Monorail board OKs budget as system nears restart

Stephen Curran

Thursday, Dec. 16, 2004 | 9:23 a.m.

Executives of the Las Vegas Monorail told the company's board of directors Wednesday morning they had no illusions for what the $650 million system will face when it re-opens.

The six-member board on Wednesday unanimously approved the budget the executives put forward for next year and reviewed incremental improvement plans along the four-mile elevated track. The budget will now be forwarded to the Nevada Department of Business & Industry.

Since the privately financed monorail's closure Sept. 8, the company has suffered more than $8 million in lost farebox revenues, a sum covered by more than $12 million in general funds that executives said was built into the budget for just such a loss, Ross Johnson, the monorail company's chief financial officer, said.

Two Wall Street financial analysts, Moody's Investor Services and Fitch Ratings, put the monorail company's $451 million in outstanding bonds on a watchlist, meaning they were in danger of being downgraded to junk status.

The monorail fits into a vaguely worded nonprofit category that groups it with 5,000 other organizations that benefit from legal language that grant it tax-exempt status as a "social welfare organization."

As such an organization, called a 501c4 for the section of the tax code it falls under, the monorail is free to operate as a for-profit business with unlimited profit potential, tax attorneys have said. The primary difference between that category and the more common 501c3 is that investments in the monorail company are not tax deductible.

A state Senate bill signed in March 2003 also requires the company to submit a copy of its annual audited financial statement to the Legislative Commission.

The Clark County Building Division, which oversees the monorail's safety, gave engineers the go-ahead Tuesday to begin "recommissioning" the system, which links the MGM Grand to the Sahara hotel. The process, during which time the nine trains will have to run trouble-free for more than 800 miles, is expected to take between seven days and two weeks, Ron Lynn, the county Building Official, said.

The system, which opened for public use July 15, has been shuttered after a 6-inch-wide washer weighing 2 pounds fell from a moving train Sept. 8, less than a week after a 60-pound wheel assembly fell into a parking lot and prompted the system's first closure.

The system carried about 1.3 million paying passengers for 48 days and made almost $4 million before the three-month closure, Todd Walker, a spokesman for the monorail, said Wednesday.

And now, with monorail officials "optimistic" the system will re-open in time for the record crowds expected in Las Vegas for New Year's Eve, the company is shooting for 29,000 people a day to ride the trains.

That figure mirrors early ridership numbers, which accounted for about 55 percent of initial projections, and should eventually rise to roughly 42,000 a day, Johnson said.

At that rate, the company could expect to see roughly $36.8 million in farebox revenue by the end of 2005, he said.

"It assumes we're able to grow that (29,000 a day) to 42,000 a day," Johnson told the board at the Sawyer State Office Building. "...There are challenges ahead but we can meet those challenges."

Jim Gibson, the president and chief executive officer of Transit Systems Management, the company that runs the monorail, outlined to the board a set of seven improvements riders will see over the next year.

Included were more user friendly ticket machines and signs guiding riders to monorail stations, which some riders had complained were difficult to find in crowded Strip casinos, Gibson said.

"We have worked hard to interface with the (Las Vegas Convention and Visitors) Authority," Gibson, who is also the mayor of Henderson, said. "They are upgrading their information."

Less certain for the monorail is the future of a publicly financed extension that would continue the track to downtown Las Vegas. The $450 million extension was entertained as part of a two-pronged transit plan that also includes a possible light-rail system that would travel from Henderson to North Las Vegas, running along the west side of the Strip.

Planners with the Regional Transportation Commission had initially hoped to break ground on the Strip-to-downtown phase of the monorail by late 2005, a timetable that has since been scraped.

The RTC's decision is at least six months away, as the county agency will need to see six months' worth of ridership data before it determines if the expansion is financially feasible, Ingrid Reisman, a spokeswoman for the RTC, said.

John Haycock, the chairman of the monorail board, called the extension "the least of my concerns" and said he and other board members are focused on re-opening the current stretch.

"The position of the board relative to the extension is very conservative," he said. "Nobody wants to be premature. When we go forward, we will be very confident."