Monorail Capital Construction Costs

7/28/2019 Monorail Capital Construction Costs

1/3

Monorail Capital Construction Costs

The Truth About Monorail Capital Construction Costs (Part 1):

"NOT $150 Million a Mile"

is is the first part of a multi-part article about revealing the truth about Monorail capital construction costs.

Myth:The first phase of the Las Vegas Monorail cost $150 million a mile to build.

Fact: The first phase of the Las Vegas Monorail cost $87 million a mile to build.

Fact: It 'should have cost' about $50 million a mile to build (about the same as Light Rail inAustin).

ansit and City officials sometimes have said that the first phase of the Las Vegas Monorail cost $150 million/mconstruct. It is true that the total cost was $650 million for about 3.9 miles of fixed-beam guideway, plushicles and control and automation systems. This does work out to about $150 million / mile.

wever, only $342.3 million of that amount is for actual capital construction costs. $342.3M / 3.9 miles = $87le. The 'Fitch Rating Report for First-Tier Series 2000 Revenue Current Interest Bonds and Capital Appreciatio

nds' report says the following:

"Design-Build-Equip Contract: This contract is between LVMC, Bombardier, and Granite. Under theapproximately $342.3 million fixed-price contract, the contractor has to construct and install themonorail system. Approximately $141.6 million will be used to construct the fixed facilities (to be

completed by Granite), $189.7 million for the operating system (to be completed by Bombardier), andapproximately $11.0 million as a utility allowance. Under the contract, there is a guaranteed completiondate and performance guarantees from the parent companies of Bombardier and Granite. Price increasesunder certain circumstances will be paid for solely from a pre-established contingency amount of $7.4million plus any amount from LVMC resulting from cost savings"

e article, 'A Unique Rapid Transit Project for a Unique City' describes how the Las Vegas Monorail was finance

x-free project revenue bonds. The following sheds insight into where the extra $650M - $342.3M = $307.7M went. Items such as bond interest, insurance premiums, extra contingencies and reserves 'added significantly' te cost of financing, but allowed the bonds to achieve a triple "A" rating:

ttp://www.austinmonorail.org/monorail_costs.htm (1 of 3)6/28/2006 3:37:53 AM
http://www.innovativefinance.org/projects/rail_transit/pdfs/rsta0908.pdfhttp://www.innovativefinance.org/projects/rail_transit/pdfs/rsta0908.pdfhttp://www.monorails.org/tMspages/LasVeg5.htmlhttp://www.monorails.org/tMspages/LasVeg5.htmlhttp://www.innovativefinance.org/projects/rail_transit/pdfs/rsta0908.pdfhttp://www.innovativefinance.org/projects/rail_transit/pdfs/rsta0908.pdf


2/3


"..the project was fully funded, without using tax money of any kind, through the issuance (by SalomonSmith Barney) and subsequent sale of over $600 million in non-recourse, project revenue bonds. Thebonds provided the capital needed to not only build the system, but also to pay for all finance costs; andno added funds are needed to pay for ongoing operations and maintenance. The cost of financingincludes large protections for the bondholders designed to insure the project's success, including:

--Over $100 million in interest during project construction and beyond;--Insurance premiums for everything from a County-required "guideway tear-down" guarantee toprotection from Force Majeure Acts; Contingencies for construction unknowns (e.g., unidentified

underground utilities and differing site conditions);--Property taxes during construction, management costs for independent oversight engineering andconstruction services; and,--$75 million in reserves to protect the project from any other unforeseen events (above and beyond theprotections provided by the fixed price contract and insurance).

