Homeowners' analysts rip monorail financing plan

A consultant hired by opponents of Las Vegas' proposed private monorail extension says the project is set up to fail so that taxpayers ultimately will have to fund the system.

Jon Twichell, an Oakland, Calif., transportation planning and development consultant, said the proposed $350 million MGM Grand-Bally's monorail project is doomed to fail because the revenue it would generate in fares would not be enough to cover operation and maintenance and bond payments.

In a report issued Tuesday by Twichell and Thomas Rubin, an Oakland transit finance expert, fingers are pointed at MGM Grand-Bally's LLC, the monorail's developer, suggesting that it will operate a system beneficial to the primary investors -- casino operators MGM Grand and Park Place Entertainment -- at taxpayer expense.

The report was financed by residents of Desert Inn Estates, who oppose the monorail route because MGM Grand-Bally's LLC plans to build the track near their luxury homes.

"If the proposed monorail is designed to fail, this raises a fundamental question," the report says. "Is the LLC's goal to build a monorail (which appears to be primarily a private system benefiting the resorts whose officers sit on the LLC's board of directors) and then compel the Regional Transportation Commission to take over the system and support its operations with taxpayers' dollars?

"If so, county taxpayers may wish to assess, before the monorail is built, how much maintaining, operating and paying capital costs on the system will eventually cost the county, and whether its route, technology and cost are both consistent with and complementary to the region's transportation needs."

Bob Broadbent, who is coordinating the monorail project for MGM Grand-Bally's, said the allegations are false.

"They (Twichell and Rubin) are privileged to say what they want, but it's not true," Broadbent said.

Twichell and Rubin delivered copies of their report, titled "Financing the Monorail: A Fatally Flawed Project Designed to Fail," to the Clark County Commission Tuesday.

They said the report was issued that day because the monorail developers asked for and received a 90-day extension of deadlines associated with the project. Twichell and Rubin said the delay was due to the company having nothing to back up their financial claims; Broadbent said the delay resulted from his company attempting to negotiate an alternate route that would avoid the Desert Inn Estates neighborhood.

The Twichell-Rubin report concluded:

* Fare revenues would not cover costs. Monorail developers have not prepared a detailed analysis of the customer market, the report says, and even with the most optimistic projections, fare revenues won't be high enough to pay for operation and maintenance plus repayment of principal and debt services on between $300 million and $400 million needed to build the system.

* The use of tax dollars seems inevitable. They say every public transit system developed in the United States in the past 50 years -- including Las Vegas' Citizens Area Transit bus line -- is subsidized by taxpayer dollars.

* The monorail would serve customers of the sponsoring resorts, not Las Vegas residents. The report says most of the route would not run along the Strip, which is where most tourists want to be. Most of the stations on the line would be at casinos and hotels owned entirely or in part by LLC board members.

* The monorail bonds may be unable to qualify for tax-exempt status. The report questions whether the system would be considered a public benefit eligible to be built by tax-exempt bonds.

* The monorail's investment plan won't work. The report says the notes that would finance the project would be uninsurable junk bonds.

Broadbent has not given a detailed accounting of the monorail's finances, other than to say bonds would be secured by fares. He said the company expects to generate more than $32 million a year in fares and other revenues, such as advertising in trains and at stations.

That amount, he said, would be more than enough to pay the anticipated debt service based on amounts private investors would put into the project.

On the issue of the subsidization of a public transit system, Broadbent said the monorail wouldn't be like a typical urban transit system. Because it would transport millions of tourists -- not millions of commuters -- it won't function like a typical transportation system.

Commissioner Erin Kenny echoed that sentiment prior to Tuesday's vote to extend the deadlines.

Broadbent said the system would be like a tourist attraction itself and that the current monorail linking the MGM Grand and Bally's resorts already draws 5 million riders a year, though it doesn't cover much ground. Park Place owns Bally's.

Critics say the current monorail isn't a fair comparison because it operates at no charge. When the developers start asking for between $2 and $3 to get on, ridership will diminish, the report says.

Broadbent also said one of the deadlines that was extended was one on the preparation of a detailed ridership study.

On the tax-exempt bonds, Broadbent concurred that the project could be jeopardized if the developers couldn't qualify for that status. If they couldn't get tax-exempt status, commissioners could put the brakes on the project, Broadbent said.

Although Broadbent received a fresh set of deadlines, he said he would consider reopening negotiations with the new owners of the Desert Inn., even though that could result in further delays.

Because the Desert Inn would not offer right-of-way for the track, Broadbent abandoned efforts for an alternative route backed by the owners of the Fashion Show Mall, the New Frontier and the Stardust hotel-casinos.

It was announced Tuesday that Sun International is buying the Desert Inn. Broadbent said that could offer new hope for right-of-way that would keep the monorail away from the Desert Inn Estates residents and quiet the project's most vocal critics.

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