With lack of funding, will DesertXpress ever lay its tracks?

There’s still one more major approval necessary to get the high-speed rail moving: DesertXpress needs money—lots of it.

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Richard N. Velotta

VEGAS INC Coverage

It’s clear from the volume of email in my inbox and messages left on voicemail that people are genuinely concerned about whether DesertXpress, the high-speed rail proposal that would link Las Vegas with Victorville, CA, has a snowball’s chance in the Mojave Desert of success.

Earlier this month, the US Department of Transportation gave the word that DesertXpress Enterprises, the private company that’s planning the 185-mile, $6 billion project, has cleared all the environmental hurdles necessary to begin work. Although the release of the agency’s so-called “record of decision” is a major step toward drafting detailed plans that will lead to construction, there’s still one more major approval necessary to get things rolling: DesertXpress needs money—lots of it.

With the record of decision in hand, the company next goes to the federal government to borrow money, through the Railroad Rehabilitation & Improvement Financing program, which provides direct federal loans and loan guarantees to finance development of railroad infrastructure. If the feds OK the loan, it would be the biggest one ever approved for that program. Since 1998, when the program was initiated, just more than $1 billion in loans have been approved on 28 rail projects. DesertXpress is seeking $4.9 billion.

The Federal Railroad Administration will review the economic soundness of the project and the creditworthiness of the applicant. The evaluation will include the financial viability of the project, including the capitalization plan; financial projections of the borrower; the business plan, which includes projections on ridership, financial modeling and an assessment of the future ability of the company to pay off the loan; project risks and, finally, a cost-benefit analysis.

What are the chances the loan is approved? It’s hard to gauge with someone as powerful as Senate Majority Leader Harry Reid in the picture.

One would have to think that any serious review of ridership would include the million-dollar question every critic asks: Victorville?

I’ve perused DesertXpress’ 73-page ridership review, which includes a rider and financial study prepared by New York transportation engineer URS in 2005, a follow-up report prepared in 2008 by Cambridge Systematics Inc., of Cambridge, MA, and an audit and review for a prospective investor by London-based Steer Davies Gleave.

The report is filled with documentation on how the high-speed rail line could capture market share from automobile traffic running on heavily traveled Interstate 15 and from travelers who fly to Las Vegas from several Southern California airports. The final estimate was that about 22 percent of those coming to Las Vegas would consider taking the train if it were available. Part of the data was based on surveys of potential riders. But the reports are unclear as to what was asked in those surveys.

The Cambridge report had some very telling comments about the initial URS study.

“While it is likely that the introduction of new high-quality service such as that envisioned by DesertXpress will induce a small number of intercity trips between Southern California and Las Vegas, we’re not convinced the day trip analysis conducted by URS is the best means to estimate this induced demand.”

“Based on our analysis of the survey data, a total of 115 Las Vegas traveler respondents were asked: ‘If there were a high-speed train from California to Las Vegas, would you consider a one-day trip on this train?’ Respondents to this question could not be provided with any additional information about the high-speed rail system, including any basic information about the routing, cost or amenities, because the surveys were being personally administered.”

In other words, many of those asked about their willingness to ride a train to Las Vegas weren’t told they’d have to ride it from Victorville.

Much of the data gathered in the ridership studies was collected before the recession took its toll on the economy. Some of the reports referenced how passengers arriving in Las Vegas could get to their hotels if the Las Vegas Monorail is extended. I’m fairly certain that isn’t going to happen anytime soon.

Still, it wouldn’t surprise me if the Federal Railroad Administration approved the DesertXpress loan. There are some forces in Washington that seem to be greater than a runaway train.



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Discussion 4 comments

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  1. So why would Sen Reid try to make a project get funded if the FRA did not think it was viable? He would not waste any tax payer money, right? He is trying to cut the budget and all, right?
    I think a high speed bus would be a great first step in the project to gauge the level of economic viability. Let a bus travel at 100 MPH from Victorville to Las Vegas on I-15, see how it goes..I think a slow train from LA would beat a fast train from Victorville ridership wise.

  2. If it is built (not very likely), it will never turn a profit. (See Las Vegas Monorail). Like the proposed Los Angeles to San Francisco High speed rail, they seem to be using extremely inflated ridership numbers. And yes, they need to ask: Victorville? I just do not think there will be sufficient numbers of people willing to pay the necessary cost for a ticket (unless subsidized by casinos like the 24hr. turnaround busses). Cost overruns are very likely to double the cost, or more, before the first rider hits the rails. My Chevrolet will get me to Las Vegas in 4 1/2 hours on 9 gallons of gas, and I have a car when I get there. A drive to Victorville is at least 2 hours.
    I like the idea if a high speed train, but I do not see it as very practical.




  4. DesertXpress the Yucca Mountain replacement money pit?