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Judge rejects Las Vegas Monorail bankruptcy plan
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John Gurzinski/Review-Journal File Photo
The Las Vegas Monorail Monday is seen in late 2010. U.S. Bankruptcy Court Judge Bruce Markell on Friday rejected the monorail's plan to exit Chapter 11 bankruptcy. » Buy this photo
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Slavko Jeric and Anna Pavlic, visiting from Slovenia, ride the Las Vegas Monorail toward the MGM Grand on Feb. 23. Jason Bean/Las Vegas Review-Journal » Buy this photo
LAS VEGAS REVIEW-JOURNAL
The Las Vegas Monorail, which has wrestled with losses since it opened in its current form seven years ago, may be nearing the end of the line.
On Friday, U.S. Bankruptcy Court Judge Bruce Markell rejected the monorail's plan to exit Chapter 11 bankruptcy because the terms "doom it to failure, if not in the next few years then certainly by 2019." As a result, the plan fell short of the legal requirements for judicial approval, he concluded.
While monorail management projected that it could manage a radically slashed debtload in the near term, it admitted that it would come up $38.4 million short in eight years, mainly because of balloon payments.
"The monorail essentially asks the court to allow it to float along until it sinks, suggesting that when it ultimately sinks, the court need not concern itself with how creditors will make it onto the life raft -- or even whether there will be a life raft available," Markell wrote. "The court declines this invitation."
In doing so, he brushed aside nearly unanimous creditor support for the plan as "largely irrelevant."
The plan emerged from two years of negotiation and arm twisting both in and out of court. Retired utility executive Donald Shalmy, chairman of the nonprofit monorail's board, said it was too early to announce what the next move would be.
But at a Monday hearing, attorneys in the case raised the prospect that the alternatives to no repayment plan would be to sell it, although buyers are not lining up for something as unusual as a freestanding monorail, or shut it down. In the latter case, there is not enough money on hand to demolish the elevated tracks and stations.
The line follows a 3.9 mile course from the MGM Grand to the Sahara, roughly parallel to the Strip a few hundred yards to the east.
JUDGE EXPRESSES SKEPTICISM
Beyond the numbers, Markell wrote that monorail CEO Curtis Myles and outside adviser Matthew Kvarda had not given "credible reasons" why a more optimistic outlook that surfaced at the last minute was not grafted into the core financial projections. In addition, he expressed skepticism that any upside potential would happen as laid out.
Monorail management projected that the combination of new riders going to and from a reopened Sahara, Caesar Entertainment's Project Linq retail and entertainment center, plus becoming eligible for federal funding could plug the $38.4 million gap. Still, no firm money source was identified for the critical goal of extending the monorail to McCarran International Airport.
The monorail has made a profit on operations, although revenues and ridership have declined steadily for several years. However, it could never cover interest or principal payments on the bonds sold a decade ago to expand what had been a much smaller line.
The reorganization plan proposed replacing the bonds, now amounting to $658 million, with three IOUs that total $40.4 million. To reach that point, the monorail and different groups of bondholders not only had to reach agreement here but in Minnesota and Wisconsin. There bondholders fought over the leftovers of a failed insurance company that had backed one set of bonds against default.
INFRASTRUCTURE ISSUES
Not only did the monorail fall short on debt service, it also did not know where it would find the millions of dollars it will need in the coming decade to replace worn or obsolete infrastructure such as station doors or ticket vending machine software.
During the first nine months of this year, the 3.8 million riders marked a 3.2 percent drop from the same period in 2010, while the $17.4 million in revenues were down 2.1 percent. The monorail had to deal with the closing of the Sahara in May, although the number of conventioneers, a big source of riders, has risen.
Ridership, however, is only half of what it was in 2005, the first full year of renewed operations, while revenues have dropped by a fourth. The monorail has raised fares to try to squeeze more money out of a declining base.
Contact reporter Tim O'Reiley at toreiley@reviewjournal.com or 702-387-5290.
