Knappster: Taxpayers getting hammered by monorail sweetheart deals

By George Knapp

What the heck has happened to Paradise Road? The place is like a ghost town these days. It's as if someone dropped a neutron bomb and wiped out all the cars, trucks and buses along this normally jammed corridor.

You say you haven't noticed any difference in the thickness of the traffic snarls along Paradise? Really? Even though the Las Vegas Monorail is up and running? And have you also failed to notice the dramatic improvement in our air quality now that so many thousands of cars are not cramming the resort corridor, thanks to the overwhelming success of the monorail? Maybe we aren't paying close enough attention.

Then again, maybe the monorail really isn't going to make even a tiny dent in our traffic and air quality problems. Of course, that's how it was sold to us. We were told over and over that this project was needed because it would be a transit system for the entire public, one that would relieve our traffic woes and improve our air quality. Does anyone seriously believe it will make one bit of difference? It's a transit system for the entire public all right, so long as the entire public is traveling to a particular casino on the east side of the Strip, because this transit system only travels to and from a handful of casinos.

Local media outlets have pretty much fallen all over themselves in their effusive praise of the project. Even the Review-Journal, the parent paper of the Mercury, jumped on the monorail bandwagon, largely because, in the R-J's estimation, there are no public funds wrapped up in the project. "None," says the R-J, which urged local officials to keep it that way when the system is expanded. The R-J should know full well that millions in federal and local dollars are already earmarked for the next leg of the monorail. And an even bigger price tag looms down the line.

Anyone who thinks the public has zero money in the 4.4 miles of monorail already in service is simply and absolutely wrong. Anyone who thinks this thing is a public works project designed to benefit the population as a whole must be looking through rose-colored glasses that are as thick as a cinder block. It's great that the public, including the officials, entertainers, space aliens, dueling Elvi and media types who crowded the train during its opening ceremonies are so giddy about the monorail, since it is highly likely that we will all own the system sometime in the near future. You think not?

I am reminded of the scene in the great film Chinatown when the Faye Dunaway character blurts out that another character is "her sister, her daughter, her sister, her daughter, her sister AND her daughter." That' sort of how it is with the monorail. It's private, it's public, it's private AND public, depending on what is most convenient at the time for the people running the show.

In the beginning, project founder Bob Broadbent assured us, over and over, that this project would be entirely private, that it wouldn't cost the taxpayers anything. Back then, the estimated cost was $250 million. The monorail eventually morphed into a quasi-public, sometimes-private hybrid. When that happened, the cost jumped to $650 million. True, no checks were written from public bank accounts to pay for it, but the state of Nevada did allow the monorail to raise money through government-backed revenue bonds. (Taxpayers might ask themselves, if the monorail is such a can't-miss propoposition, why couldn't its backers sell their own bonds without any involvement from the state?)

But the state revenue bonds aren't the only public stake in the project. State tax officials have granted millions of dollars in tax breaks to the monorail. They did it by declaring that the monorail qualifies as a tax-exempt charity, a decision that was made behind closed doors and with no public notificaiton whatsoever. The Las Vegas Sun reported on July 20 that the decision to grant tax-exempt status was made by the Nevada Tax Commission. Wrong. The monorail issue never made it to the Tax Commission and was never considered in a public meeting. See, in early March 2003, the decision was made to relieve the Tax Commission of the terrible burden of deciding which organizations should be deemed tax exempt. The authority was granted instead to the state's Taxation Department.

Coincidentally, just two weeks later, the issue of the monorail came up, and tax bureaucrats, meeting in private, handed away millions of dollars in potential tax revenue. (The monorail had applied for the exemption in 2001. It's interesting to see that no decision was made until the Tax Commission, which meets in public, was removed from the picture.) There was never a public posting of this decision. It was never even mentioned on the state's website. There was no press release from the monorail itself. Nothing. Zippo. It's just my opinion, but a decision of this magnitude would seem worthy of some tiny mention somewhere.

