The Reason Foundation has released our "Xpress West" (formerly "DesertXpress") analysis. This high speed rail train would run from Victorville (90 miles from downtown Los Angeles) to Las Vegas. Promoters predict high ridership and profits. They are seeking a subsidized federal loan of more than $5.5 billion, which is within the discretionary authority of the US Department of Transportation to fund.
Our analysis concludes the following:
1. There is serious question whether there is a market for Las Vegas travel that would require driving one-third of the way and transferring to the train. If there is no such market, as seems likely from the international experience, ridership could be as low as 97 percent below projections. The reality can be known only after the line is running.
The balance of the report is based upon the assumption that there is a market for driving to Victorville and boarding a train to Las Vegas.
2. The ridership and revenue projections (by URS Corporation) are based upon data that is more than 7 years old and predates the Great Financial Crisis. There have been significant downward demand trends in the travel market and Las Vegas tourist market since that time, especially in the share of the market from the Los Angeles Basin. It is inappropriate to use such old data in projecting system performance (Certainly no private company would rely on such old data in a due diligence analysis).
3. Even after adjusting the obsolete data (which our report does), the ridership projections are implausibly high --- at four times the Amtrak Acela ridership between Washington, Baltimore, Philadelphia and New York.
4. Over 24 years (the forecast period in the project document), we project that expenditures will exceed revenues by between $4 billion and $10 billion. This would mean that there would be insufficient revenues to pay the federal loan. This could result in a taxpayer loss approximately 10 times that of the Solyndra federal loan guarantee.
5. The free use by the private Xpress West project of the Interstate 15 median could preclude cost effective expansion of this roadway. Even assuming the implausible Xpress West assumptions about the diversion of drivers to the train, the overwhelming majority of growth in the corridor would be on the highway, not on the train. This includes not only the heavy truck traffic, but also car traffic.
Related: The Las Vegas Monorail
Wendell Cox was also author of "Analysis of the Proposed Las Vegas LLC Monorail," which indicated that ridership and revenue projections were extremely optimistic and that the project was likely to fail financially. Subsequently the project filed bankruptcy and defaulted on bonds. The actual ridership on the Monorail was within the range predicted in "Analysis of the proposed Las Vegas LLC Monorail," and far below the level forecast by project consultant URS Greiner Woodward Clyde.
Also see this letter from other consultants reviewing the project (Thomas A. Rubin, Jon Twichell Associates, Professor Bernard Malamud and Wendell Cox).