Xpress West

[me_little_me]

The real question is who, except the government will have any skin in the game? Casinos? Nevada? Las Vegas? California? How much will private investors put up (and lose)?

And if the government puts its skin in, will it have first dibs on what is left? Will the banks get their money first and the government get what's left?

If the project fails and the government ends up with a set of railroad tracks partially there and half-completed stations, will it finish the job or will it end up being abandoned because a new administration won't continue it? The Republicans may no longer want it and the Democrats might say it only benefits the rich and the money should be spent on Medicaid.

If there is enough interest for two competing plans wouldn't it be smart for the government to tell the backers to fight it out among themselves and come up with a unified plan as two train plans to Las Vegas will just steal from each other and money will be wasted, whether private or public.

 

[CHamilton]

High-speed rail project beset by political mine fields

Things were supposed to be settled by now.

Construction workers were supposed to be digging up corridors, pouring concrete, laying track and otherwise making the country’s first government-endorsed high-speed rail line rise out of the desert between Las Vegas and the Los Angeles exurbs.

On the wings of one project, Southern Nevada’s economy was supposed to be back to work.

But in the years since the XpressWest project (formerly Desert XPress) applied for an industry-backed federal loan to finance the venture, it has run into almost every conceivable political roadblock – and this month, one direct assault.

“The risks to the taxpayer from funding this project are untenable,” Rep. Paul Ryan and Sen. Jeff Sessions, the top-ranking Budget Committee Republicans in their respective chambers, wrote to Transportation Secretary Ray LaHood earlier this month. “We would urge the Administration to reject the XpressWest loan application and to direct its available RRIF funds to more worthy transportation projects.”

It’s the most scathing indictment yet of a project that has suffered from extraordinarily unlucky timing – and the direct attack has at least some of its supporters concerned that the pushback may relegate an already-beleaguered project even further to the back burner.
...
But XpressWest’s main advocates are being cautious about dismissing the bluster from the budget committee Republicans too quickly because they have been down a similar road before.
...
In theory, lawmakers and lobbyists familiar with ongoing negotiations say the Obama administration is on board with the XpressWest plan.

They are, at present, merely going back and forth about the interest rates and size of the loan. Anthony Marnell, the main force behind the high speed rail venture who has already put up $1.5 billion from private investors, wants an additional $5.5 billion from the Federal Railroad Administration’s Railroad Rehabilitation & Improvement Financing program. The $35 billion federal fund is financed by the railroad industry and has lent money to 33 rail projects since its inception, according to the railroad administration’s website.

The government, meanwhile, is pushing for a somewhat smaller loan, in the $4.5 billion to $5 billion range.

Either way, XpressWest would be the single largest loan disbursed by the program by far. The next-highest loan, made to Amtrak in 2011, was $500 million.

The terms of the loan, which was initially supposed to be awarded in mid-2012, are expected to be settled soon – a fact that partially inspired the letter from Ryan and Sessions.

In light of that letter, however, backers are somewhat concerned that an already-cautious government may become skittish about approving the loan as expected.

 

[Anderson]

Well, it seems that the loan application seems to have devolved into a FUBAR given how long it has dragged on. In 2012, it seemed to mainly be political considerations holding things up (congressional session timing, the election, etc.), but we're well beyond that now. It would be nice to know what's really going on behind the scenes.By

By the way, just an incidental question: Is CAHSR eligible for RRIF funding?

 

[Aaron]

By the way, just an incidental question: Is CAHSR eligible for RRIF funding?

Seems like it. From http://www.fra.dot.gov/Page/P0128:

"Eligible borrowers include railroads, state and local governments, government-sponsored authorities and corporations, joint ventures that include at least one railroad, and limited option freight shippers who intend to construct a new rail connection."

 

[afigg]

Well, it seems that the loan application seems to have devolved into a FUBAR given how long it has dragged on. In 2012, it seemed to mainly be political considerations holding things up (congressional session timing, the election, etc.), but we're well beyond that now. It would be nice to know what's really going on behind the scenes.By
By the way, just an incidental question: Is CAHSR eligible for RRIF funding?

