With a potential 10,000 construction jobs at stake, Nevada recently approved $200 million in tax-exempt private activity bonds in order to help finance a high-speed electric train linking Las Vegas with Southern California.
The move by the state Board of Finance and similar actions by California and the U.S. Department of Transportation allowed the XpressWest train to issue tax-free bonds to help finance the $5 billion project.
Nevada Treasurer Zach Conine, who also sits on the Board of Finance, told State of Nevada that taxpayers are not liable for the bonds if the project goes bust. Instead of issuing the bonds, the state authorized their sale by XpressWest through its authority to approve private activity bonds for projects with a public good.
“There is no mechanical way that Nevada taxpayers can be on the hook for this project,” Conine told KNPR's State of Nevada.
The difference is the state is not issuing the bonds. Instead, it is approving the use of the bonds that are from the federal government. The state gets about $360 million in private activity bonds capacity a year.
“These are conduit bonds. So what they are is we can assign them to a company, a private business, that private business can then issue those bonds, make a promise to pay them off at a future date, sell those bonds with an interest rate – a coupon payment – that they have to pay,” he explained.
He said investors don't have to pay taxes on their interest payments from the loans, making projects like this one cheaper and actually viable.
These types of bonds are usually used for green energy projects or affordable housing projects, Conine said.
“It is a relatively limited group of projects, and so we have to look at all the projects that are in front of us and make the best decision for Nevada,” he said.
Conine said the state's business and industry department, the treasurer's office and the governor's office had been looking at this project for a long time.
It is not the first time a high-speed train link between Southern California and Nevada has been proposed.
“Dreams of a high-speed train, now a high-speed electric train, between California and Las Vegas have been in place probably since the first time somebody tried to drive back to California on a Sunday afternoon,” he said.
Before they approved the bonds, the state wanted to make sure it had money set aside for affordable housing. The state banked some of the private activity bonds for those projects.
It also wanted to make sure the train company was viable. Conine said they looked at the companies finances and projections. He said they are already running trains in Florida with success.
They also worked with Clark County, Regional Transportation Commission and Airport Authority to make sure the train would work with those agencies' future plans.
Conine said the state spent years going over the XpressWest's math to make sure they made the best and highest use of the finite resources.
It also helped the state's decision that both California and the Department of Transportation had agreed to fund the project.
“Knowing that California had done their due diligence, came up with the same answer as we had and the federal government was taking some of the resources they have and putting them into the project, gave us additional support and confirmation that this was a good idea,” he said.
Besides additional jobs, which are desperately needed during a global pandemic and subsequent economic downturn, the project will help Nevada reach its environmental goals by taking three million cars off the road.
“All of which we can do, in the parlance of the government, with other people’s money because there are private investors who are coming in, supporting this project and the state simply has to use a little bit of private activity bond cap to create those 10,000 jobs. It is a fantastic investment for us,” Conine said.
Plus, he noted making the trip between Southern California and Las Vegas easier will improve tourism.
“Anything we can do to make that experience more pleasant and more effective, quicker, safer, better for the environment, we should do,” he said.
The XpressWest's estimates the train will give 10 million one-way trips each year, which is about 1,000 every hour of every day.
While that might seem like a lot, Conine said that data has been thoroughly looked over and stress tested. More importantly, he said, if the company doesn't meet any of its projections, the state of Nevada is still not on the hook.
“While I’m confident that they will be successful, I’m extremely confident that the state is never going to have to pay a dime as they adjust or if they make or don’t make projections,” he said.
Last week, the Southern California Rail Authority approved agreements to possibly tie the existing Metrolink mass transit system into the XpressWest line when it becomes operational.
The start of construction has been announced for later this year, with completion set for 2023. XpressWest says the project is expected to create over 30,000 jobs during construction, including 10,000 in Nevada.
Zach Conine, Nevada treasurer, Board of Finance member