Partner outlines vision for high-speed rail system
3 September 2012
Tony Marnell is probably best known as the builder of the Bellagio, the Mirage and Wynn Las Vegas or the owner and operater of the Rio before it was sold to what is now Caesars Entertainment.
But he’s also a key figure in the development of XpressWest, the high-speed rail system planned between Las Vegas and Southern California. Marnell is chairman and CEO of the Marnell Companies, a partner in the project.
Marnell spoke exclusively with VEGAS INC recently about the status of the first-of-its-kind project, its history and some of the misconceptions the public has about XpressWest specifically and high-speed-rail transportation in general.
Let’s start with an update. What’s the status of XpressWest’s $5.5 billion loan application through the Federal Railroad Administration?
We’re in continual Q&A regarding the loan application. Like any large loan, there are tedious, extensive amounts of information that the lender wants to have, which we certainly appreciate. We’ve been in that mode vigorously for the last 90 days. We’re at the point of making sure we have the right backup, the right information.
It’s not that complex, but everybody’s doing this for the first time. It’s the first high-speed rail loan in the country. Anytime you do something for the first time – we’re starting a new industry and this is the first product in that new industry in America – it requires, and should mandate, a thorough and comprehensive application.
Are there any other major hurdles to clear before construction can begin?
Assuming the loan is approved, when do you expect to break ground?
We’d break ground in a meaningful way in six to eight months, but we’d immediately begin hiring what would amount to thousands of people in engineering, surveying, soils testing and the company’s infrastructure – marketing departments, procurement departments – like you would when you’re gearing up any multibillion-dollar project. Las Vegas will be the base.
Based on your construction schedule, when could the first passenger board?
The project schedule does some overlapping. The engineering will take a year, but we’ll have more than enough engineering to start construction in six months. I think the actual construction will take four years. We’ve allotted six months for testing, but we know we can start testing at a minimum of six months before completion. So, from the time that we get the loan to the time we run the first passenger, we’re looking at a maximum of five years.
The involvement of the Los Angeles County Metropolitan Transportation Authority in linking Palmdale and Los Angeles is seen by many as a game-changer in making the system successful. How did that come about?
That puzzle piece was always there, but it was not for us – our company or us as Nevadans – to say so to Californians. Californians will dictate to Nevadans, but Nevadans seldom do so to California.
The California high-speed rail initiative went through the same process we went through in a different way. Our project, we think, is market-driven. We think there is a viable, real market for travel between Southern California and Las Vegas. We see that demand every day on Interstate 15 and at our airport.
We also think Las Vegas becomes the key to the Southwest and to the mountain states. Just look at the geography. Look what infrastructure is in place. Look where the population is going. We think Las Vegas finds itself in a very key place.
California had to go through its due diligence and understand how it was going to move a population soon to be 50 million people in a state the size of the country of Italy. How were they going to move that population around? Were they going to be able to keep building just highways and airports? We don’t think so. We’ve never seen any country be able to do it without a third mode of transportation, i.e. rail. Sooner or later, the system shuts down. The California High Speed Rail Authority has been doing these studies now for six years and last year, they finally came to several alternatives that they put on the table as possible solutions for their long-term planning.
When that issue came to light, Palmdale was a key place for one simple reason – it was the only logical place to continue to move Southern Californians through the San Fernando Valley north and east through the High Desert. It’s also the logical route to the Rocky Mountains.
With high-speed rail, you don’t have to think about boring long tunnels. It’s much easier to travel on the surface at a low grade and take the extra 10 minutes when you’re traveling 220 mph than to bore long, expensive tunnels through granite mountains. Palmdale is the next location for an airport in Southern California. The long-term plan will be to fly freight into Palmdale and leave Los Angeles International Airport for passengers. Move all freight coming in off boats in Southern California and transport it by rail to relieve the inner freeway systems and then distribute to the western United States.
California’s rail master plan doesn’t address San Bernardino for 35 years. So the question became Victorville-Palmdale, 40 miles, or Victorville, tunneling through the mountains around Cajon Pass to get into Southern California? So Palmdale was always there, but it was not for us to decide. We could have said, “We want to go all the way to Palmdale, but the news media would have written, ‘The Train to Nowhere … What’s in Palmdale?’”
Well, guess what, Palmdale is on the route that connects to San Francisco, and it already connects to Los Angeles. The key is that it connects to Los Angeles under a plan that’s approved for high-speed rail, not a conventional passenger route.
I may have had a bit of an advantage because for 10 years I was the CEO of a public company that owned the Rio. I could look at the slot cards of my customers that list their ZIP codes. That was an ingenious thing.
Steve Wynn (chairman of Wynn Resorts), Jim Murren (CEO of MGM Resorts International) and Sheldon Adelson (chairman of Las Vegas Sands and owner of the Venetian) were doing that – looking at where their driving customers were coming from. And they’re not coming from Beverly Hills, Santa Monica, Laguna Beach or downtown Los Angeles. They’re coming from the Inland Empire.
