We all knew the game was rigged against us. What we didn’t know until last week, however, was that officials were prepared to go to the other side of the world to make sure All Aboard Florida won.
We didn’t know that the federal government was eager to partner with AAF to sell green cards – and permanent U.S. residencies – to foreign nationals willing to each invest at least $500,000 in the company’s high-speed, passenger-rail project.
With AAF struggling to find buyers for the $1.75 billion worth of high-risk, tax-exempt bonds it hopes to sell to help fund its $3.1 billion boondoggle, that’s exactly what’s happening.
According to the website for Orissa International, the Singapore-based trade and investment brokerage that recruits foreign investors interested in the U.S. Citizen and Immigration Service’s EB-5 Visa Program, AAF is seeking to raise $300 million by selling visas.
At $500,000 apiece, that’s 600 foreign investors – plus their families – who would buy their way into America, courtesy of AAF.
“Just when you thought it couldn’t get worse … ” said Phyllis Frey, an island resident who has been a fierce and vocal opponent of AAF, which plans to connect Orlando and South Florida with passenger trains that starting a year from now will run through our community 32 times each day at 100 mph.
“It’s legal, but it doesn’t make it right,” she added. “They can’t sell their bonds, so they’re selling visas.”
The EB-5 immigrants investor visa program was created by Congress in 1990 to stimulate foreign investment in the U.S. economy and create jobs, but it wasn’t until the financial crisis of 2008 that the number of applications began to multiply.
According to government statistics, fewer than 100 EB-5 visas were issued in 2003. Last year, more than 10,000 such visas were approved, with most going to Chinese investors. Over the past 25 years, the program has brought nearly $7 billion to the U.S. and is said to have created more than 95,000 jobs.
To qualify, applicants must invest $1 million in a U.S. business – or $500,000 if the business is in a rural area or community with high unemployment – and the investment must create at least 10 full-time American jobs.
If approved, the immigrants and their family members are awarded green cards making them conditional permanent residents for two years. Once the job-creation requirement is met, the foreign national may apply for unconditional permanent residency.
“It’s a widely used tool to bring in foreign cash to fund U.S. development, and I’ve been watching to see if they’d go in that direction,” County Commissioner Tim Zorc said of AAF’s involvement with the EB-5 visa program. “To me, it looks like they’re trying to use the $300 million as their equity to bolster their bonds.
“One of the big reasons their bonds aren’t selling is that they don’t have enough equity in the deal,” he added. “The bond market wants to see more skin in the game. This would be a way to do that without putting up any of their own money.”
Zorc’s fellow commissioner, Bob Solari, has been both suspicious and critical of AAF – from its financing to safety measures – since the project was announced. In fact, Solari praised Congressman Bill Posey for writing a May 10 letter to U.S. Transportation Secretary Anthony Foxx regarding “news reports of the illegal and unethical behavior of the Louis Berger Group,” which conducted a ridership and revenue study for AAF.
In his letter, Posey cited what he called the Berger Group’s history of “public corruption” and “defrauding the U.S. government,” then asked if the Department of Transportation will rely on the Berger Group’s study to sustain a $1.75 billion private activity bond allocation for AAF, or use the study as a basis to approve the company’s renewed application for a $1.65 billion federal Railroad Rehabilitation and Improvement Financing loan.
Posey also cited an independent analysis done by Dr. John Friedman, a former economic advisor to President Obama and a current Brown University professor, who concluded that “even under all optimistic assumptions, AAF will generate annual losses of more than $100 million and will be unable to service its debt burden.”
“When you get called out by a congressman, the bond market picks up on that,” Solari said. “So they’ll try to get their money from wherever they can.”
Both Solari and Zorc said the county’s legal department was looking into AAF’s pursuit of funding through EB-5 visas to see if there’s any grounds for opposition.
County Attorney Dylan Reingold said it was too soon to know if AAF’s connection to the EB-5 visa program could be legally challenged.
“We just started talking about this less than a week ago,” Reingold said.
Earlier this year, AAF’s lawyers threatened Reingold with a defamation suit, after the county attorney publicly expressed concerns about safety upgrades, particularly at local railroad crossings.
As it turned out, Reingold’s concerns were justified: The Federal Railroad Administration informed AAF that its initial design plan for grade crossings in our county failed to meet federal safety guidelines.
AAF has since delivered an amended and FRA-approved design plan, and the county staff is now in the process of determining how much it will cost us for engineering and road reconstruction, as well as what needs to be negotiated for “quiet zone” certification.
As it stands now, we know construction already has begun on AAF’s four planned stations and that crews in South Florida are busy adding a second track to the FEC line.
We know we’re going to get stuck paying for at least part of the required railroad-crossing upgrades, even though AAF is an unwanted and unnecessary intrusion that will endanger our community and wreak havoc on our quality of life without conferring any benefits, since the trains will not stop here to pick up or drop off passengers.
We know that our only real chance to defeat AAF – other than a last-gasp, Hail Mary pass from the St. Johns Water Management District or U.S. Army Corps of Engineers – is for the funding to fall through.
And that’s not likely to happen: With AAF struggling to sell its high-risk bonds, the U.S. DOT twice has granted extensions, the latest until Jan. 1, 2017.
AAF President Michael Reininger, meanwhile, has said the bonds are not an “irreplaceable element of AAF’s business plan,” which means he knows he can get the funding he needs from somewhere else.
How far will he go to get it?
My money is on China.