Oh, but that's not all. See, to declare a monorail that only travels to casinos as an official charity, tax officials and their legal advisers had to jump through some formidable hoops. They told the Sun that the monorail qualified as a tax-exempt entity because it provides "a service that is otherwise requested to be provided" by government. There's only one little problem with this explanation. State law doesn't say that. To qualify for nonprofit status, the entity in question must provide a service that is "required" of local government. Not requested, required. Big difference. There is no requirement that local government provide a monorail to casinos. There isn't even a law that requires local government to provide transportation services at all. Of course, the legal opinion that allowed tax officials to make this decision wasn't made public either.

Here's something else that wasn't made public. Knappster has repeatedly asked state tax officials whether any of the monorail's contractors have requested retroactive tax refunds. Again and again, tax officials have told me there have been no requests for any refunds or rebates from any company associated with the monorail. This is also untrue. I suppose it is another strange coincidence, but it was also in late March 2003 when the project's principal contractor, Bombardier Inc., filed a request with the state seeking a sales tax refund of $743,652.35. Not only did the state deny any knowledge of this request, but so did the monorail company. Well, I have the memos, faxed to the state from the offices of the monorail company, seeking this refund. Maybe $743,000 is such small change that it doesn't even register with the Tax Department or the monorail company, but I'm pretty sure it's something the taxpayers would want to know about. (State tax honchos say they will look into this but deny that any such refund was granted.)

Here's another way that taxpayers have a stake in the monorail. Tax exemptions were also granted at the local level. The monorail's casino partners turned over a lot of property and easement rights so the tracks could be built. One monorail spokesman estimated the value of that land at $100 million. That's taxable property that is no longer on the local tax rolls. The assessor's office figures that exempting the monorail's property and buildings from property taxes will cost in excess of $3 million a year. Did you hear anything about this decision? Was there a public announcement by any of the elected officials who are so exuberant about the monorail? No. I guess they figured we wouldn't be interested.

Finally, we come to the issues of salaries. I don't begrudge anyone the right to earn a living, but there's a funny smell surrounding how this whole thing was pulled off. See, when it comes to getting state revenue bonds, the monorail is a public enterprise. It's also public when it comes to getting tax breaks from the state and county. But when questions are asked about who is making what, the project gets private in a hurry. The monorail's backers fought tooth and nail against a proposed public audit of the project. As an alternative, they agreed to hand over an annual financial report to the state. The first report is packed with a lot of filler--charts and graphs and such--but somehow that first report omitted telling state officials how much all of the monorail's executives are making. Monorail honchos say they are a private company and their pay is their own business. How convenient. Today it's a private company. Yesterday, it was a public entity seeking favors from we taxpayers. (We do know that the Transit Management Co., which oversees the business side of the monorail, gets close to $7 million a year. We also know it has fewer than 20 employees. You do the math.)

It would take readers a week to absorb the byzantine connections among the folks who are running this enterprise. In a nutshell, it all flows from the late Broadbent, the former McCarran International Airport czar whose son-in-law, Cam Walker, is now president of the transit system. Cam's brother Todd is the chief spokesman for the monorail. They are related to Randy Walker, who succeeded Broadbent at the airport. It is worth noting that the decision to grant a 15-year management contract to Transit Systems Management, the company founded by Broadbent, was made without a lot of discussion. Oh, and it was made without accepting any other bids. Maybe that's because, in such matters, the monorail is conveniently private.

Maybe all of this will be seen as nitpicking. But maybe not. There's a little betting pool under way at the county to guess when the public will be asked to take over ownership of the monorail. The highest estimate is 24 months. It might seem far-fetched right now, but someday soon this discussion will begin in public forums. After all, public money and public loans will bankroll the second leg of the monorail. After that, it's only a matter of time before the whole system is assumed by the public. This timetable could be accelerated if the monorail's highly optimistic ridership estimates are exposed as inflated hucksterism. (Despite a massive publicity buildup, the monorail''s first day attracted only 30,000 riders, far fewer than what it needs to break even. The company says it will not make public any new ridership figures until September. There's that pesky public-private problem again.)

A monorail system that carries gamblers from one casino to the next--and nowhere else--is considered a public transportation system, a nonprofit, tax-exempt public service. A charity, under the law. Man, that's rich, although not as rich as some people might be once the government ponies up to take over the system. One local asks the question whether she should save her ticket stubs. After all, she reasons, if the monorail is a charity, then shouldn't she get some sort of a deduction for her ticket purchase? Guess that depends on what day it is, and whether the monorail on that day is public or private.