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Jan. 10, 2008
Copyright © Las Vegas Review-Journal

Monorail has to tap reserves

By FRANCIS McCABE
REVIEW-JOURNAL

The Las Vegas Monorail Co. dipped into its reserve funds to pay off the financing used to build the rapid transit line.

According to a document obtained by the Review-Journal, the Las Vegas Monorail was unable to make a scheduled bond payment at the start of this year using money collected through operating the rail line.


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    • The company used cash reserves to meet the more than $19 million in principal and interest due for the bonds issued in 2000 to build the high-tech train. More than $2.3 million had to be withdrawn to make up the difference, according to the Wells Fargo document.

    "This was expected," said Ingrid Reisman, vice president of corporate communications for the Las Vegas Monorail Co., in a statement. "Though it's the first time we've utilized our debt service reserve fund, the budget we prepared last year anticipated this."

    Financial analysts have noted the cash-flow problem in the past, and the company's credit rating has dropped.

    Analysis from Fitch Ratings, a New York City-based credit rating firm, said in July that the Las Vegas Monorail probably would slide into financial default by 2010 if it continued to be unprofitable and had to dip into reserve funds to meet its debt service obligations.

    In July, Fitch estimated the monorail had about $69 million in reserves on hand, down from $89 million in 2006.

    Since opening to the public on July 15, 2004, the $650 million, four-mile rail system on the east side of the Strip has failed to turn a profit. How the financial situation will affect a planned $500 million extension to McCarran International Airport is unclear.

    The Nevada Department of Business and Industry, which acted as a conduit for the monorail bonds to be floated, received the note from Wells Fargo on Jan. 2, spokeswoman Elisabeth Shurtleff said.

    Taxpayers are not liable, nor is any government entity obligated to take over the monorail or its debt should the company go bankrupt. The bonds are insured by AMBAC Assurance Corp. of New York, and a contingency fund exists to tear down the line should it close.

    Contact reporter Francis McCabe at fmccabe@reviewjournal.com or (702) 387-2904.

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    Sam Dallas wrote on January 11, 2008 08:48 AM: greg,

    Did you even read the last paragraph where it states that taxpayers and government entities are not responsible for this???


    greg wrote on January 10, 2008 11:50 PM: If it is a charity,which it is not, it is a taxpayer issue. Venture is garbage and the county and state knows it.


    Sam Dallas wrote on January 10, 2008 04:04 PM: greg,
    this was a private venture.


    greg wrote on January 10, 2008 02:59 PM: This monorail idea was a bad project. And the government doesn't need to sink anymore money into this so called fake charity. The taxpayers have carried this train to nowhere already. Get the riders. Get assistance from the casinos. Just don't ask the taxpayer for more, and open your payroll books while your at it.


    Sam Dallas wrote on January 10, 2008 11:09 AM: Does anyone remember the Simpsons episode several years ago when the slick-talking monorail salesman duped the good citizens of Springfield into buying a monorail to nowhere? If this is going to fall under the domain of RTC, this thing needs to travel someplace useful. We should also put our inmate chaingang to work building it, too.


    ths wrote on January 10, 2008 07:47 AM: The one thing this article does not address and has never been addressed is that this is a means of public transportation. How many light rails, subways and metro bus systems have first paid for the capital to get off the ground and then turned a profit.

    Take out the debt services and the monorail does turn a profit on its operating. That should be news in itself, but to often people rather look at the negative.

    The government should step in and pay for the expansion as it is there for public transportation. Perhaps this would slow down the growth of traffic from the airport to the strip.


    GOD wrote on January 10, 2008 04:04 AM: The extension to the airport won't keep it out of bankruptcy. Why that monorail didn't go straight down the strip is baffeling.


    Sid wrote on January 10, 2008 03:47 AM: I wonder if it would show a profit if it were extended to the airport? Would be a great source for transportation if so. It is a great source for transportation if you are going to/from one of the few places it goes.


    Vegas Vic wrote on January 10, 2008 03:04 AM: "How the financial situation will affect a planned $500 million extension to McCarran International Airport is unclear."
    It will affect the situation by making it difficult, if not impossible, to acquire new construction bonds because of the below junk rating the company now has.