Indian River Cnty. v. Dep't of Transp.
| Decision Date | 24 December 2018 |
| Docket Number | Case No. 18-cv-00333 (CRC) |
| Citation | 348 F.Supp.3d 17 |
| Court | U.S. District Court — District of Columbia |
| Parties | INDIAN RIVER COUNTY, FLORIDA et al., Plaintiffs, v. DEPARTMENT OF TRANSPORTATION et al., Defendants. |
Stephen Ryan, Amandeep S. Sidhu, McDermott Will & Emery LLP, Washington, DC, Philip E. Karmel Bryan Cave, LLP New York, NY, for Plaintiff.
Barbara M.R. Marvin, U.S. Department of Justice, Washington, DC, for Defendant.
AAF Holdings, Inc. ("AAF") plans to construct and operate an express passenger railway connecting Orlando and Miami, Florida. The initial segment of the line between Miami and West Palm Beach is currently operational. The extension of the line to Orlando is still in the planning stages. To help AAF finance the extension, the U.S. Department of Transportation has allocated $1.15 billion in federally tax-exempt bonds to be issued by a Florida economic development agency.
The planned extension of the railway will run through Indian River County on Florida's Treasure Coast. The County and its Emergency Services District (together, "Indian River County" or "Plaintiff") have long objected to the project. In this, its second lawsuit challenging the project, Indian River County seeks summary judgment on two grounds. First, it contends that the Department of Transportation exceeded its authority in allocating the bonds because the project is not eligible to receive tax-exempt funding under two separate provisions of the Internal Revenue Code. Second, the County maintains that the Federal Railway Administration ("FRA") violated the Administrative Procedure Act ("APA") and the National Environmental Policy Act ("NEPA") by conducting a flawed and incomplete review of the public health and safety consequences of the project. Defendants the Department of Transportation, its component FRA, and several of its officers (together, "federal Defendants," "the Department," or "FRA") filed a cross motion for summary judgment, as did AAF, which has intervened as a defendant. Because the Department's allocation met the tax code's requirements and the FRA's review complied with NEPA, the Court will deny Indian River County's motion for summary judgment and grant the federal Defendants' and AAF's.
AAF is in the process of constructing a private passenger train service that will ultimately provide service between Miami and Orlando. Phase I of the project currently operates from Miami to West Palm Beach. AR 65115–16. Phase II will run from West Palm Beach north along Florida's east coast to Cocoa and then west and inland to Orlando. Id. AAF plans to lay a second track along a 128.5 mile stretch of single-track train corridor owned by the Florida East Coast Railway ("FECR") from West Palm Beach north to Cocoa. AR 65115. This track is currently used only by freight trains, some of which carry hazardous materials, but historically was used by both freight and passenger trains. AR 73914. This corridor is referred to in the record and by the parties as either the FECR Corridor or the N-S Corridor. AR 65115. The N-S Corridor bisects Indian River County. AR 73572. AAF also proposes constructing a new 40-mile track that would connect Cocoa and Orlando. This stretch of track is referred to as the E-W Corridor. AR 65115.
AAF plans to operate thirty-two passenger trains per day in addition to the FECR freight trains that now run along the N-S Corridor. AR 65116. These trains would run through Indian River County for twenty-one miles. AR 73753. There are thirty "grade crossings" in the County. Id. A grade crossing is an intersection where the railway crosses a road or path at the same level or grade, rather than an intersection where trains cross over or under the road using an overpass or tunnel. In addition to these grade crossings, the trains will traverse bridges that are either fixed or moveable (i.e. , draw bridges). Two of these moveable bridges are at issue in this case: the St. Lucie River Bridge and the Loxahatchee River Bridge. AR 73915. When these bridges are in the "down" position, trains can cross over but boats on the river cannot cross under.