This approach added significant cost to the financing, but was designed to take risk out of the bondissuance by enabling the bulk of the debt to be insured, and thereby achieved a triple "A" rating, makingthe bonds an attractive investment."

s worth noting that Cap Metro's proposed light rail system for November 2000 came in at approximately $51 M

le with 'relatively low contingencies'.

wever, as we have said, monorail costs vary greatly from city to city. But even the $87 M/mile figure for thetual capital construction cost of the Las Vegas Monorail can be considered high compared to the cost of Monoa competitive bid basis. Did it have to cost that much?

e answer seems to be: 'No'. According to this article, Nevada Journal: The Moolah Rail, Andrew S. Jakes, 'the

tionally recognized transit consultant brought in by MGM [hotel] to advise on the developing [monorai] projeys:

"We estimate that exactly the same system could be built for about $190 million," he says, "and I still

stand behind that number. Everything above $200 million is buried in various fees and interest andinsurance and the financial deal, which, percentage-wise, is quite substantial."

te that $190 million / 3.9 miles = $48.7 million/mile, about the same as Capital Metro proposed in Novembe00 for their light rail system ($50.7 million/mile).

e article also goes on:

"Ron Watson, of Transco Holdings, a Hawaii company that reports several monorail contracts in mainlandChina and private financial backing from Merrill Lynch, had offered to build the system at a cost ofbetween $25 and $30 million a mile."

"It's the biggest joke I have ever seen," Watson told Packer. "We get a kick out of this. When you have theonly deal in town and nobody wants to pursue any other dealsomething stinks in the desert," saidWatson.

kes continues:

"The question, he says, is why the system is being built "for $200 million per mile when it wasdemonstrated in '96 that it only cost $25 million per mile."

"We know how much this costs," says Jakes, noting that the existing monorail [the existing 1-mile LasVegas Monorail built in 1995 to connect MGM and Balley's] paid "$1,400 per linear foot of dual guideway

http://nj.npri.org/nj00/03/moolahrail.htmhttp://nj.npri.org/nj00/03/moolahrail.htm


3/3


designed for 65 miles per hour." However, "recently [the consortium's] numbers are $6-8 thousand perlinear foot, for the same type of guideway."

The consultant notes with satisfaction that his 1.5-mile project in Indianapolis will cost only $30 millionin total. "And that includes the stations," he boasts.

In Las Vegas the price has been quadrupled, he says, and no technical construction reason required it."

u Decide: Are your city and transit officials deliberately misleading you about the capital construction costs

norail by citing $150 million / mile? Have they researched this issue in as much depth as we have? If so, whyven't they given you all the facts?

r Further Study:

a. Fitch Rating Report for First-Tier Series 2000 Revenue Current Interest Bonds and Capital Appreciation B

report

b. 'A Unique Rapid Transit Project for a Unique City'

c. Nevada Journal: The Moolah Raild. Nevada Journal: Switching Tracks- Publicaly Funded Light Rail will Fail in Las Vegas-- But There are

Alternativese. Transportation Research Board Report: 'Financing Capital Investment: A Primer for the Transit

Practitioner' (sponsored by the Federal Transit Administration).

Next: Part 2.

Austin Monorail Project Home

Copyright 2003 Austin Monorail Project

For problems or questions regarding this web contact [email protected] updated: 10/24/03.

http://www.innovativefinance.org/projects/rail_transit/pdfs/rsta0908.pdfhttp://www.innovativefinance.org/projects/rail_transit/pdfs/rsta0908.pdfhttp://www.monorails.org/tMspages/LasVeg5.htmlhttp://nj.npri.org/nj00/03/moolahrail.htmhttp://nj.npri.org/nj99/03/cover_story.htmhttp://nj.npri.org/nj99/03/cover_story.htmhttp://gulliver.trb.org/publications/tcrp/tcrp_rpt_89a.pdfhttp://gulliver.trb.org/publications/tcrp/tcrp_rpt_89a.pdfhttp://www.austinmonorail.org/index.htmmailto:[email protected]:[email protected]://www.austinmonorail.org/index.htmhttp://gulliver.trb.org/publications/tcrp/tcrp_rpt_89a.pdfhttp://gulliver.trb.org/publications/tcrp/tcrp_rpt_89a.pdfhttp://nj.npri.org/nj99/03/cover_story.htmhttp://nj.npri.org/nj99/03/cover_story.htmhttp://nj.npri.org/nj00/03/moolahrail.htmhttp://www.monorails.org/tMspages/LasVeg5.htmlhttp://www.innovativefinance.org/projects/rail_transit/pdfs/rsta0908.pdfhttp://www.innovativefinance.org/projects/rail_transit/pdfs/rsta0908.pdf

Monorail Capital Construction Costs

Documents

Transcript of Monorail Capital Construction Costs