If the total amount to be raised is $7 billion, a $5.5 billion RRIF loan with $1.5 billion in private financing would represent 78.6% of the total. Sounds as if the US DOT and the FRA is seeking to reduce their exposure (financial and political) by asking Xpress West to put up a larger private equity share. A 70/30 split would be $4.9 billion in RRIF loans and $2.1 billion in private equity. Presumably if Xpress West defaults after the construction is completed or even mostly completed, the FRA loan would take precedence and ownership of all the property and the private investors would lose everything (but they would get a big tax write-off).

As for CHSRA, I have read about them possibly applying for RRIF loans for future segments; they should be eligible. They currently are authorized to sell around $9 billion in state backed bonds for the HSR project and supporting/related projects (Caltrain electrification, etc), so they don't need RRIF loans for the present. There is also the possibility of getting future TIFIA government backed loans, if that or the proposed infrastructure bank are funded in future federal fiscal years.

 

[leemell]

Seems like they have decided to grant the loan and are just argu...eh..negotiating over the amount and interest.

 

[cirdan]

Seems like they have decided to grant the loan and are just argu...eh..negotiating over the amount and interest.

is that your guess or has there been some news to that effect?

 

[afigg]

Seems like they have decided to grant the loan and are just argu...eh..negotiating over the amount and interest.

is that your guess or has there been some news to that effect?

I think we can take a strong clue that the grant of the RRIF application is near because Rep. Ryan and Senator Sessions wrote a letter to LaHood attacking the potential loan to Xpress West. They would not have bothered to get political points with the anti-spending crowd, if there were no prospects of the loan being granted.
With the Senate and House just having passed a continuing resolution to fund the government for the remainder of FY2013, and Congress going on recess soon, there is a window for LaHood and the FRA to grant the RRIF loan while Congress is out of town. Cuts down on the opportunity for the Republicans to grand stand right after the grant award. (who otherwise are advocates for private-public transportation projects. Well, so long as it involves a highway or airport).

 

[Blackwolf]

I'm sure that a few others here have gotten this Email as well, but NARP is weighing in on this publicly now:

The National Association of Railroad Passengers, the US High Speed Rail Association, Californians for High Speed Rail, and the Midwest High Speed Rail Association joined together to urge the U.S. Department of Transportation to consider the many benefits that modern passenger rail service would bring to the Los Angeles-Las Vegas corridor. The letter, addressed to Transportation Secretary Ray LaHood, is reproduced below in its entirety.

And that letter to LaHood:

March 20, 2013

The Honorable Ray H. LaHood
Secretary of Transportation
1200 New Jersey Avenue, S.E.
Washington, DC 20590

RE: Application of XpressWest for RRIF Loan

Dear Mr. Secretary:

The National Association of Railroad Passengers, the US High Speed Rail Association, Californians for High Speed Rail, and the Midwest High Speed Rail Association urge you to give full consideration to the following factors as you review the pending Railroad Rehabilitation & Improvement Financing (RRIF) loan application of XpressWest, the first segment of a new Los Angeles – Las Vegas high-speed line.

• Los Angeles-Las Vegas is the second busiest end-point pair in the United States—trailing only Los Angeles-San Diego. The completion of XpressWest will be a critical step toward meeting the President’s goal of connecting 80 percent of the American public to modern intercity passenger trains within 25 years.

• XpressWest will be a convenient, energy-efficient alternative to the heavily traveled Interstate-15, a congested and dangerous highway. Mid-desert traffic back-ups are fairly common. The initial 185-mile segment would have the capacity to divert more than two million annual automobile trips, saving an estimated 440,000 barrels of oil each year. The train would also provide a safer travel alternative: the Las Vegas-Los Angeles segment of Interstate 15 has been found to be one of the most dangerous highways in America, and a 2010 study found that 1,069 people died in 834 automobile accidents on the road over a 15 year period.

