State board to decide tax-free bond issue for monorail project

Adrienne Packer

Friday, June 9, 2000 | 11:15 a.m.

A collection of influential businessmen representing themselves as philanthropists whose proposed monorail will ease congestion on the Las Vegas Strip were portrayed by their critics Thursday as shameless swindlers.

Now it is up to the state Department of Business and Industry to determine what to believe and whom to trust.

Sydney Wickliffe, director of the division, expects by the end of next week to recommend whether the state should issue the MGM Grand-Bally's Monorail LLC a $650 million tax-free bond for their monorail project.

The Clark County Commission will review Wickliffe's findings and conditions placed on the project before making its final decision on July 5. Within a week the state Board of Finance will make the final ruling.

The monorail group led by consultant Bob Broadbent hopes to extend the existing system between the MGM Grand and Bally's to the back door of the Sahara hotel-casino using the Strip, Sands Avenue and Paradise Road.

Most of a debate batted around during an eight-hour hearing Thursday centered on whether the project benefits the public or caters to private corporations.

Attorney David Friedman summed up the opposition's stance by asking Wickliffe why the monorail group would invest $12 million on lobbyists and consultants if the project so greatly benefits the public.

"This isn't a public project," said Friedman, who represents the Venetian hotel-casino, one of the more active adversaries of the plan. "This is about big money, promoters and blatant payoffs."

But Broadbent was hardly fazed by the barbs. He tucked his proposal in with a list of Southern Nevada projects that skeptics had deemed failures before ground-breaking.

With each expansion of McCarran International Airport and the Las Vegas Convention Center, doubters balked. Both are now operating at capacity. The Mirage and MGM Grand would never draw the masses needed to survive, doubters said. But now they are thriving.

Broadbent told the business and industry board the monorail could have the same impact on the Strip that the Mirage had in the 1980s.

"What a visionary he was," Broadbent said of Mirage creator Steve Wynn. "It led to the next eight to nine megaresorts on the Strip."

Opponents of the monorail balked at Broadbent's comparison and urged the business and industry division to ask the Internal Revenue Service for an advanced ruling on the bond status, especially because it will be the largest tax-exempt bond issue ever executed in Nevada. They contend tax-free bonds can only be used for public projects, not private activities.

Critics guaranteed if the state moves forward, the IRS will tax the bonds and so many lawsuits will be filed that, as attorney Jim Jimmerson put it: "A lawyers full employment act" would be created.

Opponents scoffed at the monorail group's claim that a request for an advanced IRS opinion is simply a delay tactic.

"We're talking $650 million and they're saying it will take too long?" Friedman said. "It won't take a fraction of time it will take you to dig out of the mess if you go forward with it."

In its slick presentation, the monorail group explained how its project benefits all residents of the Las Vegas Valley and therefore should be considered public.

Nine four-car Bombardier trains capable of carrying between 3,200 and 5,000 passengers per hour in each direction will help control air pollution because many of those riders would otherwise be driving, proponents argued.

It will relieve the Citizens Area Transit's Strip route that is so overwhelmed the Regional Transportation Agency considered closing a lane on Las Vegas Boulevard to private vehicles and reserving it for buses.

Perhaps most important, proponents contended, is the 3.9-mile monorail will create a foundation for a more expansive public system that would serve more of the valley. If the system is built, matching funds will be supplied by the federal government.

The Regional Transportation Commission hopes to add onto the system and stretch the monorail through downtown to Cashman Field and the state office building on Washington Avenue.

"The RTC needs it to execute its plan for a rail system," said RTC representative Sam Tso.

The monorail developers plan to cover the operation and maintenance of the system and pay off bonds using fare revenues and funds generated from advertising.

Promethean Corp. representatives used advertising revenue figures from the airport to gauge the amount of money the monorail could potentially make from selling space.

If the airport can bring in $11 million a year, they said the monorail should be equally successful. The monorail holds an audience captive and operates 20 hours a day, therefore ads are more likely to be absorbed by passengers.

The monorail company's ridership projections have caused the most concern among critics. URS Greiner Woodward Clyde, a firm that advises on transportation systems, said 20 million passengers will ride the monorail a each year.

Ray Tillman of URS Greiner assured the panel that the Las Vegas system will differ from failing trains, toll roads and monorails across the country because of Las Vegas' 24-hour environment.

Public transportation in most metropolitan areas is used most heavily during commuter hours, but passenger flow is consistent in Las Vegas, Tillman said. He noted minimal changes in ridership numbers during different months, days and times when he studied the existing system.

"That is the underlying reason we are very comfortable that this is a financially feasible project," Tillman said.

Opponents said it doesn't make sense to compare the existing system, which is free, to a monorail that passengers will be charged $2.50 for a one-way trip and $5 for a round-trip.

Bill Schranko, director of operations for the cab company Yellow-Checker-Star Transportation, suggested the MGM Grand and Bally's charge passengers for a three-month trial period and compare the results to the projected ridership figures.

Whether tourists start taking cabs and walking rather than paying the monorail fare will be an indication of how successful the new segment will be, Schranko said.

"It's better to have a little egg on our face now than have David Letterman and Jay Leno making punch lines about us for the next 10 years," he said.

The Venetian's Friedman questioned why the monorail group never conducted a trial period or surveyed riders about being charged. Then he admitted he had camped out at the MGM and Bally's and did it himself.

Friedman said he questioned 2,000 monorail passengers and asked if they would ride the monorail if fees were imposed: 85 percent said 'no.'

Monorail company officials wrote in their business plan that they plan to give visitors the perception that the monorail is free by buying tickets in bulk and including them in convention packets or building the fee into the room rate.

As skeptics emphasized to Wickliffe, none of the MGM Grand properties nor Park Place -- which owns Bally's, Paris and the two Hilton casinos -- has signed paperwork guaranteeing they would pre-pay for a certain amount of tickets.

Representatives of the two casino corporations warned the state that if the project isn't built as planned, with completion by 2004, the opportunity may pass and Southern Nevada would regret it in the future.

"If not this team and the two largest gaming corporations, then who should do this project," said attorney Greg Jensen, of the Jones Vargas law firm. "If ultimately we're wrong, we'll take it down."