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a total failure how could this have been allowed to happen---it was a born looseer that will continue to fail-----it should have been made from the airport down--like any normal city---frank
This "BOONDOGGLE" was a joke from day -1-. It should have been built from downtown Freemont St. - straight up the middle of the Strip (the powers to be thought it wouldn't look nice) - and on into McCarran Airport. Every "BIG CITY" has a train into the airport. The taxi industry lobbied against it, paid off the corrupt politicians, and it is a now a "USELESS JOKE". ------------ It will never, ever be profitable -- tear it down.
$332,000 to run 3 miles of monorail track!!!???
Unbelievable that Curtis Myles equates this to other transportation systems. 3 miles of concrete track!! Ridership is dependent on tourists. That's the responsibility of the casinos. Curtis isn't bringing people to town with "ride the monorail" slogans. The casinos bring people to town. This guy is collecting an exorbitant salary for running a 3 mile track that essentially runs itself. Disgraceful.
which county commissioners signed for that monorail ? did they receive any "gratuities"/"professional fees" from any party to the construction and operation ?
The Monorail project should have been investigated by the DOJ right from the start. The Mafia owned cab companies blocked the Monorail from being built directly on the strip which was the obvious location.
The cab companies blocked that location because of it what have destroyed their business and it was blocked through threats and payola!.
The bankruptcy plan should be to dismantle the monorail and use parts for a new monorail on the strip...rocket science Vegas
They're still gonna figure out a way to leave us holding the bag on this toonerville trolley,just wait until after the next elections.
I guarantee we're going to get diddled.
The monorail needs to be shut down permanently. It is a losing
proposition and was even before it was built. The monorail
should have been elevated to run right down the middle of
the strip from the airport to all the way downtown and it should
have been given to RTC to run. Instead, politics helped design
it to run down a back alley thoroughfare for a short distance
like a toy train around a Christmas tree and run by yet another
commission whose sole purpose is to perpetuate its own existence.
The monorail cannot succeed. It doesn't have sufficient ridership,
revenue, or a route that's of any real benefit.
The LV Monorail is a really interesting thing to study. What I mean by that is that the monorail is something that anybody with common sense KNOWS in advance that it will not be used heavily. The route is out of the way and some of the stations are very well hidden. Have you ever seen the front of the Bally's station (from the Strip side)? Big lights and arrows say "MONORAIL STATION". So if you step onto the moving walkway, a tourist would think, "Okay, the monorail will be at the end of this walkway". Nope, think again! The walkways takes you to another walkway, and eventually into a small door that takes you inside Bally's to a desk where they are selling timeshares (or tickets to The Price Is Right). Then you go down another escalator and you are at the front lobby of the hotel. Where is the monorail??? You look for signs and find nothing, and you wander through the casino until you ask someone "Where is the monorail station?", only to be told a confusing and multi-step process on how to get there (walk through the casino, go down the escalator, walk past the restaurants, past the shops, go past the pool entrance, then take another escalator up to the station). What the heck?? Almost every station is like this---the monorail station is so far out of the way it's ridiculous. Just imagine how heavily it would be used if it was VISIBLE and went down the middle of the Strip! I hope they tear it down--there is nothing that can be done to save it.
problem is INCOMPETENCE;
compare this junkie system to the Seattle monorail that cost 3.5 million FIFTY years ago and still makes a profit every year.
each train can carry up to 450 passengers per trip and can travel up to 45 miles per hr
OR COMPARE to our AIRPORT monorail shuttles that are fast and efficient
So the architect of continued failure, CEO Miles Curtis continues to draw an astronomical salary; $332,000 plus the cheap POS charges $7,000 trip to China to his expense account. And the reason for his salary? "It's equivalent to what the CEOs of other transportation systems are paid." Well, maybe they actually run a "system" and not a one track abandoned trolley that nobody wants to ride and nobody does.