The Las Vegas Monorail Co. dipped into its reserve funds to pay off the financing used to build the rapid transit line.
According to a document obtained by the Review-Journal, the Las Vegas Monorail was unable to make a scheduled bond payment at the start of this year using money collected through operating the rail line.
The company used cash reserves to meet the more than $19 million in principal and interest due for the bonds issued in 2000 to build the high-tech train. More than $2.3 million had to be withdrawn to make up the difference, according to the Wells Fargo document.
“This was expected,” said Ingrid Reisman, vice president of corporate communications for the Las Vegas Monorail Co., in a statement. “Though it’s the first time we’ve utilized our debt service reserve fund, the budget we prepared last year anticipated this.”
Financial analysts have noted the cash-flow problem in the past, and the company’s credit rating has dropped.
Analysis from Fitch Ratings, a New York City-based credit rating firm, said in July that the Las Vegas Monorail probably would slide into financial default by 2010 if it continued to be unprofitable and had to dip into reserve funds to meet its debt service obligations.
In July, Fitch estimated the monorail had about $69 million in reserves on hand, down from $89 million in 2006.
Since opening to the public on July 15, 2004, the $650 million, four-mile rail system on the east side of the Strip has failed to turn a profit. How the financial situation will affect a planned $500 million extension to McCarran International Airport is unclear.
The Nevada Department of Business and Industry, which acted as a conduit for the monorail bonds to be floated, received the note from Wells Fargo on Jan. 2, spokeswoman Elisabeth Shurtleff said.
Taxpayers are not liable, nor is any government entity obligated to take over the monorail or its debt should the company go bankrupt. The bonds are insured by AMBAC Assurance Corp. of New York, and a contingency fund exists to tear down the line should it close.
Contact reporter Francis McCabe at email@example.com or (702) 387-2904.