Las Vegas Train 10 Times Solyndra Taxpayer Loss? (Report Announcement)

The Reason Foundation has released our “Xpress West” (formerly “DesertXpress”) analysis. This high speed rail train would run from Victorville (90 miles from downtown Los Angeles) to Las Vegas. Promoters predict high ridership and profits. They are seeking a subsidized federal loan of more than $5.5 billion, which is within the discretionary authority of the US Department of Transportation to fund.

Our analysis concludes the following:

1. There is serious question whether there is a market for Las Vegas travel that would require driving one-third of the way and transferring to the train. If there is no such market, as seems likely from the international experience, ridership could be as low as 97 percent below projections. The reality can be known only after the line is running.

The balance of the report is based upon the assumption that there is a market for driving to Victorville and boarding a train to Las Vegas.

2. The ridership and revenue projections (by URS Corporation) are based upon data that is more than 7 years old and predates the Great Financial Crisis. There have been significant downward demand trends in the travel market and Las Vegas tourist market since that time, especially in the share of the market from the Los Angeles Basin. It is inappropriate to use such old data in projecting system performance (Certainly no private company would rely on such old data in a due diligence analysis).

3. Even after adjusting the obsolete data (which our report does), the ridership projections are implausibly high — at four times the Amtrak Acela ridership between Washington, Baltimore, Philadelphia and New York.

4. Over 24 years (the forecast period in the project document), we project that expenditures will exceed revenues by between $4 billion and $10 billion. This would mean that there would be insufficient revenues to pay the federal loan. This could result in a taxpayer loss approximately 10 times that of the Solyndra federal loan guarantee.

5. The free use by the private Xpress West project of the Interstate 15 median could preclude cost effective expansion of this roadway. Even assuming the implausible Xpress West assumptions on diversion of drivers to the train, the overwhelming majority of growth in the corridor would be on the highway, not on the train. This includes not only the heavy truck traffic, but also car traffic.

Related: The Las Vegas Monorail

Wendell Cox was also author of  “Analysis of the Proposed Las Vegas LLC Monorail,” which indicated that ridership and revenue projections were extremely optimistic and that the project was likely to fail  financially. Subsequently the project filed bankruptcy and defaulted on bonds. The actual ridership on the Monorail was within the range predicted in “Analysis of the proposed Las Vegas LLC Monorail,” and far below the level forecast by project consultant URS Greiner Woodward Clyde.

Also see this letter from other consultants reviewing the project (Thomas A. Rubin, Jon Twichell Associates, Professor Bernard Malamud  and Wendell Cox).

The Las Vegas Monorail case is described in the Reason Foundation report.

 

Comments (7)

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  1. Another project that cannot be justified using common business sense and that would only be proposed for reasons political, corrupt, or both.

  2. seyyed says:

    The funny thing about this is that this targets an audience coming in from Los Angeles and yet they have to drive 90 miles to get there. If I were driving from LA I would drive the extra hour to get to LV in my car so I have it with me, and I’m sure that’s what a lot of people are going to decide to do.

  3. Otis says:

    It’s hard to say when projects like these are going to succeed. This one, though, may end up costing the tax payers and perhaps local governments way more than planners realize.

  4. Nichole says:

    The benefits of driving a third of the way there and then paying to take a train is not worth the tax payers money.

  5. Kyle says:

    Pity they don’t do projections on profit distribution. I bet a politician or two would be lining their pockets.

  6. Robert says:

    Aside from Disney, I can’t recall many monorail plans that have worked.

    I feel that the inconvenience of driving 90 miles (especially in the area surrounding LA) outweighs the convenience of using the proposed rail system, especially when round trip flights from LA to LV can be booked for around $150.

  7. Chuck says:

    How has the Amtrak done?

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