• It will help speed up and enhance the California high speed rail project with extensions to Palmdale (70 miles from Los Angeles; currently served by Metrolink commuter trains) where the two systems will seamlessly integrate, significantly increasing ridership on both systems, and increasing private sector interest in the California system to help fund further extensions.

• It will expand the market for American high-speed rail manufacturing.

• It is consistent with the desire of Americans for good train travel. This is reflected in the fact that Amtrak has set ridership records in nine of the last ten years. Moreover, as a recent Brookings Institution report noted, Amtrak ridership from 1997 to 2012 at 55% grew faster than domestic aviation ridership (20%), highway vehicle-miles traveled (16.5%), U.S. population (17%) and real gross domestic product (37%).

As you know, the RRIF Loan Program was established by Congress in 1998 specifically to help support development of the US rail system. Under the RRIF program, the Administrator of the Federal Railroad Administration (FRA) of the U.S. Department of Transportation (DOT) is authorized to provide direct loans and loan guarantees out of a $35 billion pool of revolving credit.

XpressWest is well suited for this program. This project is ready to go today, having already gained environmental clearance and secured the needed rights-of-way. Private investors have already assembled $1.5 billion in funds to support the project.

With leadership from the private sector, we can be confident the project will be delivered quickly and efficiently, and managed with strong business practices. Because the nation’s high-speed rail network will be created through public-private partnership, this project offers the ideal model starter project to help move the nation’s new rail program forward.

Upon full consideration of the above listed factors, we believe this project has merits worthy of a RRIF loan. Thank you for your time and consideration.

Sincerely,

Daniel Krause, Executive Director, Californian’s for High Speed Rail

Ross Capon, President, National Association of Railroad Passengers

Rick Harnish, Executive Director, Midwest High Speed Rail Association

Andy Kunz, President, US High Speed Rail Association

 

[leemell]

Seems like they have decided to grant the loan and are just argu...eh..negotiating over the amount and interest.

is that your guess or has there been some news to that effect?

I think we can take a strong clue that the grant of the RRIF application is near because Rep. Ryan and Senator Sessions wrote a letter to LaHood attacking the potential loan to Xpress West. They would not have bothered to get political points with the anti-spending crowd, if there were no prospects of the loan being granted.
With the Senate and House just having passed a continuing resolution to fund the government for the remainder of FY2013, and Congress going on recess soon, there is a window for LaHood and the FRA to grant the RRIF loan while Congress is out of town. Cuts down on the opportunity for the Republicans to grand stand right after the grant award. (who otherwise are advocates for private-public transportation projects. Well, so long as it involves a highway or airport).

That is it exactly (I used "seemed" because of the implication). The pig doesn't squeal unless something is getting close.

 

[cirdan]

Seems like they have decided to grant the loan and are just argu...eh..negotiating over the amount and interest.

is that your guess or has there been some news to that effect?

I think we can take a strong clue that the grant of the RRIF application is near because Rep. Ryan and Senator Sessions wrote a letter to LaHood attacking the potential loan to Xpress West. They would not have bothered to get political points with the anti-spending crowd, if there were no prospects of the loan being granted.
With the Senate and House just having passed a continuing resolution to fund the government for the remainder of FY2013, and Congress going on recess soon, there is a window for LaHood and the FRA to grant the RRIF loan while Congress is out of town. Cuts down on the opportunity for the Republicans to grand stand right after the grant award. (who otherwise are advocates for private-public transportation projects. Well, so long as it involves a highway or airport).

That is it exactly (I used "seemed" because of the implication). The pig doesn't squeal unless something is getting close.

Another interpretation (cynical, I know) is that they know its going to be turned down and are thus now making extra noise against it so they can later claim credit for its defeat.

 

[Paulus]

Seems like they have decided to grant the loan and are just argu...eh..negotiating over the amount and interest.

Fred Frailey left a comment in one of his articles that the FRA doesn't actually reject anyone for RRIF, they simply keep coming back with more questions until they shut up and go away.

