Fortress Plan on Las Vegas Passenger Rail to Wait Until 2022
(Bloomberg) -- Fortress Investment Group will wait until 2022 to try again to finance a passenger train to Las Vegas from Southern California with tax-exempt bonds.
Its company Brightline Holdings, LLC had planned to go before the California Debt Limit Allocation Committee this year. In January, the state board reserved that portion of California’s limited financing resource in anticipation that the venture would request $200 million of private-activity bonds. Brightline spokesperson Ben Porritt said no size for the bond request next year has been set yet.
Fortress last October pulled an unrated bond sale that would have financed construction for a 169-mile (272-kilometer) line connecting Las Vegas to the desert town of Apple Valley, 90 miles away from downtown Los Angeles. It failed to attract enough investors even after it was downsized to $2.4 billion from $3.2 billion, showing that sweeteners and high yields weren’t enough to overcome reservations about a project that depends on the recovery of the pandemic-ravaged travel and entertainment industries and has few comparisons in the U.S.
In the latest iteration of the project, the line would move closer to Los Angeles by extending to Rancho Cucamonga, which is located along an existing commuter rail called Metrolink.
“We support their efforts to extend to the Los Angeles metro area,” California Treasurer Fiona Ma, who chairs the agency that divvies up the scarce bonds, said in an emailed statement. “There it will serve more residents and help establish a new multi-modal hub that will create environmental and economic benefits.”
Last year, California and Nevada had given Fortress the ability to sell private activity bonds, which are meant for ventures for the public interest that are capped annually in each state by the federal government. California reallocated Fortress’s award of $600 million to affordable housing needs.
“COVID has impacted just about everyone, including our cooperating agencies, and as a result shifted our timeline for this request to 2022,” Porritt said in an emailed statement. “Private activity bonds are a great way to enable private sector investment to modernize America’s passenger rail infrastructure at both the federal and state level and we expect they will play a meaningful role in the success of this project.”
Ma is a strong supporter of the Fortress train. In a June 7 letter to Congressional members, she urged measures to boost high speed rail such as increasing the federal allotment of private activity bonds by praising the company’s line in Florida. That system, the country’s first new privately financed intercity passenger rail in a century, is expected to resume operations later this year that were suspended due to the pandemic, Porritt said.
©2021 Bloomberg L.P.