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Las Vegas Monorail could seek partnership with Chinese
Las Vegas Sun ^ | Wednesday, Feb. 17, 2010 | Steve Kanigher

Posted on 02/18/2010 9:08:51 AM PST by Willie Green

Officials seek to restructure massive debt under Chapter 11 bankruptcy

Las Vegas Monorail President and CEO Curtis Myles spent several hours on the witness stand in U.S. Bankruptcy Court on Wednesday defending the transit operator’s decision to seek reorganization of its massive debt.

But in a revealing interview after the day-long hearing before U.S. Bankruptcy Judge Bruce Markell, Myles discussed his strategy going forward should the judge grant the monorail’s request to proceed under Chapter 11 of the bankruptcy code.

Markell took under advisement arguments from the monorail, its major creditor and a bank that disputes the way the transit operator has transacted its financial affairs since last fall. Markell said he expects to issue his rulings as early as next week.

After the hearing, Myles brushed aside rumors that the monorail would attempt to sell its assets to the Regional Transportation Commission, where he served as assistant general manager before taking his current position in 2005.

Instead, he disclosed a multi-prong strategy that includes applying for Federal Transit Administration funds and pursuing a partnership with Chinese investors and government agencies, all for the purpose of expanding the monorail to McCarran International Airport.

To apply for the federal funds, though, Myles said the monorail likely would have to be sponsored by Clark County or another government agency in Nevada.

The China connection began with a five-day trip he took to Beijing in June with representatives of the proposed DesertXpress high-speed train project that would link Las Vegas with Southern California.

Myles said the Chinese officials he met included senior executives with a state-owned bank and a state-owned railway company.

“There are still doors open with these individuals,” Myles said. “My understanding is that they are performing their due diligence. The idea is that there would be a seamless system connecting the existing monorail with the airport.

“The Chinese are looking to franchise their rail system expertise around the world.”

At least this is how Myles said he hopes things turn out. But that’s not a sure thing, given that the major creditor, Ambac Assurance Corp. of Wisconsin, has argued that the monorail doesn’t even qualify as a Chapter 11 debtor.

Ambac insured more than $450 million of the $649 million in bonds that were issued by the state in 2000 to build the transit system.

Ambac attorneys told Markell that the only appropriate bankruptcy for the monorail would be under Chapter 9. For that to happen, the monorail would have to be treated as a municipality or other local government agency.

Ambac attorney William Smith of Chicago told Markell that when the Nevada Department of Business and Industry issued the industrial development bonds in 2000, the monorail had to be declared “an instrumentality of the state” to make the bonds tax-exempt. The tax-exemption allowed the monorail to borrow at lower interest rates than available under conventional financing.

The reason Nevada was forced to declare the monorail an instrumentality of the state is that in 2000, Nevada was allowed by the Internal Revenue Service to issue only $200 million in tax-exempt private activity bonds, Smith said.

It was because the monorail bonds exceeded that cap that the transit operator was presented to the IRS as an instrumentality of the state, Smith said.

“I think the judge understood that the standards used to determine an instrumentality of the state for tax purposes is also what is used by other courts” to determine eligibility under Chapter 9, Smith told the Sun.

Ambac lawyers sought to bolster their argument by pointing to the control the governor of Nevada has over the monorail’s budget and approval of members of its board.

Myles countered that the monorail acts as a private nonprofit corporation — and therefore is an eligible Chapter 11 debtor — because it must maintain a business license and a franchise agreement with Clark County and has no taxing authority. Monorail attorneys also said their client is not even eligible to file under Chapter 9.

Legal experts have told the Sun that creditors such as Ambac would have more control over the potential sale of assets under Chapter 9 than under Chapter

11.

Myles also defended his $331,000 salary and the $5,000-a-month stipends paid to the monorail’s five board members. His salary in particular, he said, is about equal to what the heads of public transit systems make when benefits packages are considered.

Markell also heard arguments between the monorail and Wells Fargo Bank, which had exclusively managed the transit operator’s accounts until last fall. The bank had began rejecting requests for certain reimbursements — including the $6,700 Myles spent to go to China — arguing that they did not fall under necessary operation and maintenance expenses.

But the monorail, which had begun exploring a restructuring of its debt, opened an account with Bank of America to cover expenses it said Wells Fargo refused to pay.

Wells Fargo, which has been involved since the bonds were issued, stepped up its role as a trustee of the monorail’s funds in 2007 after the monorail defaulted on the bonds.

Markell is being asked to decide whether the bank’s trustee role was violated by the monorail and whether any sanctions are appropriate.

The monorail filed for bankruptcy last month, revealing at the time that it owed $500 million to $1 billion.

Although monorail officials say it makes enough money to pay for ongoing maintenance and operations, it does not earn enough from ridership fares and advertising to pay off the bonds.

The four-mile transit route that runs east of the Las Vegas Strip has carried more than 40 million passengers, but its ridership has fallen far short of initial projections.

Miles told Markell that in recent years, the percentage of tourists who use the monorail has dropped from 20 percent to 16 percent because the transit operator has been spending less money on marketing and because fewer people are flying into Las Vegas.

Traditionally, 80 percent of the monorail’s riders are individuals who fly into town.

Although the Nevada Department of Business and Industry issued the tax-exempt industrial development bonds, it has maintained that taxpayers are in no way liable for bond debt that the monorail is unable to repay.

Under Chapter 11 reorganization, it is possible that Ambac could lose a substantial amount of money. The insurer has reported that it could lose as much as $1.1 billion if the monorail does not retire any more of its debt


TOPICS: Business/Economy; US: Nevada
KEYWORDS: china; trains; transportation; vegas

1 posted on 02/18/2010 9:08:51 AM PST by Willie Green
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To: Willie Green

Monorail!


