Bloomberg News

Vegas Train Loan Shouldn’t Be Solyndra Victim, Chief Says

May 18, 2012

DesertXpress is proposing a 190-mile link between Victorville, California, and Las Vegas with trains reaching 150 miles per hour. Source: DesertXpress via Bloomberg

DesertXpress is proposing a 190-mile link between Victorville, California, and Las Vegas with trains reaching 150 miles per hour. Source: DesertXpress via Bloomberg

The U.S. high-speed rail line that’s closest to construction deserves a $5.5 billion federal loan that shouldn’t be held up by backlash from Solyndra LLC’s bankruptcy, DesertXpress Enterprises LLC executives said.

Closely held DesertXpress is proposing a 190-mile link between Victorville, California, and Las Vegas with trains reaching 150 miles per hour.

It can break ground within months if the U.S. Transportation Department approves its loan application made in 2010, Andrew Mack, chief operating officer of DesertXpress, said in an interview in Washington yesterday.

“The project has been keeping its head down and developing for eight years,” said Greg Gilbert, the company’s legal counsel. “We hope we don’t get caught up in politics, because we’ve focused on the business enterprise.”

The amount requested by DesertXpress is about 10 times larger than the loan guarantees solar-panel maker Solyndra won from the U.S. Energy Department before failing last year, leading to congressional hearings and investigations. It would also be more than three times the amount of all loans made under the Federal Railroad Administration’s construction fund.

DesertXpress is majority owned by Las Vegas-based Marnell Cos., which helped build casinos such as the Mirage and Bellagio, both owned by MGM Resorts International. (MGM:US) The project is supported by U.S. Senate Majority Leader Harry Reid, a Nevada Democrat.

“It is policy of the Federal Railroad Administration that we do not comment on pending loan applications,” Kevin Thompson, associate administrator for communications and legislative affairs, said in an e-mail.

‘Relatively Strong’

Agency Administrator Joseph Szabo, in an interview in November, called the merits of DesertXpress’s application “relatively strong.”

The lengthy scrutiny the loan has received from regulators and Congress should shield the project from political criticism, Mack said.

“This should demonstrate to the world we have a viable project, which we think we have,” he said. “This is a public infrastructure project. It’s going be open to the public and serve a public purpose.”

The proposed railroad’s Victorville terminus is about 85 miles northeast of downtown Los Angeles by car. The company plans to build 15,000 parking spaces to accommodate commuters who would prefer to ride the last 80 minutes of a casino trip by rail rather than risk hours more stuck in traffic, Mack said.

Few Loans Taken

The railroad administration has authority to lend $35 billion from a 14-year-old construction fund that has distributed only about $1.6 billion since 1998, according to the FRA’s website. House Transportation and Infrastructure Committee Chairman John Mica, a Florida Republican, criticized the agency in February 2011, before Solyndra’s troubles became publicly known, for not processing loans fast enough.

The rail developer is in talks with construction firms, railroad suppliers and financiers, and will have $1.4 billion in private financing and cash to cover the remaining costs to begin operating trains, Mack said. He declined to name the firms, saying talks were in progress and a final deal was dependent on the government loan.

Developments in California should make the project more attractive to regulators, Mack said. Plans are underway for a 52-mile transportation corridor between Victorville and Palmdale, California, that would link DesertXpress to Southern California’s commuter-rail network, he said.

Local governments in Los Angeles and San Bernadino counties are close to an agreement that will increase speeds on the commuter-rail network to accommodate high-speed trains, Mack added. That could make DesertXpress a link if a future Western high-speed rail network includes Utah and Arizona, he said.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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