Monorail in the black, but it needs an image boost
15 October 2012
- State finds funds to pay law firm in Las Vegas Monorail bankruptcy (2-4-2011)
- Monorail proposes plan to cut $630 million in debt (2-27-2010)
- Monorail knew of insolvency for years, ﬁles show (2-27-2010)
- Las Vegas Monorail officials thinking beyond crushing debt (2-22-2010)
- Las Vegas Monorail could seek partnership with Chinese (2-17-2010)
- Monorail spending expected to be scrutinized at bankruptcy hearing (2-17-2010)
- Las Vegas Monorail bonds downgraded after bankruptcy filing (2-5-2010)
- Las Vegas Monorail argues against bankruptcy as municipality (2-3-2010)
- After all the promises, will taxpayers be stuck with the monorail’s bills? (1-22-2010)
- Judge sets hearing date in Las Vegas Monorail bankruptcy case (1-19-2010)
- Las Vegas Monorail files for bankruptcy protection (1-13-2010)
The much maligned, and according to supporters often misunderstood, Robert N. Broadbent Las Vegas Monorail is emerging from Chapter 11 bankruptcy protection. It has new board members and a new attitude.
The 3.9-mile elevated system runs along the east side of the Strip with seven stops from the MGM Grand to the shuttered Sahara. It opened in 2004 but has endured major problems, including a four-month shutdown after train parts fell from the guideway to the ground. Critics complain that the route is limited, the stations are poorly positioned and tickets are expensive.
Former Clark County Manager Pat Shalmy now chairs the monorail’s board of directors and former Regional Transportation Commission deputy manager Curtis Myles serves as its president. They and Ingrid Reisman, vice president of corporate communications, sat down with VEGAS INC to discuss what’s next for the transportation system critics love to hate:
What do you want the public to know about the monorail?
MYLES: This is a public transit system that doesn’t receive any subsidies. A private, not-for-profit company covers all of the operational and capital costs. We filed for bankruptcy because we couldn’t cover all of the debt service.
The company has several new board members. What do they bring to the table?
SHALMY: Bruce Woodbury was a Clark County commissioner for 28 years. He was chairman of the RTC and supported the monorail back in the ’90s. He brings all of that transportation history, knowledge and support to the board, and a lot of the ideas on how all this works together because he was the father of the master transportation plan that we took to the voters in 1990.
Tony Santo has been on the board for 3½ years, has been in gaming for more than 30 years and recently led the effort to bring the Plaza back to life downtown. Before that, he was with Harrah’s, Caesars and other properties on the Strip and was on the Las Vegas Convention and Visitors Authority board. He brings a particular business acumen that maybe was lacking a little bit before.
MYLES: Mark Russell (senior vice president and general counsel of MGM Resorts International) served on the RTC’s Regional Fixed Guideway Steering Committee in 2003 and 2004. He helped the RTC decide which technologies to use for the system, which is planned through the Strip, down to Henderson and back north to the (future) UNLV campus.
SHALMY: Rick Mazer (regional president of Caesars Entertainment) is with Caesars and is a major player with stations along the system. He hasn’t been in the community as long as some of the others, but he is committed to seeing the monorail be successful.
The two people that the Bankruptcy Court required that we bring on are Michael Solow and Robert Manzo. Solow is an attorney and Manzo is a CPA, and they have lots of experience in bankruptcy and restructuring companies coming out of bankruptcy. They don’t live here, but they have been here and have participated in our strategic planning processes.
MYLES: What’s most interesting about those two guys is that we didn’t go out and recruit them. The bondholders sent their names to us. They’re prominent in what they do. Manzo started a company that eventually got bought by one of the largest restructuring companies in the world. Solow is the chair of the restructuring group in one of the most prominent law firms in the world. Both of them have Las Vegas experience going back to the ’80s. Solow worked on the restructuring of the Aladdin twice. He also worked on the bankruptcy for America West Airlines back in the early ’90s. Manzo worked with a number of companies on the creditor side and on the debtor side.
Ridership continues to be your biggest obstacle. Is it possible to build ridership with the existing system?
