Las Vegas monorail crashes as Sisolak says no to plan
Governor Steve Sisolak will not sign a certificate that would allow Las Vegas Monorail Co. to secure up to $ 200 million in tax-exempt bonds, a move that could derail the transit system project build two new stations on the Strip.
The Monorail Co. needs money to repay a recent loan of around $ 13 million and build new stops at Mandalay Bay and the next MSG Sphere at The Venetian. Since last year, lobbyists for the private, not-for-profit transit system have been pushing for former governor Brian Sandoval and then Sisolak to sign a certificate approving the issuance of the 30-year bonds.
“After careful consideration, the governor refused to sign the certificate,” Sisolak communications director Ryan McInerney wrote in an email to the Review-Journal on Friday night.
McInerney did not provide details on when or why the decision was made. Monorail Co. officials could not be reached immediately for comment on Friday, but Chairman and CEO Curtis Myles said in an interview Thursday that there were several ways the company could go about it.
âThe way we pursue it with the governorâ¦ we think that’s the best way,â he said. âNot the only way, but the best. “
The debt would have been the largest incurred by the Monorail Co. since $ 650 million of state guaranteed bonds were issued in its name in 2000 to expand its route.
The Monorail Co. was seeking funding through an IRS ruling that allows nonprofits to issue tax-exempt bonds on behalf of the government, provided certain criteria are met. A key requirement was that Sisolak sign a certificate that would cap the amount of money Monorail Co. could borrow, re-approve the charity’s charter, and agree that the state would own the monorail system once it was in debt. reimbursed.
Financing of two new stopovers
The financially struggling Monorail Co. has spent the past two years trying to secure funding for a mile-long extension of its track to Mandalay Bay and, more recently, to add a stop near of the MSG sphere. The two new stops were touted as key to improving ridership and ticket sales.
But the task has proved difficult for Monorail Co., which filed for bankruptcy in 2010 after ticket sales fell well below expectations and the company failed to repay $ 650 million in guaranteed bonds. by the state.
Although ridership revenue has declined every year since 2016, Myles said Thursday that the nonprofit and an anonymous financier were confident that the planned stops at Mandalay Bay and MSG Sphere would generate enough new traffic to be more than profitable.
“We are only going to do this if we and our lender have a high enough level of confidence that we will be able to repay it,” he said, adding that the monorail is currently operating at a rate of 11-14. %. margin.
Under the IRS ruling, the state would not have been liable for the debt if the Monorail Co. had defaulted on the new bonds, said Stacey Lewis, public finance lawyer at the Pacifica Law Group in Seattle. .
âThere is no obligation imposed on taxpayers. It’s just a mechanism to meet tax-exempt funding requirements, âshe said.
Decrease in ridership revenues
Before Sisolak decided not to sign the certificate, his staff received a plethora of documents from the Monorail Co. to examine the financial health of the association.
The records, which were obtained by the Review-Journal following a request for public records, offer insight into the generally covert operations of the nonprofit organization.
A ridership study released in June shows that monorail ridership revenue has declined every year since 2016. The study blamed the decline on renovation projects that closed hotel rooms on the Strip and a decline tourism after the mass shooting of October 1, 2017.
Ticket sales over the past two years have grossed around $ 41.5 million. That’s $ 2.1 million less than Monorail Co.’s budget and nearly $ 8.7 million less than forecast in a ridership study published in April 2016. The study does not specify the operating costs of the monorail system.
However, the study also predicts that annual ridership on the existing system will once again increase from this year and increase by more than 14% by 2025. The projections bode well for the Monorail Co. , but they are offset by the forecasts made in the 2016 study.
“It’s more specific now,” Myles said of the new study.
What happens next?
It is not known what will be the next step of Monorail Co.
Myles said the association is no longer asking the Clark County Commission to guarantee up to $ 135 million in hotel room tax revenue over 30 years if the monorail needed it. Two years ago, he told commissioners that Monorail Co. couldn’t get low-interest bonds for its expansion without this commitment. On Thursday, it no longer appeared to be an insurmountable obstacle.
âIt didn’t seem like the right time for it, so we moved on,â Myles said. âWe have a lender who believes in the project, they analyzed it in nine ways as of Sunday. They believe in the project and they clearly understand the risk they are taking and they are ready to move things forward gradually, despite what happened there.
The Monorail Co. has a new loan of about $ 13 million that it got last month to pay off maturing bonds and interest in the same amount. Loan details are being kept under wraps due to a nondisclosure agreement, Myles said.
The emails show that the association hoped Sisolak would sign the certificate before the majority of the debt fell due on July 15, so the new bonds could be used to pay off the old ones.
Less than two weeks before the deadline, monorail lobbyist Kris Ballard warned Sisolak’s general counsel Brin Gibson that the state could be forced to take over the monorail system if the governor did not act not quickly. The Monorail Co. didn’t have the money to pay off its existing debts, and its lenders might not want the monorail track and equipment if it went bankrupt again.
“I give this outcome an even playing field since there is no way to sell the assets for use elsewhere,” Ballard wrote. “So (the governor) might end up causing what he might be trying to avoid.”
The Review-Journal is owned by the family of the President and CEO of Las Vegas Sands Corp. Sheldon Adelson. The Sphere is a project of Madison Square Garden and Las Vegas Sands Corp.