State off the hook if monorail bonds not paid

Wednesday, Jan. 21, 2004 | 9:55 a.m.

CARSON CITY -- Officials of the Strip monorail system said Tuesday that the state would not be liable to pick up the tab if the system fails to pay off its $650 million in revenue bonds.

The monorail is now undergoing tests and is scheduled to open March 1, Cam Walker, president of Transit Systems Management, said at a meeting of the Legislative Committee on Transportation.

Sen. Joe Neal, D-North Las Vegas, the chairman of the committee, said he knew the project was worthwhile but questioned the exposure of the state if the system is unable to pay off its bondholders.

Walker and attorney Nick Niarchos both told the committee the state could not be sued if the revenue from the fares is not enough to meet the debt payments.

Niarchos said the bondholders "cannot sue the state for any shortfall," even though the Legislature authorized the bonds.

Neal also asked Walker about an axle that fell from the monorail during testing. Walker said it was an "isolated incident."

Walker told the committee that this Saturday the system will test run all nine trains at once. The average wait between trains should be one minute as they make the loop from the MGM Grand to the Sahara hotel, he said.

Security is a concern, Walker said. Firefighters were conducting tests Tuesday on the monorail, and the FBI and SWAT teams have run tests on how to proceed in the event of a hostage-taking incident, he said. Homeland Security Department officials have examined each station.

Walker predicted 14 million to 15 million rides during the 10 months of operation this year and 19.5 million in subsequent full years. He estimated $32 million in fares and $6.7 million in advertising revenue in subsequent years. He said net revenue is projected at $15.4 million the first year.

Sen. Mike McGinness, R-Fallon, asked for a price comparison of a cab ride to the monorail from the MGM to the Sahara.

Walker said the cab ride would cost an estimated $17 without a tip. The one-way fare on the monorail is $3. But the rider, if he gets off halfway down the Strip, must buy another ticket to travel to the next station. The average tourist visits six hotels a day, he said.

Walker said the hotels are encouraging daily passes, which will start at $10 during the three-month start-up period and then rise to $15. A 10-ride pass would be $20 in the first three months and then go to $25. A three-day pass will initially be $25 and then rise to $40 after the first three months, according to Walker.

Asked about extending the monorail to downtown Las Vegas, Walker said the monorail system is working with the Regional Transportation Commission and has completed an environmental impact statement.

He said the plan is to combine government grants with private financing. So it is important, Walker said, to show "we have our house in order" in the Strip operation.

So far, the construction is $20 million under budget. In addition, the monorail has a $20 million contingency fund that drew $3 million in interest. So that's a total $43 million, Walker said.

"It doesn't mean we're out of the woods," he said. "We must be successful in operation."

Transit Systems Management is the company hired to run the project.