole argument of whether there was Federal funding or
not Federal funding, whether there was truth or not truth in
the testimony on transportation and infrastructure. So did the
Department investigate All Aboard Florida's claims in their
application at all?
Mr. Burthey. The Department does review all components of
the application, including the actual use of Title 23 funds
that a sponsor claims.
Mr. Mast. Does the Department determine FEC to be
Brightline? Are they the same company to the Department?
Mr. Burthey. That is not a consideration that the
Department makes. Given pending litigation on that issue, I
cannot comment further.
Mr. Mast. So the Department does not look at whether one
company received Federal funding and whether a completely
separate company is applying for private activity bonds. That's
not looked at in an application, when one company is claiming
that they received Federal funding?
Mr. Burthey. Unfortunately, Congressman, I cannot comment
further on that given litigation that's pending.
Mr. Mast. Okay. I would hope that you could comment on this
being that this is the primary concern of how we are
determining whether somebody is eligible for private activity
bonds. The Department does seem very unsure of whether All
Aboard Florida actually received Title 23 funds or not, and as
we said, that's what the application is entirely based on----
Mr. Meadows. So, Mr. Burthey--hold on, if the gentleman
will yield for just a second. So, Mr. Burthey, are you
suggesting that you don't know whether you evaluate that or
not?
Mr. Burthey. I'm not suggesting that. I'm suggesting that
the overlap between FEC and All Aboard Florida is the subject
of litigation, and I have been instructed by our counsel to not
comment on that matter.
Mr. Meadows. So let me ask you this, his question is more
generic. Do you typically evaluate whether one entity and
another is one in the same? Do you typically do that? Which
would not speak to the litigation at bay here or at bar. I
mean, do you typically evaluate that?
Mr. Burthey. Well, obviously, all applications are very
different, and so it would be----
Mr. Meadows. Right. So either it is typically evaluated or
it is not because all applications are evaluated differently,
but you would say do you consider two different entities--to
Mr. Mast's point--as one typically? In all your reviews--
obviously if you're prepared for litigation you have already
looked at this and all of that. Would you typically do that?
Mr. Burthey. Well, certainly, Congressman, Mr. Chairman, we
do very significantly take a look at the applicant that is
requesting private activity bond allocation, but with regard to
whether or not when and if he is judged versus another I mean,
I think it is difficult to answer that question on an
overarching basis. I think it is very situational.
Mr. Meadows. Well, can you confidentially get your counsel
and certainly with the DOT's help respond to this committee in
30 days with specificity. I see your staff is nodding yes. Is
30 days enough? All right. Thank you. I yield back.
Mr. Mast. Thank you, Mr. Chairman. I'm going to complete
with my line of questioning with this, and I would like to go
to Chief Wouters for a minute here. In all of your time in
looking at safety issues, have you experienced the push on the
county or have you heard, Mr. Reingold, the push on your county
to say that because there is uproar about the 32 trains and
train horns blowing 32 times in the backyard of everybody or in
the downtown of everybody.
Have you been approached by the Brightline project about
the fact that there can be quiet zones or that they can be
quieted or they cannot below the train horn?
Mr. Wouters. Thank you, Mr. Congressman. Yes, we have been
approached about them. At this point the county's position is
we don't feel that it is a good thing. We recognize the
significant change in the train speeds and frequency through
the area. It is something that the community needs to have
time, if you were, to come to understand how it works.
Much like Congressman Posey mentioned in the incident that
happened on the train that you were on, they have to come to
understand those changes in speeds affect the way they make
decisions, and we don't think that quiet zones are an important
thing to put in. We think that all the safety features should
be working as normal, not agreeing to those quiet zones.
Mr. Mast. Mr. Reingold, do you have a comment?
Mr. Reingold. We have concerns with quiet zones, as well.
As we have seen already in South Florida there have been
significant accidents and incidents already, and we certainly
will take the consideration of quiet zones seriously, but we
are very concerned about the safety of this project, and thus,
are not jumping instantly into that issue.
