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#41 Guest_Andrew_*

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Posted 06 May 2013 - 09:48 PM

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



#42 Anderson

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Posted 06 May 2013 - 10:57 PM

Probably mediocre (at best).


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#43 afigg

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Posted 06 May 2013 - 11:13 PM

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.



#44 Guest_Andrew_*

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Posted 07 May 2013 - 01:15 PM

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



#45 leemell

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Posted 07 May 2013 - 06:20 PM

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.



#46 afigg

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Posted 07 May 2013 - 06:45 PM

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.



#47 Guest_Andrew_*

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Posted 07 May 2013 - 09:23 PM

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? 



#48 leemell

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Posted 07 May 2013 - 10:39 PM

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.



#49 Guest_Andrew_*

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Posted 08 May 2013 - 11:13 AM

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



#50 leemell

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Posted 08 May 2013 - 02:16 PM

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



#51 afigg

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Posted 08 May 2013 - 06:42 PM

 
They are already commiting $1.4b.  This is $500M more.
The RRIF application was submitted over 2 years ago. Some of the original backers who promised or likely vaguely promised to invest $1.4 billion may have withdrawn, their investment agreement expired or had to put their money elsewhere. Getting $2 billion in private equity financing together for a passenger rail project, something that has not been seen in the US for many years, is a challenge. Question is where are the major Vegas casino companies in this?

Edit: wording fix

Edited by afigg, 09 May 2013 - 05:44 AM.


#52 leemell

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Posted 08 May 2013 - 08:32 PM

Last time I looked into it there were five major casino conglomerates investing in it.  They were not named but it sounds like the big players in Vegas.  The guy running the show is a major Vegas contractor who has built many of the Strip building complexes.  They probably haven't or couldn't withdraw as the RRIF application requires the funding details including almost certainly the names the investors.


Edited by leemell, 08 May 2013 - 08:36 PM.


#53 Anderson

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Posted 09 May 2013 - 03:57 AM

Also, let's be honest...$1.4bn is no small change.  That's a pretty good new resort or two between the group.  Likewise, these guys may have a good deal of revenue (and indeed, solid profits from a chain of hotels), but $500m is still a decent amount of money (not to mention opportunity cost) to put into a project like this.  Not that they might not still put the money in, but I can see such a reply causing a careful evaluation of options.


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#54 Guest_Thomas_*

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Posted 09 May 2013 - 07:51 AM

I believe that whichever casino employees are behind this probably know what they are doing. But, with that being said, I believe that this major infrastructure project has to be done. Xpress West might even have as large as an influence as Midtown Direct did when it was created in the 1990's for improved service into New York City. 

 

Will people be able to buy stocks in Xpress West?



#55 Anderson

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Posted 09 May 2013 - 03:17 PM

Guest: That's an excellent question.  I would not be surprised if, once things are up and running, there's a public offering of some sort (either to pay back construction loans, to allow the initial investors to realize some direct gains, or to fund further expansion).  However, I don't expect that to happen until the operation is at least up and running and on a path to profitability, since I highly doubt that the investors would want to sell their stakes for too low a price.

 

One thing I will say is that there have been a lot of very rich folks (Warren Buffet and Carlos Slim come to mind) who have been pushing HSR at times (Slim has even expressed an interest in investing in it), so there should at least in theory be capital pools to tap into.  JR Central also seems interested in investing in the US as well.  However, I also don't expect them to give away their money...so the wrangling over those funds will likely be fierce.

 

(Of course, I'm now imagining a world where Berkshire Hathaway ends up effectively taking this over...)


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#56 Guest_Andrew_*

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Posted 09 May 2013 - 04:55 PM

Would China invest in this?



#57 leemell

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Posted 09 May 2013 - 06:40 PM

Well, California Gov. Jerry Brown was in China for two weeks recently and one of his chief subjects was investing in HSR, CAHSR specifically.