The Inland Empire is only 40 minutes away from Victorville. That’s why it makes sense.
Where would trains stop on a trip from Las Vegas to Los Angeles?
The interesting thing about high-speed rail is that there are twin tracks. Let’s say, theoretically, that we have stations in Las Vegas, Victorville, Palmdale and Los Angeles. There will be trains like there are planes, in that you’ll be able to get on and go nonstop from Vegas to Palmdale, or Vegas to Los Angeles, or Los Angeles to Las Vegas. Because there are two independent tracks, you can go around stations or stop at stations. It’s all in the scheduling.
That’s been going on in Europe for 30 years. In America, we don’t know about trains, especially in the West. We have no idea how passenger train service really works.
If you travel in the Northeast Corridor and you want to get to Boston from New York, everybody knows the train schedule. They may not know their home address or their license plate number, but they know the train schedule every day of the week to all those major cities. The same thing would happen here. The system has the ability to meet the market and meet the demand.
How did you first get involved in this project, back when it was DesertXpress?
This first started for me about 25 years ago. Las Vegas was taking notice of what was going on in Japan.
Japan had just built and was operating a “bullet train.” One of the key people in the room at that time was Cliff Perlman, the chairman of Caesars Palace. Also in the room was Sen. Harry Reid. They said, “Go to Japan and go look at this thing and see if it makes any sense for us to go from Las Vegas to Los Angeles.”
That was the first time I had ever seen high-speed rail. For most of my career, we were asking for things out of Europe. We were looking for marble, tile, carpet, all kinds of things for hotels.
I started using high-speed rail. It was way easier than going to airports, and there weren’t as many flights 25 years ago. Then 10 years ago, we began hearing the rumblings of what China was going to do. That’s when we tried to follow this idea of how we were going to get another form of transportation to Las Vegas. We needed a big idea that works in the type of market we already had.
The solution here was quite easy. We have a wide-open desert. We don’t have a lot of environmental issues here. Most of it is Bureau of Land Management property, so there aren’t huge condemnation costs like California has. The condemnation in California is far more expensive than the railroad.
It was clear that Amtrak has it’s own life and purpose. We started looking through the railroad laws, and we discovered that we could build a private railroad. So the idea was, “Let’s go do this right.”
That was nine or 10 years ago. We went to the Federal Railroad Administration and told them we wanted to build a railroad between California and Nevada. We asked about the application and went through the process. It took 7½ years.
We think there’s a real market for this product. We think it’ll be a big boost for California and for Las Vegas.
Are there private investors funding the project? Who are they and how much are they investing?
We’re putting up $1.5 billion. I can’t disclose who they are right now. We’re under confidentiality agreements with the U.S. government. They know all of this information, and we have agreed that we are not going to go through the loan process in the public.
If it’s decided on, it will become public information. If we’re denied the loan, as a private company, we don’t think we should have to disclose it.
It’s not a public opinion poll. It’s a real project and has a real purpose for a real need. It’s being presented as a business proposition under existing laws and statutes. There has not been one penny, and there is not one penny intended, of taxpayer or grant money in the application at this point in time. It’s private capital and infrastructure financing instruments.
What’s your vision for a network to connect Phoenix, Salt Lake City and Denver through Las Vegas?
As we speak, there are existing and planned high-speed corridors in America. They are looking at fulfilling an existing demand or preparing for what I call the “China effect.”
China looked at its country and said, “If we connect City A with City B, then one plus one becomes three.” One city might provide manufacturing, one city might supply technology, and they needed to start communicating.
We don’t have good connections with Phoenix right now. But if you could get to Phoenix in an hour and 20 minutes, it would be a nice place to go see a ball game or golf or go on vacation. Las Vegas would also be a lot more attractive for people to come for a day or two. It would be a simple trip to go from downtown Phoenix to Las Vegas in an hour and 30 minutes.
Likewise Salt Lake City and Denver?
I think Denver is only a matter of time. We just haven’t figured out how to get to Denver. It’s as viable as anything. Denver is a perfect example of a place where it makes sense to connect cities in the West with high-speed rail.
The fact that Salt Lake City, Phoenix and Denver have had success with their light-rail systems is a plus for high-speed rail because when you get people to go intermodal, they can really get rid of their cars. The terminals that have been built in China are beyond Americans’ ability to think anymore. All the connections are together in one terminal. You can come into Shanghai or Beijing on an airplane and go into the city by rail. That’s where the future is. That’s how you cut down on pollution and up your productivity, especially now that it’s illegal to use a cell phone while you’re driving. It’s no problem on a train.
What do you think about the possibility of UNLV’s Howard Hughes College of Engineering creating a high-speed rail institute to teach prospective employees for companies that build rail systems?
It’s all part of a new industry. It’s all part of where we need to go.