Mr. Mast. Mr. Goddard, you did mention quiet zones briefly
in your written testimony. Is the possibility of quiet zones
something that you push on the localities or encourage to the
localities?
Mr. Goddard. So the quiet zones are completely at the
option of the municipalities through which we travel.
Mr. Mast. In order to avoid outrage of a train horn blowing
at every interaction in an area do you encourage--have you
encouraged the City of West Palm Beach or any other cities to
consider permitting quiet zones?
Mr. Goddard. No.
Mr. Mast. Okay. I don't know if you're aware, but this goes
to the point, and I'll finish with this. This goes to the point
of the continued cost of this project, not just at the local
level or, you know, potentially at the State level, but also at
the Federal level, just last week the mayor of the City of West
Palm Beach she was in my office and she was very specifically
asking me that the Federal Government pay for increased
infrastructure at every intersection because they permitted
every intersection as a quiet zone as to avoid the outrage in
their community of this train travelling through it 30 times,
and they now wish that the Federal Government will pay to get
those quiet zone permitted intersections up to a higher quality
because of the deaths that have occurred.
This is in the area that this train is running and this is
just in my opinion another example of where the Federal
Government potentially gets on the hook for the cost of this
line, not just from where FEC or Brightline is asking for
dollars, but where the cities and the municipalities come and
ask for those dollars, as well as especially in the result of
safety concerns.
In that, Mr. Chairman, I thank you for the time today and
thank you for the hearing.
I thank all of you for your testimony to me. Thank you.
Mr. Meadows. I thank the gentleman from Florida. I'm going
to recognize the other gentleman from Florida for a probably
more straight 5 minutes because I gave him a very generous 5
plus minutes in his opening round. So the gentleman is
recognized for 5 minutes.
Mr. Posey. Thank you again, Mr. Chairman, for holding this,
and it is so enlightening. I mean, I'll be eternally tormented
trying to figure out how in the world a highway is the exact
same as a railroad, and if you can solve that puzzle or you can
before I do share it with me because it is----
Mr. Burthey, in 2005 Congress passed the Safe Accountable
and Flexible Efficient Transportation Equity Act. I know that
sounds all oxymoron, but, you know, we did, and they did. And
it created a $15 billion pool of tax exempt bonds that could be
used on eligible taxes and facilities. In order to obtain these
tax exempt bonds private sector entities must submit an
application for review. And what I'll ask you to respond to in
writing since we do have a very limited amount of time here is
if you would be kind enough in the next 30 days to let me know
if there is a high demand in the private sector for these
bonds, how many applications DOT receives, how many
applications are typically approved and how many are denied.
Who oversees exactly, precisely who oversees the
application review process like name and position numbers. How
long a review process for applications typically takes from
start to finish. If you could do that. Can you do that in the
next 30 days.
Mr. Burthey. Yes, sir.
Mr. Posey. Thank you very much. Generally given that
there's a $15 billion pool that we just talked about, how much
do project sponsors request in taxes and private equity bonds?
Mr. Burthey. In other words, on average how much--what is
the average of our applications?
Mr. Posey. Yes.
Mr. Burthey. It varies wildly. It is always in the hundreds
of millions at least and sometimes into the billions.
Mr. Posey. Okay. And roughly how many requests are we
talking about?
Mr. Burthey. Over history or in a given year?
Mr. Posey. In a given year.
Mr. Burthey. In a given year? I believe last year we
approved somewhere in the neighborhood of four to six.
Mr. Posey. Okay. In your correspondence to me if you can
also briefly walk me through the application process. I know it
is set in statute somewhere, but if you would include that in
the letter I have another reason for requesting that.
Mr. Burthey. Okay. Yes, sir.
Mr. Posey. Who makes a determination of whether a project
fits under one of the 15 categories in 142(A)?
