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If you build it, will people ride it?
It is the question now dictating the future of Brightline, the express train that hopes to take passengers from Miami to Orlando and beyond.
Almost a year after launching its service from Miami, tens of thousands passengers now hop the train for the Miami-to-West Palm run, and back, each month. In February the figure totaled more than 78,000, according to a monthly Brightline ridership filing.
The number of riders is on a recent uptick, the company reports. Still, passenger levels remain below the company’s initial projections, and Brightline continues to operate at a loss. In February, the company decided to forgo an initial public offering (IPO), one that Bloomberg reported was set to be the largest of the year.
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“It seems like there’s nobody on the train sometimes,” said Daleik Vaughn, 38, a residential community association manager who works in Fort Lauderdale and has been taking Brightline since June.
The seemingly empty trains, revenue shortfalls and a canceled IPO have led some to question the private rail’s long-term viability.
But Brightline — soon to be known as Virgin Trains — is forging ahead with development of a 170-mile-long extension from West Palm Beach to Orlando. That route, and South Florida residents’ desire to avoid debilitating road traffic, will bring the company into the black, the company says.
The expansion plans don’t stop in Central Florida. Brightline also plans to bring service west to Tampa and further north to Jacksonville. It also wants to add stops at PortMiami, Fort Lauderdale-Hollywood International Airport and Disney World. And, it wants to offer packages that would connect passengers directly to airlines.
To add a bit of gloss to the project, Virgin founder Richard Branson is slated to ride the rails Thursday to promote its rebranding — part of a broader push to make South Florida a new hub for the travel giant. Its new cruise line, Virgin Voyages, is due to debut from South Florida in 2020. The idea is to provide all-in-one offerings to Virgin customers using Virgin trains, planes and ships.
Brightline declined to provide answers to questions about the company’s financial future, referring instead to remarks Virgin Trains USA President Patrick Goddard made at a March 6 bond hearing before the Florida Develpment Finance Corp. That’s the agency that approves sales for the type of bonds being sought by Brightline. The bonds allow developers to borrow at a more favorable rate. Only bondholders, not taxpayers, would not be on the hook in that event of a default, according to an FDFC spokesman.
“We have a clear line of sight to both covering expenses and debt service and ultimately profitability,” Goddard said at the hearing.
A March 20 Brightline bond prospectus document says the company is prepared to accept another year of losses in 2019. And the company’s planning suggests it believes FDFC approval is a forgone conclusion.
But it is no sure thing. At the same hearing, dozens of residents and officials from the Treasure Coast north of Palm Beach County lined up to express reservations about the project. So many voices, in fact, that the FDFC decided to schedule a second hearing for Friday.
The hearing is likely the final significant challenge to realizing Brightline’s Miami-to-Orlando vision. Without the financing — and the ridership to back it up — the future of the project is stuck at a crossroads.
WHO’S RIDING NOW?
On a recent Tuesday morning, Leon Chlimper, 58, stepped out into the shaded underpass at MiamiCentral station in downtown, just north of Government Center. It was the end of the daily morning commute for the sales manager, who picks up the 7:39 a.m. in Fort Lauderdale.
For the past eight months, Chlimper has been a regular. “It is convenient. It beats driving,” he said. His home is four miles from Brightline’s Fort Lauderdale station at Northwest Second Avenue, just north of Broward Boulevard. For $350 per month, he said, he replaces the stress and unpredictability of traffic with a smooth 25-minute ride each way.
Depending on one’s perspective, Brightline’s ridership gains are either trending upward or still showing signs of sluggishness.
In his presentation before the FDFC, Goddard said Brightline carried approximately 240,000 passengers in the fourth quarter of 2018. That included a surge from holiday-associated special events like the Polar Express ride, when Brightline conductors and attendants dressed as characters from the illustrated children’s classic.
For all of 2018, Brightline registered more than 579,000 trips — less than the amount predicted in 2017 by consulting firm Louis Berger, which had projected more than 1 million passengers in Brightline’s first year of operation. Full tri-city service from Miami did not begin until May.
In the first two months of 2019, Brightline ridership was going in the right direction. Between January and February, passenger figures jumped from 73,568 to 78,707.
