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February 19, 2006

The Vegas monorail boondoggle

Las Vegas monorail.jpgTory Gattis of the smart Houston Strategies blog has been doing his typically excellent job of covering developments on the proposed expansion of the Houston Metro light rail line. Neither an over-the-top advocate nor a grizzled pessimist about urban rail systems, Tory takes a refreshingly measured view that such systems should attempt to maximize usefulness while being a part of an integrated urban mobility plan that doesn't place all urban mobility eggs in one transit-type's basket.

The wisdom of Tory's approach is reflected by what is currently playing out in Las Vegas, where Sin City's new $650 million, 4.4 mile monorail project just experienced the worst monthly ridership in the system's 18-month history (earlier post here). Although comparing Houston's light rail system to the Las Vegas monorail is bit akin to comparing apples and oranges, it is noteworthy that the poor performance of the Vegas monorail has contributed mightily to the junk bond rating of the Las Vegas Monorail Co. bonds that were used to finance the system. Now, the Vegas transit authority finds itself unable to sell bonds at a realistic price in order to finance construction of logical expansions of the system, such as an extension to McCarron Airport.

Read the entire article because it is a wonderful reminder to us of how financial logic and constraints are abandoned in the face of such governmental boondoggles. For example, what do you think the Vegas transit authority did in the face of a system that is generating less than half of the amount necessary to pay operating expenses and debt service, lost $20 million last year, and is generating far fewer riders than projected?

The transit authority increased its base one-way fare from $3 to $5.

But wait, pointed out a spokesperson for the transit authority, that cool move generated an almost 24% increase in monthly revenues from a year ago even though 18% fewer riders used the system. Thus, even though the system needs over a 50% increase in monthly revenues to approach break even status, the transit authority's spokesperson reasoned that an anecdotal month's worth of higher revenue indicates that a drastic ridership increase won't be needed to break even. According to the transit authority, all that is needed is a quadruple increase in the monorail's marketing budget in order to attract more riders, presumably high-rollers who enjoy moving from casino to casino. Often.

So, how long do you think it will take for the Vegas monorail to be converted into Vegas' newest rollercoaster attraction? ;^)

Posted by Tom at February 19, 2006 07:42 AM

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Thanks for the very complimentary post! I am somewhat surprised that the Vegas monorail is suffering so badly, given the major destinations along the line and the number of tourists that go to Vegas each year. A few thoughts:

-- $650m for 4.4 miles is simply *insane* (our Main St. line is roughly twice the length for half the price)

-- $5 one-way fares are nuts. If you're traveling with at least one other person, a taxi seems like a more attractive option.

-- The casinos try to be totally self-contained and discourage wandering. I think people usually go to Vegas for a weekend and stay at a single hotel-casino for that trip.

-- Making people walk through casinos to get to the stations in back is a nightmare - it can easily add 5-10 mins of travel time at each end of the trip. The casinos have a strong financial incentive for you to get lost in their casino, give up, and start feeding them money - so the walks are circuitous and the signage almost non-existant (at least that's how it was for the old monorail system when I was last there - according to the Wikipedia, nothing's changed:

http://en.wikipedia.org/wiki/Las_Vegas_Monorail

Posted by: Tory at February 19, 2006 09:53 AM

I don't mind being referred to as "Grizzled" when it comes to relentlessly reminding those uninformed taxpayers that Urban Rail in Houston is so utterly wasteful, those who advocate it should be shunned not celebrated as they seem to be.

I am waiting for the FY2005 METRO report just sent to the FTA NTD to show how wasteful it has been of our precious transit resources.

Here is what I gleaned from the FY2004 report that included nine months of tram operation:

Derived METRORail FY2004 Statistics:

Revenue/VRM $ 3.14

Operating Expenses/VRM $29.86

--------

TAXPAYER SUBSIDY/VRM $26.72

TAXPAYER SUBSIDY/UPT $2.36 *


*The operating expenses do not include significant costs for Rehabilitation/Reconstruction/Replacement/Improvement for existing service (yet this was a start up situation).


*****

Environmental economist Randal O'Toole (Thoreau Institute: www.ti.org) has produced a 14 page report with a lot of interesting history of the U.S mass transit industry.

He has a subspecialty in transportation. This report was done for the Cato Institute.

http://www.cato.org/pubs/pas/pa559.pdf

Posted by: Tom Bazan at February 19, 2006 02:27 PM

While I was at CES this year, I tried using the Las Vegas monorail to get around. CES is notoriously overcrowded and getting a taxi can take hours at peak periods. But the monorail was not much better, due to the drawbacks already mentioned here: stupid placement of stations at the back of casinos, poor signage and overpriced tickets. I think the monorail could have been a boon, but too many interest groups got in the way . . . cabs and limo companies didn't want it coming to the front of hotels and competing with them. And the casinos didn't want it spoiling the flow of traffic past the gaming tables. To do something like this right, you really have to put transit where people can get to it easily, and have it go where they really need to go.

Posted by: Dwight Silverman at February 19, 2006 06:20 PM

This is an example of human behavior not coinciding with "Socialist Central Planners."

People do no want to be hered like "Sheeple." If they can afford a private vehicle, they will take it.

Short of people like HPD Chief Hurtt, who will soon likely ask Houston Mayor "Citizen Bill" to expand his proclamation "that Houstonians do not have the right to change a flat tire along the side of the road" to "Houstonians do not have the right to drive a car in Houston."

Time will tell.

Posted by: Tom Bazan at February 20, 2006 07:42 AM

"Grizzled" is not the term I use for Tom when he refers to me and others as uninformed taxpayers, when we support mass transit for ALL Houstonians, as opposed to the wretched few who cannot afford a car.

However, Las Vegas does have parallels to Houston. As noted earlier, poor routing and placement of stations kills ridership. For us, running tracks to the backs of homes and businesses, as Westpark would do, is akin to running your monorail to the back of the casino. It is my hope that METRO does its job by choosing the BEST route for the University line, instead of bowing to threats by a minority of voters who won't use the system anyway.

Posted by: RedScare at February 21, 2006 08:21 PM

Important point re: the Vegas monorail: this is not a government project. It's actually a private non-profit corporation which had hoped to cover both operating and capital costs with fares. At this point that doesn't look likely, so a government bailout may well be coming. But this isn't a misguided "transit authority" or "socialist central planners." It is a cautious tale for anyone who thinks the secret to good transit is "space-age" technology rather than well-located stations and convenient service.

Posted by: Christof Spieler at February 22, 2006 06:34 AM

Couldn't the Vegas monorail more correctly be called a failure of Capitalist Planners?

Posted by: Mark at March 17, 2006 07:28 PM

Also what is being missed that is that the LVM is covering its operating and maintenance costs ... which is more than any light rail system can claim.

It isn't a true capitalistic venture. Had it been done as any startup company there would have been private stock sold as part of the capital mix. As it was, it was funded entirely by bonds.

if the city wants an extension, it will probably have to fund it.

Posted by: Larry at April 7, 2006 11:47 AM

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