One of the things about high-speed rail is that there is a whole proposition of new employment in a clean, energy-efficient industry. It’s an industry that enables commerce. When you have transportation solutions that enable commerce, now you’re job- and profession-enabling. This isn’t something that can be outsourced. It’s not something that’s going to be built in South America someday. It’s going to be built in America.
Why not have Las Vegas be the catalyst and have the first one? There’s a need.
Some of XpressWest’s critics say the 150-mph trains are the lowest form of high-speed rail and the company should be looking more at European and Asian technology that travels much faster. Any regrets about using the Bombardier technology and not other companies’ trains or, for that matter, maglev technology?
We’re going to go 190 mph.
Let’s use the analogy that if you’re on a runway and the plane starts to fly when it reaches 150 mph. It’s the same thing with high-speed rail. We can go from Las Vegas to Victorville in 86 minutes. If I want to take you at 200 mph, it’s seven minutes quicker. But I’m going to use twice the electricity, and I’m going to spend twice the operating costs, which means I’m going to have to charge you twice the amount of money to save you six or seven minutes.
It’s a math problem. The trains that we are putting on the tracks will reach higher speeds in sections. When we talk about speeds, were talking about the fastest it will go on its journey. The train will not go 220 mph from Point A to Point B. We will be bringing you the latest technology. Our trains will be capable of going 220 mph. We’re engineering interoperability with California, which will go 220 mph. But it’s also a maintenance and energy equation.
One other thing: The idea that a high-speed train can’t go over Cajon Pass is a total falsehood. It’s just going to go over slower. You have weight and you have gravity and at a certain point, you’re going to slow down to get up that grade. And you’re going to have to slow down going down the grade because it isn’t a roller coaster.
Another thing to think about is people become uncomfortable with anything more than a 5 percent grade. It’s like the feeling you get when you take off in an airplane or land in an airplane. It’s not as comfortable as when you’ve leveled off. And you’re relative to your surroundings. You get more and more uncomfortable if you see things going by quickly.
How does the XpressWest project rank among your career ambitions? Were there critics who expected the Rio to fail before it was built?
I have the fortunate experience to live my lifetime in what I call the 50-50 world. If you’re against it, then I’m for it. And if I’m for it, you’re against it. If anybody is going to let that bother them, they shouldn’t be in the game. That’s as simple as I can explain it.
The thing that is exciting about this is it’s not an original idea or a forced idea. The market is here. We’re begging to figure out how to highlight Las Vegas and now every state has gaming. We need to highlight ourselves once again.
As Las Vegas was developing, there were people who filled in parts and pieces, and we were always sending out to the rest of the world the message to come here and see what’s new. “Look what we just did!” We have showrooms that are swimming pools. We have volcanos. We have mountains. There was always another reason to come to Las Vegas.
I’m not saying that this is the reason to build the train, but this is a place where we could showcase a new industry. This is an industry that’s driven by demand, not some political reason. We’re not trying to give Las Vegas a spark. We’ve already got a hell of a spark. We just need it to keep burning.
The other thing we have here is that we build well. We build more product for less money, and we have a great workforce in the Southwest. We’re productive. We’re on schedule. We build for good prices, we build good products, and we’re a great place to showcase that southwestern spirit.
What other misconceptions do you want to clear up about the project?
First, the initial high-speed rail corridors came about under Bush. The Obama administration saw that eight years of work and said, “Where do we go with this?”
The second thing is this loan we’re applying for was put into place by Congress in the last year of Bill Clinton’s administration. This is not some new thing. It’s all Republicans and Democrats.
If we want private industry to get involved in developing our rail system and wean ourselves off Amtrak tax support, why not put an instrument in here that private industry can work with? The single biggest question I get is, if it’s such a good idea, why don’t you go to the bank and get the money? The last banker that gave me a 30-year loan was when I was 23 years old. There are no 30-year loans for these kinds of projects. The only way people do big infrastructure projects is through the government. Commercial banks won’t do it.
Next, this is not a Solyndra situation. The project itself has been administered by the Federal Railroad Administration under two different presidents so far. When we received our environmental impact statement more than a year ago, we had to state our probable sources of funding. We identified the loan program in the document as a probable partial funding source. We applied for the loan 19 months ago, so this is not something where somebody called up and said, “Give this cowboy in Las Vegas a loan.” It has had true due diligence, and it’s going on right now on this loan. I don’t think people understand that.
Nineteen months may seem a little long, especially when you’re talking about commercial deals, but when you look at a project that’s being built to a 100-year standard and you look at a loan that has a mortgage to it of 30 to 35 years, you look at it with a different perspective. You look at it from the perspective of, say, Hoover Dam.
Just about every building I’ve built in my life, I’ve already torn down and built another one where it was. It’s not a hotel-casino that we’re going to remodel in a few years. This is setting a standard for a new industry in America. It’s like building the first atomic power plant or the first jet airport.
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