Those figures remain below November and December numbers, when ridership hit 80,660 and 98,076, respectively. (Excluding holiday promotions, December ridership increased 5 percent over November, Brightline said in a filing, meaning 81,603 passengers.)
Goddard told the hearing board that revenue per rider has more than doubled since last January (although he did not disclose the figures), and the company now projects more than 2 million riders for 2019.
Still, Brightline trains at times seem to be running below capacity. On a recent 8:40 a.m. train from Miami to Fort Lauderdale, nine of the 60-odd seats in one $25 business-class car, the lowest fare at that hour, were occupied; the next car had 13 passengers. Nearly all were business travelers. The cars were a bit more full on the return trip, with more than two dozen seats filled with a mix of tourists and business travelers in one car.
Brightline referred questions about ridership to Goddard’s remarks at the March 6 hearing.
According to the Florida Department of Transportation, the most recent I-95 traffic figures are from 2017, making it impossible to determine whether Brightline has made a meaningful impact on reducing congestion on the interstate.
Part of the ridership challenge remains simple math. Based on average government fuel economy standards, the cost of driving round-trip from Fort Lauderdale to Miami is about $7 a day, or about $175 a month. West Palm to Miami in a car is about $15 a day, or about $320 a month, both excluding repairs. Brightline’s monthly West Palm-Miami passes cost $350 from Fort Lauderdale and $450 from West Palm Beach, plus parking.
Of course, this does not factor in time. During rush hour, driving from Miami to West Palm Beach usually takes about two hours; to Fort Lauderdale, an hour, according to Google — without accidents or construction back-ups. On Brightline, the Miami-to-West Palm run takes fewer than 75 minutes and 30 minutes from Miami to Fort Lauderdale.
The time factor is one reason Kevin Grayling, 49, a United Kingdom native, was taking the train on a recent morning. Grayling, who lives in West Palm Beach, said he was impressed to find something as sleek and comfortable as Brightline in the U.S. He uses it every so often when he needs to go to Miami for business; the European comfort and avoidance of traffic, he said, are irresistible.
For an occasional trip, the round-trip price of at least $40 is a bit on “the higher side,” he said — which may account for the relatively few passengers he said he tends to see on board. But as he noted, “You can’t have a drink sitting in traffic on I-95.”
Alice Snyder, of Pittsburgh and her friend Memerie Lewis, of New York, are retirees with homes in West Palm Beach. They were taking their first Brightline ride on a day-trip to Miami that same morning. They were looking for a novel experience and said the cost was reasonable.
“We were knocked out.” Snyder said.
Brightline believes current South Florida ridership numbers will continue to grow. But even if they don’t, company officials have said the real turn in its fortunes will come when it reaches Orlando.
To get there, it must get the approval of the FDFC. Brightline is asking the nonprofit, quasi-governmental agency for permission to borrow an additional $950 million from the municipal bond market, using what are known as private activity bonds. That’s on top of the more than $1 billion it has already asked for permission to borrow. The debt is tax-free and traded in the municipal bond market, and is used to finance large infrastructure projects. Brightline is seeking more funds through private activity bonds than any other U.S. project, according to the U.S. Department of Transportation.
It is not clear when the commission will rule. But it will be difficult to move forward without FDFC approval. In 2016, U.S. District Judge Christopher Cooper said in an opinion on a lawsuit challenging Brightline’s ability to access the private activity bonds that the bonds appeared to be the project’s financing of last resort, wrote the magazine Government Tech. “[It] is not the current financing plan for the project — it appears to be the only financing plan,” Cooper wrote.
For 2018, Brightline reported a net loss of more than $117 million, on $10 million in revenues. The company referred questions about its financial outlook to Goddard’s remarks at the March hearing.
In its bond prospectus released March 21, the company laid out three financial scenarios for the years 2019-2029.
The first projects ridership of 2.1 million in 2019 with average revenue per rider of about $25. That would ramp up to 6.6 million riders in 2023, when Orlando service would start, and bring an average revenue per rider of about $73. It expects to lose about $15 million this year and $49 million in positive earnings in 2020.
The second shows the same ridership with but trimmed revenues and average revenue per rider of about $16 in 2019 and about $46 in 2023, with 2019 losses of $34 million and positive earnings of $5.2 million in 2020.
