Firm to examine feasibility of tax-free bonds for monorail

Tuesday, Oct. 12, 1999 | 11:29 a.m.

CARSON CITY -- A plan that could save Las Vegas Strip casinos millions of dollars in financing construction of a monorail is being examined by the state, but one official calls it a high-risk venture.

Charles Horsey, acting director of the state Department of Business and Industry, said today the state hired Public Resources Advisory Group of New York, a firm with national transportation experience, two weeks ago to assess the feasibility of the $600 million plan to build the monorail system from the MGM Grand to the Las Vegas Convention Center and the Sahara hotel-casino.

A 1997 law permits the issuance of the bonds tax-free for such projects as the MGM Grand-Bally's Monorail Limited Liability Co., Horsey said. The tax-free bonds would save the backers interest payments. But Horsey called the monorail a "high risk" venture because it is unclear whether a $2 fare per rider would be enough to pay off the debt.

If the New York firm finds the plan is too speculative, Horsey said the state agency will not recommend the project to the state Board of Finance, which must give its approval. The board is headed by Gov. Kenny Guinn.

"Because of the high-risk nature of the project, the role of the financial adviser is more important than ever," he said.

There will also be public hearings to take testimony before any recommendation is made to the finance board, he said.

There is opposition to the project, which would run along the east side of the Strip, from some casinos in Southern Nevada, he said. That will be taken into account, he said.

Public Resources Advisory Group will complete its assessment by the end of November at the earliest, Horsey said. Public hearings would be held this winter.

If the tax-free bonds are issued, Horsey said, the state and Clark County would not be liable if the project failed to generate the revenue necessary to pay off the debt.

"Neither the state nor the county will guarantee payment on the bonds," he said.

Supporters of the project are now seeking to obtain insurance to cover the debt, but so far they have not secured the coverage, Horsey said. He said he expected some casinos to buy a good share of the bonds.

"The governor has made it clear, due to its high-risk nature, that the bonds will not be sold to widows and orphans ... unsophisticated investors," Horsey said.

There was a "false alarm" last week, Horsey said, when there were reports that issuance of the bonds would dry up financing for housing projects for low- and middle-income Nevadans. He said the bonds for any monorail are authorized under a different section of the law and do not affect the housing bond project.

"They (the monorail bonds) don't compete," he said.