MYLES: It is. In fact, we have this conversation every day. September 2008 was the first month that we saw significant year-over-year decreases in visitor volume and airline passengers. That was everybody’s first real month realizing, “Wow, we’re in a recession.” That continued to get bigger in October, November and December 2008, and it continued for another 45 months. Visitor volumes had fallen and the demographic of the Las Vegas visitor had changed. It was a challenge that fly-in versus drive-in traffic changed because, for us, the lion’s share of our riders fly to Las Vegas. There was a lot of headwind.
Can additional ridership be done? Yes, we’re doing it. We’ve got three hotel guys on the board who understand exactly what it takes to generate interest among visitors. The thing we have to do is get back to marketing the system. We stopped in 2008 as the result of the bankruptcy process we were going through.
The hotels have started to be pretty significant partners. We’re working on some things that we’re not at liberty to talk about. It’s something that should benefit us to a pretty big degree. We have to get back to being aggressive with our fare-setting. We had to be relatively conservative in the early period in the middle of 2008. Then because we were in the bankruptcy process, we had a difficult time making any changes to it.
Now that we’re essentially out of bankruptcy except for dotting a couple of I’s and crossing a few T’s, we can get back to being more aggressive on our marketing. We will be doing pretty much the same thing that we were doing back in ’06, ’07 and ’08 when we were doing somewhere between 7.5 million and 10 million rides a year. Maybe not at the same level because some resources were spent over the last year getting through this process. And, we may do them a slightly different way because we have a slightly different demographic. But it’s basically the same structure: Get the awareness of the system out there and respond to the demographic that’s coming to town in the fare tables.
How much does ridership have to increase for the company to feel comfortable knowing it will be able to pay maintenance and other expenses?
MYLES: Not much. When you look at what we have coming up in capital expenses, we really don’t start to see an impact until around 2020.
We perform ongoing maintenance on an annual basis now through our contractor, Bombardier. There’s a certain amount of replacement on the lower level that occurs annually. We replace some of the operating systems inside our fare boxes and some of the train control computers. The big replacements are the ones that have gotten all of the attention and to a large degree have been misunderstood.
These are 30-year vehicles. Bombardier maintains them as if they will be used for 30 years. We’re scheduled to start replacing trains in about 2034.
The fare collection system is important because you’ve got to collect fares. The train control system is a big deal because the train controls are what keep the trains separated from each other. They allow us to set a specific schedule for the trains, and it’s a fully automated system. Someone sits at a control center at Joe W. Brown Drive and Sahara Avenue and looks at this system electronically every minute and looks at what the system is telling it. We’re not scheduled to start replacing those things until 2020, 2024 and 2035.
But have you penciled out whether you’ll be able to meet the expenses of those replacements? Do you have to increase ridership by a certain percentage to pay those costs?
MYLES: No, because we already have the ridership to do it. That was part of the feasibility of our bankruptcy plan. We needed to demonstrate to the court that under existing conditions of the company, with the debt we were proposing for the system once we emerge and with the obligations we would have with capital asset replacement, this is what the system will do absent some other big thing happening. It’s enough to handle both the debt and the capital replacements. We don’t have to increase ridership. We just have to make sure it doesn’t fall.
The monorail’s biggest success has been transporting people to and from conventions. How will you expand on that?
REISMAN: For the citywide events, most people want to travel during the peak times of 7 a.m. to 10 a.m. and 4 p.m. to 6 p.m. We are practically at capacity during those times. What we’re seeing is that those conventioneers are also using the system for other trips in between.
For smaller conventions, we work very closely with them to get them pre-selling tickets straight to the conventioneers and to get information to them about the monorail. In 2012, we have partnerships with 41 of the 59 major conventions that are scheduled at the Las Vegas Convention Center.
What does the monorail need to become a must-use transportation system?
MYLES: The monorail is never going to be in a position where it’s going to be the one thing you want to do. It’s going to be one of the things to use, in addition to walking or taking a bus, cab, courtesy car or private vehicle. We don’t look at it as creating a must-ride situation as much as we want to present it in a more pervasive, more accessible way. It needs to be one of the good options.
If you’re going in and out of the Convention Center, it’s one of the best options, if not the best option. During the five or six conventions that really take over the town, there are 160,000 people, and they all have to make trips. In a three-day period with each of them making at least one round trip a day, that’s 480,000 trips. We’re carrying about 80,000 of those and we’re carrying them without adding to congestion, without having to wait too long and in a way that they can count on it being there. That kind of accessibility and mobility is what we want to expand on.