#58 George Harris

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Posted 09 May 2013 - 07:21 PM

Last time I looked into it there were five major casino conglomerates investing in it.  They were not named but it sounds like the big players in Vegas.  The guy running the show is a major Vegas contractor who has built many of the Strip building complexes.  They probably haven't or couldn't withdraw as the RRIF application requires the funding details including almost certainly the names the investors.

 The casino operators would have a bigger view than just the railroad itself.  They migh joyfully pour money into a railroad that they know will lose money if that feel that it will bring more people in that will be willing to hand over money in Las Vegas sufficiently to justify the cost of the railroad construction and operation.  Also, they might figure that the operating cost will be worthwhile even if the original overall investment cannot be recouped.  If they feel their loss on a bankruptcy of the railroad is tolerable, they would be more than willing to let it happen regardless of who else loses.  After all, these guys are not exactly models of integrity.  Remember, our government has shown itself more than willing to dump money into losers given the right political connections, and it is hard to be much better connected politically than Harry Reid.

 

There is a good historic example of this:  The Florida East Coast Railroad.  Henry Flagler built it up to encourage travel to south Florida with the objective of encouraging travel to south Florida where he had major interest in developing Miami and environs.  He did not mind that the railroad lost money so long as the overall picture was positive for Flagler, and given the time, there was no possibility of government bail outs as there is now. 



#59 Anderson

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Posted 09 May 2013 - 07:26 PM

Well, Flagler felt that the company as a whole would make money...land company and all.  IIRC, the only big money-loser was the Key West Extension (which was an engineering mess as well).  The main line wasn't a massive money-maker, but it didn't lose money and the land operations (sadly since split off) made up for it with a solid return on investment.

 

Actually, this is a sort of inverted version of the railroad resorts in NJ/MD/DE: The railroads built the resorts partly to encourage travel on their lines to/from them.  Here, the resorts exist, an they're investing in the railroad to get people to them.

 

With that said, you do raise an interesting possibility: The casinos invest in the road, it ultimately goes bust under the debt load, but once that clears you have a modestly profitable entity that can be floated (after all, let's not forget how many railroads went bankrupt once construction was complete but which stayed in business).


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#60 Guest_SWendt_*

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Posted 13 May 2013 - 04:53 AM

Of the two viable options out there, this one is by far the more costly and the more risky. The X Train will provide affordable service from Fullerton to Las Vagas whereas XpressWest will not connect to anything without an additional $1.5 billion extension. Anyone driving out to Victorville has already driven through the worst part of the trip, namely getting out of the LA basin.  The X Train also has already secured rights for a good portion of its route. Track that is already in place, which is why the X Train could actually be running trains by the end of the year. X Train has already purchased equipment and has folks with real railroading and logistics experience. And they are doing it WITH PRIVATE MONEY. So, why should we loan Xpress West $5 billion dollars to build a brand new line that won't be completed for at least 3 or 4 years at the earliest and stops over 100 miles short of LA? Besides, because X Train has lower start up costs their chance of success are much higher, where the multi-billion dollar HSR is a huge gamble on a route that has always been lackluster at best.

 

I suspect that one reason Paul Ryan objects to this, as does Fred Frailey, is that there is no reason for the government to give a $5 billion loan to a company to provide an inferior service that a 100% privately funded company is already planning to provide for a lot less. This deal smells like a government subsidy to Las Vagas Casino operators. Will this really provide a $5 billion improvement in the everyday lives of the people of LA and LV?

 

Another disturbing fact about this and any money loaned to the CalHSR is that those billions are now NOT available to other projects that could provide a much more immediate and dependable benefit to many more people all across the US!  Think what Amtrak could do with that amount of money! Think about what kind of improvement could be made to other PROVEN corridors! Increased track capacity on the Surfliner which could allow real express service and increased speeds. Added station platform capacity on the Capitol corridor to allow quicker stops. Or how about loaning the money to Amtrak for the NEC rebuild to allow it to reach its dream of actually running its Acelas at their designed speeds over the whole route in 5 years instead of 45 years!

 

There is just so much more railroading that could be done with the $5 billion than building a 180 mile railroad in the middle of the desert.






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