 

[Anderson]

I have to wonder about that being the policy (versus it sort-of happening that way). At some point (i.e. enough rounds of questions), a reasonably well-funded operation faced with that could probably find grounds to sue and force a decision (since sooner or later you run into a case of "you had three years to ask that question and it's nothing new").

 

[Nathanael]

The real question is who, except the government will have any skin in the game? Casinos? Nevada? Las Vegas? California?

Yes, yes, yes, no, in that order.

 

[Anderson]

Yes, yes, yes, and depends. CA won't necessarily have skin in the game directly, but there is enough potential for a revenue split at Palmdale*, follow-through traffic from various destinations**, or track rent LAX-Palmdale*** that they will have a significant stake in the success of this line.

*To explain, if a Palmdale-Vegas ticket is $90 and an LAX-Vegas ticket is $120, CAHSR might get part or all of the $30 depending on who's actually running the train (i.e. like the ACL-FEC trains back in the 50s, or like the old California Zephyr).

**In this case, an SFO-Vegas passenger would have a ticket SFO-Palmdale-Vegas; the first segment would go to CAHSR and the second to Desert Express.

***And in this case, DX would just run the trains and get revenue, but pay CAHSR for using up slots LAX-Palmdale (or wherever else-Palmdale...I think we can envision one or more trains being run up the valley or down to San Diego if the demand exists or comes into existence).

 

[Andrew]

What is the probably that we get a decision on this project this upcoming summer?

 

[Anderson]

Probably mediocre (at best).

 

[afigg]

What is the probably that we get a decision on this project this upcoming summer?

According to this Las Vegas Review Journal article from mid-April, Xpress West has been approved for a loan of almost $5 billion, but has to raise additional private funding to qualify. Appears that Xpress West will have to come up with around $2 billion in private equity, not the $1.4 billion that was originally proposed. This article was posted today on rr.net, but has been around for 3 weeks and no one picked up on the news?

Excerpt

WASHINGTON — Plans for a high-speed train connecting Las Vegas and Southern California have hit a money snag, Sen. Harry Reid said Tuesday.
Reid, D-Nev., said backers of the XPressWest project are struggling to come up with funding to enable approval of a $5 billion government loan. Federal backing would make up the bulk of the $6.9 billion rail plan.

“We’ve had a few setbacks. We are still working hard on it,” Reid told reporters when asked about the status of the project after a meeting of Nevada’s members of Congress.

The Federal Railroad Administration has been weighing an application for a $5.5 billion loan since December 2010, when the project was known as Desert XPress.

 

[Andrew]

Could New Starts or TIFIA fund the remaining amount of money?

 

[leemell]

Seems like DX/XW should be able to get the casinos to commit to $500M more over the life of project construction considering the amount of construction going on even in the current economic condition.

 

[afigg]

Could New Starts or TIFIA fund the remaining amount of money?

No. New Starts is an FTA program for transit projects, not intercity passenger rail. And New Starts is probably only for state and local governments, not a private company. The TIFIA program provides government backed loans similar to RRIF loans. The point is that to qualify for a very large RRIF loan, Xpress West has to provide some private equity, put their skin into the game if you will.

 

[Andrew]

Well, it should not be too difficult for the remaining $600 million to be come up with. Could Tax Incremental Financing Bonds--which was used to fund the seven line extension in New York City--be the solution?

 

[leemell]

Could New Starts or TIFIA fund the remaining amount of money?

No. New Starts is an FTA program for transit projects, not intercity passenger rail. And New Starts is probably only for state and local governments, not a private company. The TIFIA program provides government backed loans similar to RRIF loans. The point is that to qualify for a very large RRIF loan, Xpress West has to provide some private equity, put their skin into the game if you will.

They are already commiting $1.4b. This is $500M more.

 

[Andrew]

How far would the proposed terminal be built from "The Strip?"

 

[leemell]

Most of the four alternatives are near the Strip. The preferred alternative is across I15 from about the middle of the Strip.