All Aboard Florida execs talk Siemens train purchase, funding options

— by Angela Cotey, senior associate editor

The phrase "all aboard" is becoming a bit closer to reality for All Aboard Florida (AAF), as officials continue to make progress on the Miami-to-Orlando intercity passenger-rail project. Designs for stations in Miami, Fort Lauderdale and West Palm Beach have been unveiled and are being finalized. Station site prep work is under way, and construction is scheduled to begin in early 2015.

But two of the most significant project announcements to date have come in the past two months.

In mid-September, AAF officials announced they had awarded a contract to Siemens to build locomotives and single-level intercity passenger cars for the corridor. AAF execs chose Siemens after an "exhaustive" search and procurement process that took nearly two years, says President and Chief Operating Officer Don Robinson. The process included trips to Europe, where AAF officials rode trains to get a feel for the type of service and ride quality they want the Florida service to mimic.

Execs focused mainly on higher-speed corridors and trips in the three-hour range — the amount of time AAF trains would take to make the 235-mile trek from south to central Florida.

"As you go a shorter distance or a longer distance, [riders'] needs change," says Robinson. "During a three-hour trip, how do people use and store their luggage? How do they use dining cars? What seat configurations worked for them?"

Seven rolling stock manufacturers expressed interest in the AAF contract. The agency selected Siemens because of the company's willingness to adapt products for AAF's needs. Plant location was a big factor, as well: Siemens will build the locomotives and rail cars at its Sacramento, Calif., plant, meaning the rolling stock will be made in America. The company will retrofit a portion of its plant so it can manufacture the intercity passenger cars — the first such vehicles Siemens will build for a U.S. rail system, says Robinson.

Rolling stock order

AAF's order includes five trainsets that will operate on the initial Miami-to-West Palm Beach segment. The agency plans to purchase an additional five trainsets once it has financing and environmental approvals secured for the second phase of the project, from West Palm Beach to Orlando International Airport.

AAF officials say they are aggressively pursuing new options for the project on the financing front. The first phase is being funded through equity from Florida East Coast Industries L.L.C., which is developing the project and owns the rail corridor, as well as bonds that were issued earlier this year, says Robinson. AAF had been seeking a $1.6 billion federal Railroad Rehabilitation & Improvement Financing (RRIF) loan to help finance the second phase, but now is considering issuing private activity bonds to solicit debt financing from private capital markets.

Seeking private equity bonds

Doing so would ease taxpayers' concerns that they might be on the hook for any project financing, says Robinson. The alternate financing also could be quicker to obtain.

"[This option] ... gives us responsibility of and control over the timing of the process," said AAF President and Chief Development officer Michael Reininger during an audio interview posted on the Treasure Coast Newspapers' website on Oct. 7.

The private activity bond program is administered by the U.S. Department of Transportation, which must approve AAF's application for a $1.75 billion bond allocation. Depending on the approved amount, AAF would be able to either eliminate or significantly reduce the requested amount of the RRIF loan, says Reininger.