Unfortunately for us, we’re not on the west side of the Strip and can’t extend to another five properties, the other big convention facility and the other big arena. We need to be connected to them and to the airport. The airport seems to be the obvious choice to make it more pervasive and make it more accessible to people and make people more aware of it.
What has to happen for that to occur?
MYLES: We’ve looked at alignments and at what it would take to move certain facilities and work around certain infrastructure. But with any project, you’ve first got to look at what’s going to make a project viable. If it’s an airport extension on our system, the first question is how much is it going to be used? We’ve got to answer that question, and we haven’t done that study yet.
SHALMY: Every time I tell someone I’m on this board, the first question I get is, “When is it going to the airport?” Everybody’s asking. If we can show that it can be a viable, helpful part of helping the airport with all of its traffic, giving people choices, helping the resort corridor, we definitely will do it. The question is when and how do we do it.
MYLES: If you look at all of the other major urban areas in the United States, almost every one of them has a rail connection to a central business district. But they came about in different ways. Some entity granted land or provided funding. In Seattle, I think, they added a car tax. We’re private and not for profit. We don’t collect any taxes and don’t receive any subsidy. We’re not looking at a plan that’s going to change that.
If you look at how our system ranks against other rail transportation systems of similar size and scope in the United States, we rank pretty well when you get up in the categories that the Federal Transit Administration reviews when they decide what systems are going to get federal assistance. Once we determine that the system is sustainable and viable with an extension, we’d be in a position to compete for those federal grants or loans.
What would an airport extension cost?
MYLES: It’s even harder to say now than it was before because so much has changed economically. There’s a lot of concrete, a lot of steel and a lot of systems in there.
SHALMY: One of the considerations for any extension is the fact that we already have the infrastructure in a certain position where you can extend it using public right-of-way. The county franchise allows us to go up and down Paradise and Swenson and streets like that. We could do that again to get to the airport or downtown. That gives us an advantage over a lot of other systems around the country. However you imagine it, we think we can do it on public property rather than go through the private process and eminent domain, which would slow us down.
MYLES: The lion’s share would be on airport property or on Tropicana right-of-way.
Are you seeking private investors to pay for an airport extension?
MYLES: No. There have been a number of private entities that have expressed interest in talking to us about it. We’ve just not been a position, legally or otherwise, to talk.
Is that something that’s on the horizon?
MYLES: It’s possible. But this system was financed entirely with debt. Nobody is interested in trying to put together another plan like that again because of what we went through in the last 36 months. It was painful, not just for us, but for the bondholders. No one is proud of having written down the debt.
Is the UNLV Now stadium proposal part of the equation?
SHALMY: Yes, discussions could take place. We haven’t had any, except over coffee, but those things could definitely happen.
MYLES: Transportation is a big piece of how people come to view an experience. Whether it’s Rome, Paris, New York or Las Vegas, if you can’t get to what you want to see and do, you’re going to remember that. Las Vegas is in competition with everybody to create a value proposition that gives people a good experience when they come here. If we don’t address transportation problems in a pretty significant way, that’s when we fall behind. Our role is to be part of that bigger solution.
If connecting to the airport is a part of that solution, we should make that happen. If connecting to the terminus of the XpressWest train station or to the three large convention facilities is part of the solution, we should do that.
SHALMY: I’m pretty sure this is the largest airport in the country, maybe the world, that does not have some kind of surface transportation system connected to it.
MYLES: McCarran is one of the top 15 airports in the world (by passenger volume), and it doesn’t have a rail connection. Heathrow, Gatwick (in London), Kennedy (in New York) and Dulles (in Washington, D.C.), San Francisco, Chicago Midway, Chicago O’Hare, Miami, Dallas-Fort Worth, even Los Angeles all have it.
Denver doesn’t have it, but they’re building it.
MYLES: The Denver system is one of the most successful systems built in recent memory – maybe the best behind only Salt Lake City. Very successful, but lots of local tax money. But it’s a system designed for the entire region, not just for the city of Denver. All the suburbs of Denver and Salt Lake City are tied into the system. Here, the system is just 4 miles. It needs to be extended another mile to capture most of the central business district.
Other extensions have been discussed. Is there any thought about extending the route north or to downtown?