Mr. Burthey. The Department does, sir. Ultimately the
discretion for the program lies with the Secretary of
Transportation.
Mr. Posey. The Secretary then.
Mr. Burthey. Ultimately by statute.
Mr. Posey. Okay. Typically does the project sponsor have to
specify the type of exempt facility in their application?
Mr. Burthey. The Department of Transportation only manages
the $15 billion with regard to the qualified highway or freight
transfer facility. That's the only definition that applies to
the $15 billion cap.
Mr. Posey. Okay. So does DOT give any difference to or rely
upon the project sponsor's evaluation of how their project is
eligible?
Mr. Burthey. Yes, we do.
Mr. Posey. Okay. Mr. Crandall, would you like to comment on
the record further about the judge's decision as to the cost of
the taxpayers of the subsidy?
Mr. Crandall. Thank you, Mr. Posey. In the district court
the judge heard testimony as to the probable cost to taxpayers
and reached the opinion that the original $1.75 billion, if
granted, would cost taxpayers about $600 million during the
first 10 years of that bond issuance.
Mr. Posey. Okay. Thank you. Mr. Goddard, is the RRIF loan
application still pending?
Mr. Goddard. Thank you, Congressman. If I could just
clarify Mr. Crandall's response.
Mr. Posey. Okay.
Mr. Goddard. So the 600 million was actually a number that
was formulated by one of Care's consultants. It was not
actually--didn't come from the judge. We ran our own numbers.
It is probably around $250 million.
Mr. Posey. Okay. I'm running out of time here.
Mr. Goddard. And we actually have--there will be a tax
benefit of about $650 million from that investment of $250
million.
Mr. Posey. Back to the RRIF loan, is it still pending?
Mr. Goddard. Yes. We are actively in the process of
applying for a RRIF loan.
Mr. Posey. And how much is the RRIF loan for?
Mr. Goddard. $1.75 billion.
Mr. Posey. Okay. That is 1.75 billion with a B?
Mr. Goddard. With a B.
Mr. Posey. Okay.
Mr. Reingold. If I can, Congressman? This is Don Reingold.
Mr. Posey. Why was the decision made to seek funding
through the tax exempt private equity bonds?
Mr. Goddard. I think as a private entity and stewards of
our investor's capital we are going to avail of any, any
funding available that's at a lower cost of capital.
Mr. Posey. Okay. And what other sources of funding has All
Aboard Florida used to fund Brightline or attempted to fund
Brightline?
Mr. Goddard. So in addition to, you know, obviously PABs
and RRIF are options for us, but should they not materialize,
conventional, that's an option.
Mr. Posey. Okay. Mr. Chairman, I thank you for your
indulgence.
Mr. Meadows. I thank both the gentlemen for your leadership
on this particular issue, and, Mr. Reingold, I think you wanted
to respond, and I have not forgotten Mr. Goddard's ability to
offer rebuttal on something, but go ahead Mr. Reingold, if you
want to respond to Mr. Posey's line of questioning. I think you
tried to interrupt him and didn't get recognized, so go ahead.
Mr. Reingold. Thank you to the chair. Two points I want to
make about the litigation, which has been discussed. First off,
there have been a mention that the All Aboard Florida prevailed
on all of the lawsuits. I just want to state that the Federal
court had found that, in fact, that the court had found that
the plaintiffs had adequately alleged the existence of a major
Federal action. That was significant win for the counties.
Additionally, specifically to the point as asked by the
Congressman was that the judge found that over a 10-year
timeframe that the amounts to what would amount to a $370
million to $600 million cost to the taxpayer, so that was
exactly the information that was found and determined by the
Federal court, not just by Care FL's consultant, but actually
by the court. Thank you very much for letting me clarify.
Mr. Meadows. I thank you for your clarification. Mr.
Goddard, I think you wanted to speak to the safety issue, if I
recall, that you said there was some misinformation out there,
and I told you I would come back, and I want to be good to my
word there.
