Guinn says state not liable for project debt

Thursday, May 25, 2000 | 11:23 a.m.

CARSON CITY -- Gov. Kenny Guinn said Wednesday the state will not have any legal or moral obligation to repay investors if a proposed $600 million monorail connecting hotels in Las Vegas goes belly up.

Guinn said he wanted to make it clear there is no state guarantee and to make sure that somebody does not lose their life savings by investing in the project pushed by the MGM Grand-Bally's Monorail LLC.

The state is waiting for a report from the Public Resource Advisory Group on the financial feasibility of the monorail and whether there will be enough riders to support the repayment of the bonds.

Supporters of the project want the state to issue tax-exempt governmental purpose bonds to cut down their financing costs.

The 3.8-mile stretch would extend from Bally's to the Sahara hotel-casino with stops at the Flamingo Hilton, Imperial Palace, Harrah's, the convention center and the Las Vegas Hilton. There is already a line linking Bally's with the MGM Grand.

Charles Horsey, administrator of the state Housing Division, is monitoring the feasibility report, and he said there should be restrictions to make sure the bonds are "not sold to widows and orphans," because of its risky nature.

There have been conflicting private studies whether this transportation system would attract enough riders to pay for itself.

A survey by URS Greiner Woodward Clyde suggested the system would carry 52,500 passengers a day at $2.50 per person, making it financially viable. But consultants Jon Twichell and Wendell Cox claim the monorail will fail, leaving Nevada taxpayers to repay the bond holders.

Guinn emphasized several times during a meeting of the state Board of Finance that the state would not be liable for any debt, even though the bonds were issued through the state. The finance board would have to ratify any decision for the state to sell the bonds.

"We want to make it very clear the state has no obligation ... or a moral obligation," Guinn said.

State Treasurer Brian Krolicki said the proponents and opponents have heavily lobbied members of the board. But he said there would be an independent analysis to determine if they are "A bonds or junk bonds."

Krolicki said there is nothing to study now but once the report is issued by the Public Resources Advisory Group, his office will need two to four weeks to examine it before it goes to the finance board.

After the report is issued, the state Department of Business and Industry will hold a public hearing to take testimony on the pros and cons of the project. The department would then make a finding whether the state should go forward with the bonds. And that decision must be ratified by the finance board composed of Guinn, Krolicki, state Controller Kathy Augustine and public members Mike Kern of Las Vegas and Claire Hess of Reno.