2 posted on 02/18/2010 9:11:41 AM PST by tumblindice
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To: Willie Green

—here’s another link to our soon-to-be taxpayer ripoff—

http://www.lasvegassun.com/news/2010/feb/17/monorails-generous-spending-examined/


3 posted on 02/18/2010 9:12:16 AM PST by rellimpank (--don't believe anything the MSM tells you about firearms or explosives--NRA Benefactor)
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To: tumblindice
Soooo, that's the reason he's seeking a spritual meeting with the Dalai Lama today? He hates Las Vegas!!!


4 posted on 02/18/2010 9:14:41 AM PST by mentor2k
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To: Willie Green
It should have gone to the airport from the very start but the taxi and limousine interests were able to prevent it. Just as the DC Metro should have gone to Dulles from the start.
5 posted on 02/18/2010 9:17:40 AM PST by iowamark
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To: iowamark
---but the taxi and limousine interests were able to prevent it--

--got some references for this?

6 posted on 02/18/2010 9:20:33 AM PST by rellimpank (--don't believe anything the MSM tells you about firearms or explosives--NRA Benefactor)
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To: iowamark

I’ve been to Vegas several times. The monorail is useless considering its limited service area and your point about not going to the airport.


7 posted on 02/18/2010 9:22:37 AM PST by TSgt (I long for Norman Rockwell's America.)
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To: rellimpank

http://en.wikipedia.org/wiki/Las_Vegas_Monorail#cite_note-16
“”Providing monorail service to the airport has been an unpopular idea with limousine and taxi operators in the city, as trips to and from the airport form a major portion of their business.[17]””


8 posted on 02/18/2010 9:26:55 AM PST by iowamark
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To: Willie Green

This was a liberal’s wet dream boondoggle from the get go.

It is poorly designed, inconvenient and too expensive to ride.

The traffic on the strip is awful, but there are alternate routes now, but tourists want that scenic drive, it’s pretty cool.

And, yes the limo and taxi lobbies are very opposed to this going to the airport.


9 posted on 02/18/2010 9:31:37 AM PST by Jvette
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To: Jvette

This is the same as happend in Buffalo, NY

There was federal money available to build a rail system, so they did.

They CLOSED THE MAIN STREET in buffalo to build it, and drove all the buisnesses away- so there is no reason to use the rail


10 posted on 02/18/2010 9:35:49 AM PST by Mr. K (This administration IS WEARING OUT MY CAPSLOCK KEY!)
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To: Willie Green

Yes, by all means let’s do more trains that lose money, would go bankrupt if the taxpayer’s wallet is not raided, and where we pay hundreds of thousands of dollars to the people running these financial fiascos... Go trains!


11 posted on 02/18/2010 9:36:36 AM PST by PugetSoundSoldier (Indignation over the Sting of Truth is the defense of the indefensible)
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To: Jvette
This was a liberal’s wet dream boondoggle from the get go.

The Las Vegas Monorail was honorarily named the Robert N. Broadbent Las Vegas Monorail for Robert N. Broadbent, whom Las Vegas officials credit with gaining the support from the public and officials needed to bring the monorail to fruition. Broadbent, a former Boulder City mayor, Clark County commissioner, assistant secretary of the interior, and McCarran International Airport director, died in 2003, a few months before the system's scheduled opening. The Las Vegas Monorail Company is the company's official corporate name.

ROBERT BROADBENT was a Republican.

12 posted on 02/18/2010 9:45:16 AM PST by Willie Green
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To: iowamark
--none the less, the co comms did this:

On December 7, 2006, Clark County commissioners granted permission for the proposed extension to McCarran Airport. Funding had not yet been identified.[21] As of 2009[update] the Las Vegas Monorail Company was still in the planning phases of the proposed extension to McCarran International Airport. -

-the thing has been a failure from the beginning since it really doesn't get anyone from where they are to where they want to go--I suspect the plan was to eventually have Harry Reid find tax money for the "airport extension" and , yes, there were and are plenty of RINO's on the gravy train--that's how Clark County works--but it's now as broke as any other of the overspending governments--

13 posted on 02/18/2010 10:04:14 AM PST by rellimpank (--don't believe anything the MSM tells you about firearms or explosives--NRA Benefactor)
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To: Willie Green

What’s your point? McCain favors amnesty, he’s a Republican.

The monorail was meant to lessen traffic on the strip, yet it is inconvenient and costly due to its poor design. It was not favored by conservatives who knew before it was even started that it would

a)take longer than thought to build
b)cost more than thought
c)never turn a profit

Broadbent did a lot of good things in Nevada, but no one is perfect and this sucked from day one.


14 posted on 02/18/2010 10:18:24 AM PST by Jvette
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To: Jvette
The monorail was meant to lessen traffic on the strip

No, it was built by the 6~7 major casinos on the strip to easily shuttle all tourists amongst themselves and reduce the number of "escapees" to other competing venues.

15 posted on 02/18/2010 12:13:15 PM PST by Willie Green
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To: Willie Green

He’s getting $331,000 to run the LV Monorail? It’s one run of track no more than 5 miles long. It’s like $50k per train. No wonder they charge $5/ride and have no customers.


16 posted on 02/18/2010 12:17:37 PM PST by MediaMole
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To: Willie Green

http://www.lasvegascitylife.com/articles/2005/09/15/cover_story/cover.txt


17 posted on 02/20/2010 11:29:30 AM PST by Jvette
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