AAF is partially financing the railway project through private activity bonds ("PABs") issued by the Florida Development Finance Corporation ("FDFC"), an agency of the State of Florida. Congress has authorized the United States Department of Transportation to allocate tax-exempt authority to PABs used to finance specific types of transportation projects. See 26 U.S.C. § 142(m)(2)(C). AAF initially applied for a PAB allocation in August 2014. In December 2014, the Department of Transportation approved that application and provisionally allocated $1.75 billion in tax-exempt PABs for the project. SeeIndian River Cty. v. Rogoff ("Indian River Cty. I"), 110 F.Supp.3d 59, 65 (D.D.C. 2015). AAF planned to use these PABs to finance both phases of the railway.
In November 2016, the Department, at AAF's request, withdrew the provisional allocation and replaced it with a $600 million allocation of PAB authority to finance only Phase I of the project. SeeIndian River Cty. v. Rogoff("Indian River Cty. III"), 254 F.Supp.3d 15, 17–18 (D.D.C. 2017). Then, in December 2017, AAF applied for a new allocation of $1.15 billion in PAB authority to finance Phase II of the project. See AR 74220–62. As part of its application, AAF represented that the project had received $9 million in Title 23 federal funds, disbursed by Florida's Department of Transportation for highway-rail crossings along the rail corridor. AR 74235. AAF included in its application a resolution by FDFC approving the issue of bonds to finance the project. AR 74240–53. That resolution concluded that the bond issue had received requisite public approval for tax-exempt status because a designee of the State's Governor had approved their issue after a properly noticed public hearing. AR 74242–44. AAF's application highlighted that the bonds had already received this public approval. AR 74221. Further, AAF included in its application a bond counsel validity opinion, by the law firm Greenberg Traurig, which concluded that "interest on the Bonds ... is excludable from gross income for purposes of federal income taxation under existing laws as enacted and construed[.]" AR 74256.
The Department approved the application and provisionally allocated $1.15 billion in PAB authority on December 20, 2017. AR 74324–26. Its provisional allocation letter conditioned final allocation on several requirements, including compliance with all applicable federal laws, as well as "a final bond counsel tax and validity opinion ... issued at the time of the closing of the bond issue in substantially the form provided with the application." AR 74324. While FDFC will issue the bonds, AAF is responsible for marketing and selling them to investors. The parties have represented that the bonds will be marketed in the next several weeks.
AAF originally sought federal loan funding for the project through the Railroad Rehabilitation and Improvement Financing ("RRIF") program. RRIF loans are subject to NEPA review. 49 C.F.R. § 260.35. FRA reviewed the potential environmental impacts of the project under NEPA. AR 73636. With respect to Phase I, FRA issued a Finding of No Significant Impact in 2013. AR 73570. FRA then began preparing an Environmental Impact Statement ("EIS") for Phase II. AR 73571. It held five public scoping meetings in May 2013 and received 248 comments in response to those meetings and more than 160 comments in the subsequent seventeen months. AR 74155–56. As required, FRA coordinated with federal, state, local, and tribal governments, including Indian River County. AR 74157–59.
FRA completed a draft EIS in September 2014. AR 74164. The draft attracted some 15,400 public comments. Id. During the comment period, FRA also held eight public meetings, id., which were attended by over 2,500 people, AR 74165. FRA issued a Final Environmental Impact Statement ("FEIS") in August 2015. See AR 73568. FRA subsequently received additional comments on the FEIS, including from Plaintiff. AR 65154. When AAF withdrew its RRIF loan application in 2015, FRA decided to not issue a Record of Decision ("ROD"). AR 65118. After AAF re-filed an RRIF application in 2017, FRA resumed the NEPA process and published the ROD in December 2017. AR 65109–65. Appendix C to the ROD provides responses to the comments on the FEIS. See AR 65154; AR 65266–300.
The FEIS selects AAF's preferred route as the best alternative for the project and determines that no further environmental review is necessary. AR 73578. The FEIS itself is 646 pages long and separately includes numerous appendices including maps and analyses of noise impacts, navigation patterns, and more. The FEIS and ROD outline the purpose of and need for the project, the alternatives considered, the affected environment, the potential environmental consequences of the project and reasonable alternatives, and the historic properties affected by the project. The FEIS also includes a chapter on measures that would avoid, minimize, or mitigate impacts that would result from the project. AAF has committed to implementing a series of mitigation measures during both the...
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