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July 31, 2015

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DesertXpress rail project going after tax dollars, after all

High-speed rail company after nearly $5 billion loan

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Photo courtesy DesertXpress Enterprises LLC

The fully electric DesertXpress trains are expected to take passengers between Victorville, Calif., and Las Vegas in 84 minutes.

Ever since plans to build a high-speed train from Las Vegas to Victorville, Calif., were unveiled, developers have been adamant about one point — they wouldn’t ask taxpayers to fund it.

But DesertXpress Enterprises has no qualms about borrowing from taxpayers — and borrowing big — for a project that skeptics say has little chance of gaining the ridership needed to pay for it.

The company has applied for a $4.9 billion loan through a federal program to construct what is billed as a $6 billion project. Since the plan was presented nearly two years ago, the cost estimate has ballooned from $4 billion.

The Federal Railroad Administration will hire an independent analyst to determine if ridership estimates, $50 one-way fares and other related revenue will be enough to repay the loan and prevent taxpayers from getting stuck with the bill.

The company, which is waiting for environmental clearances before it can begin preliminary design and engineering on the 185-mile route, requested the loan through the federal Railroad Rehabilitation & Improvement Financing program.

Under the program, funding may be used to develop or establish new railroad facilities, and direct loans can finance up to 100 percent of a railroad project with repayment periods of up to 35 years and interest rates the same as what the government is charged.

If approved, the loan would be more than four times the amount the program has lent to 28 railroad projects since 2002.

Since then, it has loaned $1.02 billion with the largest loan, $233 million, going to the Dakota, Minnesota & Eastern Railroad in 2003.

According to the Federal Railroad Administration, it plans to solicit bids to independently assess the loan application by March 1. Nine companies have expressed interest in bidding on the analysis.

The review will include an evaluation of the economic soundness of the project and the creditworthiness of the applicant. The evaluation also will include projections on ridership, an assessment of the company’s ability to pay off the loan; project risks; and a cost-benefit analysis.

The administration typically approves loans within three months.

Representatives of privately held DesertXpress Enterprises have said they would not seek direct federal funding for their project, which envisions an 85-minute trip along the Interstate 15 corridor.

A spokeswoman acknowledged the loan application, noting it’s consistent with plans not to use tax dollars, but to borrow money from federal sources.

Although DesertXpress officials were optimistic in 2010 that ground would be broken this year, delays in environmental clearances have pushed engineering the project back. Construction is expected to take three to four years.

The environmental process is expected to spell out the best route options for the track, including a recommended location for a station in Las Vegas. Four sites are options: a site near Russell Road, two near Flamingo Road and one in downtown Las Vegas.

Plans call for conventional steel-wheel trains to operate at 150 mph on two dedicated tracks. Critics think the train wouldn’t get the ridership it needs to support itself with Victorville as the southern terminus.

Developers chose Victorville because most passenger traffic in cars pass through the high-desert community en route to Las Vegas on I-15.

After critics ripped the Victorville end point, the company announced plans to build an extension west to Palmdale, where a station for the California high-speed rail project is planned.

The project also has been criticized because Sen. Harry Reid, D-Nev., a longtime supporter of a magnetic levitation system between Las Vegas and Los Angeles, withdrew his support and began backing DesertXpress in 2009. Reid said he was frustrated by the lack of progress on the maglev project, but critics said the switch was because DesertXpress investor Sig Rogich formed a campaign support group for Reid’s re-election months before the change in support.

DesertXpress officials have said a maglev is too expensive, but boosters of the technology say long-term costs are about the same because of the higher maintenance expense for traditional rail compared with the frictionless maglev, which is propelled on a magnetic field.

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