MYLES: We were working with the RTC and there was a proposal to go downtown and we got started on it, but there were some issues and the project didn’t go forward. Downtown has always been considered by city and county planners to be a part of the resort corridor and the central business district. It’s a growing part of it, considering what’s been going on down there lately. To exclude it from the system would be a big mistake for the community and a big mistake for us. As part of our thinking in the larger scope of the system, downtown is included.
The long-term plan for the monorail was to have a north-south route on the west side of the Strip. Is that still in play?
MYLES: We’re already connected to 24,000 rooms and there’s another 70,000 or so on the west side of the Strip, and we’ve got to get them connected somehow. Some are already connected with a series of Dopplemeyer systems. CityCenter has a brand new system, there’s another between Mandalay Bay and Excalibur, and there’s even a system originally built by Steve Wynn between Mirage and Treasure Island. But all those systems are not compatible or extendable to each other.
There are going to be opportunities to develop routes to connect the west side. What has helped a lot is that MGM is the primary property owner on the west side of the Strip. What we have to do, and we haven’t done it yet to a big degree, is to sit down with the property owners and talk about what they want and what they’re prepared to facilitate. They’re all private properties and nothing happens until they’re ready to facilitate what’s happening. They’ve indicated in the past that they’d like to see something like that happen, but we never got into detailed discussions about routes or extensions or that kind of thing.
The monorail in many ways has become a symbol for failure in our community. Do you consider it a failure?
MYLES: No. When you’re inside projects like this and you look outward, it’s difficult sometimes to understand or accept why people look at it the way they do. I get why people say it’s a failure: if you say it’s a failure long enough, everybody believes it’s a failure. But look at the system and compare it to any other rail system in the United States. Pick a measurement – revenue per mile, passengers per mile, revenue per passenger, operating ratio, on-time performance, cost to the taxpayer. It ranks extremely high. We’re in a place where success sometimes is measured by what people can see. The Wynn, Bellagio and CityCenter are considered hugely successful developments because you can see people going in and out. We’re not that visible. So unless you’re out there telling people how successful you are, they don’t know.
SHALMY: They talk about the bankruptcy or how something fell off the train back in 2004. But if you go through all the measurements and ask the gaming and business community or the traveler on the monorail what they think, they say, “It’s not a failure. I use it. It works. It gets me to where I want to go on time.” It depends on whom you ask about it. And we’ve struggled with that for 10 to 12 years.
What do we do about that image? Now, we think we have an opportunity to get back to that original question, to change people’s minds by doing the things we’ve said we’d do and by doing them well, emphasizing how it supports a clean environment and congestion relief without direct government subsidy.
MYLES: People said when the Beltway was being built without continuous high-speed lanes, it was supposed to be a freeway and it was the road to nowhere. But if you didn’t have the Beltway today, Tropicana, Rainbow, Jones and Buffalo would be nearly impassable. The Desert Inn super-arterial is another example. The Convention Center is another example. Why are they building to 3 million square feet? We had a 6,700-seat arena that looked like a flying saucer. Another project that’s getting the same kind of criticism is XpressWest. That’s one of those kinds of projects that today, people say, “Why, why, why, why, why?” But in 10 or 20 years from now, people will say, “Thank God they did that.” The monorail is one of those things, too. We’re doing it because we can see it, and we’re not going to stop because everybody else can’t see it. Sometimes you have to have the courage to continue when you’re right when everyone else says you’re wrong.
What would you like to say to the monorail’s critics?
MYLES: At the end of the day, whether we’re proven right or wrong, we believe we’re doing the right thing. If the right thing helps this community grow, that will be proven out. We won’t have to say anything. If we’re wrong, that will be proven out too, and nobody will have to criticize us for it. I played sports all the way up through college and you always come up against somebody who says you can or can’t do that. You have to use that as motivation to keep going. That’s one of the reasons why the louder people say we can’t do something, the more we’re driven to do it.
SHALMY: What would the resort corridor be like without the monorail? Think it through. How does this serve the economy and the growth aspirations of this community? It performs very well. Without it, congestion, pollution, gridlock. Give us a chance. Look at this openly to be part of the community that our vision says we can be a part of. A lot of them think they’re paying for this thing. Nothing is coming out of their billfold or their pocket unless they buy a ticket to ride it. We’ve got to be patient in explaining this. Let us prove what we can do here.
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