Mr. Goddard. I appreciate that very much, Mr. Chairman. And
I want to recognize the good work that all first responders do
in our communities, but I would like to just point out that the
maximum allowable speed for freight trains are 60 miles an
hour, not 70 miles an hour.
You know, this image of chaotic disruption of trains
running through the counties is a little bit misleading. You
know, freight trains obviously take a lot longer than passenger
trains to get through a crossing. It takes us all of about 45
seconds to get through a crossing. It is actually about half
the time of a red light.
Brightline would only run 32 trains, far fewer than most
systems throughout the country. In South Florida there's
already a local commuter system that runs 52 daily trains over
72 grade crossings with no impact on first responders. In one
suburban Chicago town they run 102 daily trains at grade. In
Long Island more than 800 trains run over 200 crossings.
So again, if we believe that short passenger trains are
going to create the kind of disruption that Brightline
opponents claim then perhaps we should consider shutting down
all commuter and intercity rail systems in the country.
Mr. Meadows. Well, obviously we are not debating that
particular issue today. That's a little bit of hyperbole, but I
will let the gentleman make his case, and point well taken in
terms of how quickly it would go through.
Listen, obviously there are three different debates that
are going on here. One is the fact that there are some who
don't want this bill for any reason whatsoever. I recognize
that. There are two other very significant debates that are
going on, and it is the proper use of private activity bonds
and the way that this has come about and the safety concerns
that create an unfunded mandate for some of our municipalities
and counties along the way. Those are two very different
arguments that, quite frankly, have a lot more and perhaps less
passion behind them, but a lot more material facts, Mr.
Goddard, and unless we are able to answer those questions to
the satisfaction of the American taxpayer we are going to
create problems for Secretary Chao and Mr. Burthey and the
others because, quite frankly, what we are doing and what I see
this as is the PAB that you're looking at is being used in a
way that is not consistent with the original intent of
Congress. And your counsel again is shaking his head no, but
that's all right.
What we have is we have moneys that was spent for a
crossing that goes this way, and we are building with PABs
something that goes the exact opposite way. And when we look at
that this was all about trying to have a partnership for Title
23 funding along with PABs and other things to create a highway
going one way, understanding that the--on the rail transfer
side of things they were saying we understand that there may be
these like there would be with a seaport or an airport there
would be these facilities that should qualify neither of which
the money--Title 23 money has been spent for.
So what we will do for your own edification, as well, is we
will get some of the legislative history that I don't think is
consistent with the interpretation of DOT or perhaps the way
that it is done because I can tell you based on our initial
research this may not have been the best vehicle to use a
private activity bond.
That being said, I want to thank all of our witnesses for
coming, and specifically Mr. Goddard, listen, I know this is
like going to the dentist. We are now getting it over so you're
getting out of the chair. I get that. I was a developer.
Listen, there's no one who has seen not in my backyard more
than I have, and at the same time we have a responsibility to
make sure that we do things safely and with integrity and
making sure that we don't create a financial liability for
other entities. That is a big concern of mine hearing what we
have for these counties and knowing that we can say, okay,
because, you know what, we don't face the same taxpayers when
their county commissioners have to raise rates to pay for that
$8 million over a 10-year period. So we really need to address
that.
Mr. Burthey, I thank you for allowing for short timeframes.
I thank your staff for doing that. Give my best to Secretary
Chao, and as we look at this I want to make sure that we know--
we are going to leave the record open for 2 weeks for any other
opening statements that any of our members would like to make,
especially in light of the fact that we are holding this on a
day that we recessed yesterday.
And additionally, any additional questions, so all of you
may be getting additional questions in 2 weeks for additional
questions for the record. I would ask that yourespond to the
committee's request. We will try to be gracious in terms of the
amount of time that you have to respond to those questions.
And if there is no further business before the subcommittee
the subcommittee stands adjourned.
[Whereupon, at 11:57 a.m., the subcommittee was adjourned.]
APPENDIX
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