Editorial: Monorail financing questions

Friday, Nov. 26, 1999 | 9:20 a.m.

The state of Nevada is weighing whether to issue $600 million in tax-exempt bonds that could save casinos millions of dollars in financing the construction of a monorail on the east side of the Las Vegas Strip. Charles Horsey, acting director of the state Department of Business and Industry, has referred to the proposal as a "high risk" venture because of the uncertainty as to whether the $2 rider fare would bring in enough money to pay off the debt.

To better gauge the feasibility of the monorail project, which the Clark County Commission already has approved, the state Department of Business and Industry hired the Public Resources Advisory Group, a company with national transportation expertise, to provide it with guidance on the proposal by MGM Grand-Bally's Monorail LLC. As part of its task, the group is taking comments from others with a stake in the project, including opponents.

The Sun's Adrienne Packer reported Tuesday that an Illinois firm, Wendell Cox Consultancy, has found that the monorail system's plans are too optimistic and could result in a net loss of $1.5 billion over 30 years. Wendell Cox Consultancy was hired by Mandalay Bay hotel-casino, which has expressed its reservations regarding the MGM Grand-Bally's monorail project that would link the MGM Grand to the Sahara hotel-casino. And while critics may question the objectivity of the Cox report, the fact is the report raises substantive concerns that shouldn't be dismissed.

One of the key points raised by the Cox report is the exceedingly rosy projections for the monorail system, whose supporters claim will have 54,000 passengers a day in 2003, the year it is expected to be ready for operation. Project backers also believe there will be a net profit of $350 million by the year 2034. But the Cox report contends that even in the best of circumstances, an optimistic projection would be just 27,000 riders, resulting in a net loss of $860 million by 2034. A more likely scenario, according to the Cox report, would be a loss of $1.5 billion.

It should also be kept in mind that other mass transportation systems in the nation haven't lived up to their advance billing. The Cox report notes that a Jacksonville, Fla., monorail system is comparable to that proposed for Las Vegas, but the Florida project faced its share of difficulties. For instance, the Metro-Dade Transit system had projected that its monorail would have 10,000 passengers a day, but the reality is it only carries 1,800.

Ultimately the state Board of Finance, which is headed by Gov. Kenny Guinn, will have to make the final decision on whether to issue tax-exempt bonds for the monorail project. The Cox report may not be a show-stopper, but the study does raise troubling questions that need to be answered.