The third projects lower ridership, with 1.4 million riders in 2019 that ramps up to 4 million riders in 2023, but with the original average revenue per rider figures of $25 in 2019 and $73 by 2023. In this scenario, 2019 losses would be about $36 million and positive earnings of $5.3 million would be reached in 2020.
In all three scenarios, the company expects to cover its annual debt service, which rises from $17.3 million in 2019 to $90 million each year thereafter.
Fitch Ratings has said Brightline’s plan is sound. Although it no longer tracks the project because it no longer falls under the ratings agency’s infrastructure criteria, Fitch wrote in a Dec. 4 note that after accounting for station-opening delays, Brightline had outperformed its own solvency model.
Nuveen Asset Management, one of Brightline’s current bondholders, declined to comment on the project’s outlook.
Some financial observers remain leery about Brightline’s long-term viability.
Joseph Krist, a partner at New York’s Court Street Group Research who covers the municipal bond market, said he remains wary about the project’s immense cost and the unproven demand for a train option to Orlando.
“Projects like this … have a really mixed performance record in terms of whether the debt gets paid off, how it performs,” Krist said.
In the past, the FDFC has shown support of Brightline: It unanimously approved the August 2018 bond issuance request, and approved an earlier request in 2015 that Brightline ultimately split into two separate bond issuances. But the agency’s decision to hold a second public hearing could indicate hesitation.
One potential issue: ongoing opposition. In November, the government of Martin County and the private Citizens Against Rail Expansion in Florida (CARE FL) signed a settlement ending opposition in exchange for safety enhancements, “quiet zone” eligibility, a Treasure Coast train stop, and access concessions to local mariners. But neighboring Indian River County continues to negotiate.
Indian River commissioners are uncomfortable with the the gag order Brightline imposed in negotiating that settlement, county attorney Dylan Reingold said in an interview, and they continue to believe the project poses a serious safety hazard from the train’s speeds expected to hit more than 110 mph in the Treasure Coast stretch.
Reingold was among approximately dozen speakers against the project at the March 6 hearing.
So was Rochelle Lessner, who drove from Hollywood to attend the hearing in Orlando. According to the hearing transcript, she said she had recently narrowly missed getting hit by the train because she was stopped by traffic on the tracks.
“When you are thinking about what you are doing to the quality of life and the quality of life in the cities and the safety of the people who live here, I want you to think about this, and I want you to think about this, and please do the right thing,” Lessner said.
Others noted Brightline trains have been involved in multiple fatal accidents in South Florida. In no instance has a court found Brightline liable. Police have investigated most as trespassing incidents.
If the FDFC approve the bonds, those who are opposed may have little recourse. According to the Sun-Sentinel, Brightline has prevailed in 10 separate rulings in cases brought by Treasure Coast entities.
Despite lingering protests, Brightline is moving ahead. A $682 million inter-modal station at Orlando International Airport funded by taxpayers and to which Brightline is adding its own station has already been completed. The company will lease that station for $2.8 million a year.
In addition to Brightline, the Orlando station will connect with Central Florida’s Sunrail commuter service, which takes passengers south from Kissimee through downtown Orlando and up to DeLand. It will also connect to a light rail system serving Orlando’s convention center and Universal Studios.
All construction contracts for completing the Orlando connection from West Palm have been put out to bid, Goddard said.
Goddard also confirmed at the March 6 hearing that Brightline is in discussions with Disney for an on-property station that would add greater connectivity to airport passengers and those traveling from South Florida. Disney did not respond to a request for comment.
Orlando area officials remain supportive. Orange County Mayor Jerry Demings said the region’s 1.4 million residents are clamoring for new modes of transit. “What I can tell you is that we’re a growing community,” Demings said according to a hearing transcript. “Because of that tremendous growth, we need alternative forms of transportation.”
Michelle Martinez, a district director for U.S. Rep. Darren Soto, whose district includes Orlando, said Soto remains “bullish” on Brightline, according to the transcript. She urged the FDFC to assist the project sponsors with the financing to help make it successful.
FDFC officials did not ask any questions of Goddard at the March 6 hearing. An FDFC spokesman said they will do so at the April hearing if they wish.
For Goddard, any doubts have been addressed.
“We appreciate the work of this FDFC board and staff for the economic development, business activity, job creation, and a higher standard of living for Floridians.,” he said. “If this is your checklist, we check all these boxes.”