The Las Vegas Monorail Co. essentially asked Clark County commissioners Tuesday to guarantee that a public contribution of up to $135 million would be available to the company if needed for a pair of extensions to the system.
In addition, the company said the expected cost of the extensions and two planned stations has risen to $172 million, a $62 million increase over the original estimate.
The extension of the monorail to Mandalay Bay and the construction of a new station at the shopping area there would run $140 million, according to figures provided to the county. A proposed station at the MSG Sphere at The Venetian that would serve the nearby Sands Expo and Convention Center and The Venetian and Palazzo properties via a pedestrian walkway would cost an estimated $32 million.
Las Vegas Monorail Co. President Curtis Myles said the $135 million public contribution would be used if needed. Tlhe money would come from a 2017 agreement with the county that called for $4.5 million of hotel room tax revenue be available each year to the Monorail Co. in case of an emergency.
The agreement has a clause saying that the county can cancel the agreement at any time and that no money is guaranteed to be distributed to the monorail in a given year.
That agreement would need to be reworked to guarantee the $4.5 million a year would be available for a term of 30 years if needed and to remove the county’s ability to cancel the agreement at anytime to appease possible lenders for the monorail projects.
Commissioner Larry Brown noted this would be the first time that the county would consider this kind of investment with a private company.
Two loans sought
That guarantee is a must, as Myles said the company is now seeking two different loans, one for the MSG Sphere project and one for the Mandalay Bay extension, instead of one large loan for both.
“Discussions with lenders and the market for this kind of project is relatively narrow for financing,” Myles said. “Those lenders have suggested that we phase the financing of this so that we can get a portion of the project done (MSG Sphere station) in advance, while the rest of the project (Mandalay Bay) is developed and we complete our obligation at the airport.”
The funding in question for the MSG Sphere station is reliant upon the entire project moving forward, Myles said. The lender has provided the company with an aggressive timeline for having its financials lined up by the end of May, but he said he believes that it is more realistically expected in the beginning of June.
“After that window closes, this particular piece of capital is no longer available,” he said. “If this capital is no longer available, it’s very likely that we will not do either one of the financings because this lender is also anticipating in participating in the larger financing as well.”
County Attorney Mary Ann Miller expressed concerns about the requested change in language, which took any air of optimism out of the meeting.
“What the monorail company is asking you is to change that completely and make this an obligation … and the only reason you’re doing this is that it has been presented to you that the lenders are requiring it,” Miller said. “So under contract law they would be considered third party beneficiaries of this contract.”
Miller worried that if the Monorail Co. went into bankruptcy again, the county somehow could be relied upon financially by the lenders.
Myles insisted the company’s projections show the only time the monorail would request a $4.5 million payout would be to secure the initial loan from the lenders.
“Our projections show that you would be making that transfer once, and never again,” he said. “Our projections show that we will be able to do what this financing will let us be able to do.”
Myles also said that the financial support he expects from resorts is being factored into the lenders’ decision to loan the monorail funding.
“Based on conversations we’ve had to date, I’m very confident that we’ll get the participation (from resorts) that’s required to secure the loan,” he said. “Today I’m under the impression that support would come in the form of one investment in debt.”
Upcoming debt payment
The Monorail Co. has dealt with financial instability for much of its existence.
After filing for bankruptcy protection in 2010, the company’s debt was reduced from $650 million to $13 million.
The Monorail Co. is on the hook for a $10 million payment in principal plus interest in July, and Monorail spokeswoman Ingrid Reisman said there is no reason to believe that won’t occur.
“We’ve met all of our debt obligations, I don’t see why this would be any different,” she said.
She declined to comment on whether the request to obtain the possible guaranteed $4.5 million per year would be detrimental to the company paying that debt.
Reisman also denied a request by the Review-Journal for updated ridership numbers, and Miller said the county had not been provided any updated figures as well.
The Monorail Co. and the commissioners are slated to discuss the $4.5 million per year issue over the next few weeks, and it will be heard again at a future board meeting.
Despite that, Miller cautioned the board members about amending the 2017 agreement and the possible ramifications.
“We’re not in the business of financing companies,” Miller said. “There are some hoops to go through if you’re going to get rid of cancellation policy or try to circumvent the budget appropriation laws. There are some legal concerns doing everything that they asked for.”
The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson. Las Vegas Sands operates The Venetian and Palazzo.