Monday, Sept. 13, 2004 | 10:53 a.m.
Recurring problems with the Las Vegas Monorail have shaken up plans for its expansion to downtown Las Vegas, while leaving the rail cars dead on their tracks for a second time in as many weeks.
The Strip-to-downtown expansion of the monorail, which planners had expected to begin building within a year, is on indefinite hold following the shutdown of the monorail on Wednesday, Ingrid Reisman, a spokeswoman for the Clark County Regional Transportation Commission, said Friday.
Also, Jim Gibson, the chairman and chief executive of Transit Systems Management, which oversees monorail operations, said the problems with the privately funded first phase of the monorail from the MGM Grand to the Sahara hotel could leave Bombardier Transportation out of the proposed publicly funded expansion plans.
Bombardier, the Canadian company that provided the rail cars and operates the monorail, was awarded a $223 million contract for the Sahara Avenue-to-Fremont Street extension of the monorail in October 2003. But that agreement expires at the end of the month, Gibson said Sunday. Unlike the first phase, the monorail expansion will include substantial government funding.
"The problems with the first phase have already delayed any expansion discussions," Gibson, who is also the mayor of Henderson, said. "Today we are in a position where Bombardier really does have to come through and does have to prove itself with the first phase. ... They are not guaranteed anything for the second phase."
The monorail has been closed since Wednesday after a two-pound disc came loose from a device used to secure the train's drive shaft. The system had reopened just the day before following a six-day closure that began when a 60-pound wheel assembly fell off a moving train Sept. 1.
Investigators from Bombardier and another group hired by Transit Systems are going over the monorail system, and Gibson said it was too early to say when that work could be completed and when the monorail could open to passengers again.
"We want to get these trains running again without these ridiculous anomalies," Gibson said.
Gibson said formal discussions and agreements for the expansion won't happen until the existing monorail has been open for 20 hours a day for six months, which will give officials the ridership data they believe will justify an expansion. Before the shutdown, the monorail was operating 16 hours a day.
When, and if, the expansion occurs, Gibson said he would be taking a close look at what company or companies would get those contracts.
Bombardier was part of the group that pitched the first phase of the monorail, so the decision to go ahead with the project included agreeing to use the Montreal company.
Bombardier has had its problems elsewhere, including legal disputes with Amtrak over the delivery of rail cars.
Earlier this year Amtrak and Bombardier settled dueling lawsuits surrounding the high-speed train serving the Northeast. In the lawsuits Amtrak said Bombardier was late delivering its rail cars, and Bombardier said the delays were caused by the numerous changes requested by Amtrak officials.
In another lawsuit Bombardier and Envirovac, which makes special rail-car bathrooms, were accused of ripping off the government by providing unsuitable rail cars. A federal appeals court ruled in favor of the companies on Aug. 27, agreeing with their argument that the lawsuit had no standing because Amtrak is not part of the federal government. The court did not rule on whether the private companies provided faulty rail cars.
Gibson said he was aware of Bombardier's recent legal entanglements, but said that, when considering whether or not to keep Bombardier in the future, he will likely look more at the company's "performance under our contract."
"We are looking with great care at Bombardier's performance," Gibson said.
Helene Gagnon, a spokeswoman for Bombardier, said the previous lawsuits had little bearing on the current contract with the Las Vegas Monorail. The Amtrak suit, she said, stemmed from a disagreement over whether infrastructure built by Amtrak was adequate for Bombardier's trains.
All existing infrastructure in Las Vegas was built by Bombardier, Gagnon said.
"In the case of Amtrak, they were responsible for the infrastructure that was out of date for high-speed (rail)," she said. "In the case of Las Vegas, the comparison can not be made."
The closure of the four-mile monorail system has also raised concerns on Wall Street.
On Friday credit rating agency Fitch Inc. placed the monorail on "Rating Watch Negative," meaning the system's failures put outstanding bonds in danger of being downgraded to noninvestment, or junk bond, status.
The potential downgrade would not affect the monorail's current operations but would hurt holders of the monorail's debt, as the bond value would likely drop, Scott Trommer, senior director of Fitch, said.
Also, if monorail executives wanted to borrow to pay for the expansion, a downgrade would likely increase the cost of future bonds, meaning the company would have to pay more to borrow money from investors.
Reisman said the potential downgrade alone is not likely to affect whether or not the RTC would proceed with the project, but she said it is "not surprising" the credit agency would react to the problems.
When the monorail closed, the $650 million system was meeting about 55 percent of its ridership goals, bringing in about 30,000 riders a day. Both Fitch and monorail leaders had said they anticipated ridership numbers to increase over time.
Todd Walker, a spokesman for the monorail, said a prolonged closure was one of many scenarios the company prepared for when securing financing.
"The project was financed four years ago with adequate money to ensure we could get through a number of different scenarios," he said. "Opening the system should never be at the safety of the public. That's what our focus is on. The financial side will take care of itself."
Monorail bonds, rated at BBB- when they were issued, the lowest for investment-grade bonds, retained the rating despite the warning, Trommer said. To push the rating into the noninvestment category, problems would have to continue past January, when interest used to cover the debt would run out, according to Fitch.
Krolicki expressed confidence that the company's bonds would avoid slipping into junk status and said that he had "full faith" in the long-term viability of the Las Vegas Monorail.
"They (monorail officials) structured this deal to weather the unanticipated, which is what we've seen in the last few weeks," Krolicki said. "A whole lot more bad would need to happen to affect the bond rating."
Clark County Commissioner Bruce Woodbury, who is also chairman of the RTC, also expressed an optimistic long-term view of the monorail.
"I am, like everybody, somewhat disappointed. But I have a long-term perspective for this project. ... And I think we'll not only have a second phase, but a third phase and fourth phase as well."
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