Las Vegas Monorail files for Chapter 11 bankruptcy protection

Las Vegas — Troubles continue to mount for the Las Vegas Monorail – the city's privately owned 3.9-mile elevated tourist line connecting several casinos and the Las Vegas Convention Center in the famous Strip district.

On January 13th, the line's private operator, Las Vegas Monorail Company (LVMC), filed for Chapter 11 bankruptcy protection, with officials laying blame on the current economic crash, leading to a drop in ridership as fewer people have been visiting the tourist-oriented city. "The current economic downturn, including a 30 percent decline in convention traffic to Las Vegas, has increased the financial strain on the Monorail, like it has with every other tourism-dependent Las Vegas company" said President and Chief Executive Curtis Myles, quoted by the Las Vegas Sun (Jan. 13th). However, Myles assured the public that the line would continue to operate.

According to an article in the Las Vegas Review-Journal (Jan. 15th),

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Ridership has never met expectations since 2004, when the elevated train began providing service between the Las Vegas Convention Center and Strip hotels. Because the train's popularity was underestimated, the company has failed to pay off the $650 million in construction and start-up costs. In 2000, the state's Department of Business and Industry awarded the company the tax-exempt bonds in a three-tier structure with the company promising revenue after the monorail met the start-up costs. Monorail representatives told the state it anticipated about 20 million passengers a year who would pay a fee of $2.50 per trip. Its Web site says it has carried 27 million passengers in five years. Last year, the train carried 6 million passengers and brought in $27 million in fare box and advertising revenues. In prior years, ridership figures hovered between 7 million and 8 million.
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LVMC CEO Myles told the Sun that the monorail had carried 40 million riders (rider-trips) since opening. However, that would still average less than 8 million a year – about 40% of the original projection.

In its documents filed in federal Bankruptcy Court, LVMC indicated debts of $500 million or more owed to hundreds of creditors, according to the Sun article.

While the paper notes that "The monorail has suffered from a poor local image", it nevertheless acknowledges that there have been "frequent calls to expand its service to McCarran International Airport."

CEO Myles affirmed that "We have long expressed the importance of expanding our system to the airport and other points within the resort corridor", but added, "It is necessary that the company first get through this process to address its current capital structure before moving forward with those plans."

However, there remain daunting financial obstacles to any such expansion of the system, says the Sun, pointing out that the LVMC hasn't even paid off its original investment loans. Citing an LVMC board member, the paper notes that "The company hasn't raised enough money from fares to pay off the $650 million in construction and startup loans floated to build and start operating the expanded system...."

In an brief analysis of the latest monorail developments, LRN Project senior technical consultant Edson L. Tennyson concludes that

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Since roads are free, there is no way the monorail company could fulfill its promise to pay for everything out of the farebox. It was a dishonest scam promotion that deserved to fail.

However, this does not prove monorail is not sound, as no light rail or commuter rail system could do without subsidy, either.

We need to look at that $25 million annual fare revenue from 6 million annual passengers and about 18 million annual passenger-miles. That is $1.39 revenue per passenger-mile, enough to make a profit on MetroBus in Washington; but MetroBus charges "only" 33 cents fare per passenger-mile, well above average. San Diego Trolley would almost break even on MetroBus fare per mile.

Clearly, monorail has no economic justification, not because it went bankrupt, but because its operational costs are so high and passenger attraction so low.
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The Las Vegas Monorail, like several other recent monorail proposals and projects, was portrayed as a much more feasible and desirable alternative to light rail transit (LRT) by a segment of that loose grouping of rail transit opponents sometimes wryly characterized (by LRT supporters) as the "Anything But Light Rail (ABLR)" amalgam. Among that sub-group, the Las Vegas Monorail was expected to become a model of the supremacy of monorail technology, both technologically and financially.

However, the monorail's major technical problems quickly dispelled the notion of technological superiority. And, over the past several years, the monorail's purported financial performance advantages have been steadily discredited by its deteriorating financial condition.

Now the monorail's bankruptcy tends to corroborate assessments of monorail feasibility expressed in previous LRN reports.

For example, discussing a spate of problems with the Seattle monorail projects (which led to its eventual demise), our article Seattle: Monorail project's financial uncertainty sets off alarms cautioned that

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...these recent developments tend to provide additional evidence that monorails are not the "miracle transit" solution their promoters would have the public believe – and in fact are as vulnerable to common problems as any other major transit project.
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And, in a 2005 article on earlier financial problems, Las Vegas Monorail extension plans in doubt after FTA nixes funding, LRN warned:

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The latest travails of the Las Vegas Monorail seem to represent an object lesson in the need for realistic expectations in public transport projects. While the monorail's current average ridership of 37,500 per day would be considered excellent for almost any new North American rail or guideway transit service, the problem in the Las Vegas monorail case seems to be unrealistically high expectations – the Las Vegas monorail has consistently been portrayed as something of a "miracle", supposedly poised to break the "norm" of subsidized transit operations by attracting so many riders (with automated operation at an unusually high fare level) that it would make a "profit" and pay for its ongoing operational costs, plus paying back its private investors. ...

In their crusade to disparage light rail and other forms of standard-rail public transit – especially modes operating on the surface – monorail enthusiasts have repeatedly brandished the Las Vegas monorail as an example of a technology with some kind of miraculous capability. Meanwhile, many experienced transportation professionals have consistently voiced skepticism. Now, it appears, what would otherwise be regarded as, indeed, a phenomenal success in terms of ridership and high revenue, is being branded a failure. This is unfortunate, but it seems to represent an example of what happens when enthusiasm eclipses reality.
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Despite bankruptcy and its other troubles, it's conceivable that the Las Vegas Monorail will be able to remain in operation, and perhaps even eventually claw its way back to some degree of financial stability. But there is nothing in its experience to suggest it's a worthy model for other American cities, and, in our view, certainly not a superior alternative to surface light rail transit and regional passenger rail systems.

On the contrary, the Las Vegas experience strongly corroborates our consistent contention that monorail technology is an expensive, technologically inferior, and far less flexible "fixed-guideway" transit mode compared with standard rail systems – especially surface LRT – and that urban transit planners would be well cautioned to scrutinize any proposed monorail alternative on the basis of real-world experience (e.g., operating monorails in Las Vegas and Jacksonville, and Seattle's Monorail Project devacle), rather than the fantasies and promises of monorail promoters.