Risks to monorail investors outlined

Adrienne Packer

Tuesday, July 18, 2000 | 11:08 a.m.

In its report recommending the state issue tax-free bonds for a Las Vegas Strip monorail, the Department of Business and Industry outlines potential risks to investors.

Department Director Sydney Wickliffe also explains why she believes the monorail is public and therefore eligible for $650 million in state tax-free bonds.

In a 10-page summary of her findings Wickliffe said the state's financial advisers, the Public Resources Advisory Group (PRAG), warned that if the economy and tourism begins to struggle, the monorail will lose ridership.

To keep the system operating, the monorail company might have to raise fares and issue more debt. PRAG also said revenue sources like advertising and hidden fare packages are unpredictable.

Wickliffe said risks will be offset if the first tier of the bond issue is insured, the second tier is sold to sophisticated investors and the third tier is issued on a non-transferable basis.

She reiterated that neither Clark County nor the state will have a legal or moral obligation to support the bonds.

"I and my advisors will assure that full disclosure of all the foreseeable risks involved in the financing is made to the investors," Wickliffe wrote.

Opponents of the monorail project, which will extend the existing system north ultimately linking the MGM Grand to the Sahara hotel-casino, have claimed the new segment solely benefits the two primary operators -- the MGM Grand and Park Place properties.

Because private individuals and corporations will benefit from the system, opponents have claimed, the project should be considered private.

Wickliffe, however, said the extension will benefit the entire valley.

In her findings, she writes that the 3.9-mile system will enhance tourism and convention activity, ease traffic congestion on the Las Vegas Strip, reduce vehicle emissions and provide 280 new jobs during the construction phase.

"I am satisfied that the project is public in nature and is not intended for private benefit," Wickliffe said.

Monday's announcement that the Department of Business and Industry approves of the bond issue was a significant step for the monorail sponsors. The proposal still must be approved the Clark County Commission and finally by the state Board of Finance.

Bob Broadbent, the lead consultant on the monorail project, said Monday he was not surprised by the state's recommendation.

"We always assumed they would be on our side because we are doing the right thing," Broadbent said. "You never know what anybody is going to do, but we were confident."