Dive Brief:
- Virgin Trains USA's plans to build a $4 billion high-speed rail system between Las Vegas and Southern California will likely be postponed for two years after developers failed to win tax abatements from Nevada lawmakers during the most recent legislative session, the Las Vegas Review-Journal reported.
- If the state legislature had approved the rail company's request for partial breaks on sales and property taxes, construction would have started next year. Virgin plans to present the same package of tax abatements to Nevada lawmakers during the 2021 session. Bob O'Malley, Virgin's vice president of government affairs, told the Review-Journal that a tax deal was a critical part of the project's financing.
- The project is expected to generate almost $2 billion for the local economy; create more than 1,000 construction jobs; bring more than 5 million visitors to Las Vegas every year; and generate more than $14 million of environmental benefits annually. These positive impacts should be enough, O'Malley told the Review-Journal, to justify tax abatement.
Dive Insight:
O'Malley emphasized in his remarks to the Review-Journal that the kind of tax incentives Virgin was looking for from the state of Nevada did not constitute public funding for the project. However, he did maintain that such a give would encourage investment in the rail. Virgin, formerly Brightline, has made it clear that it will fund the entire project with private money just as it has the company's South Florida system. Virgin is also planning to privately finance an extension from South Florida to a new terminal at Orlando International Airport and then from Orlando to Tampa.
Privately funded rail projects, Joseph Schofer, professor of civil and environmental engineering at Northwestern University, told Construction Dive last month, have a better chance of success than publicly funded ones because when private investors' money is at stake, there is a higher level of due diligence before the project begins and better risk management throughout the project.
Critics of publicly funded rail point to the California bullet train project, which was supposed to connect San Francisco and Southern California, as an example of what not to do when planning and executing such initiatives. The project, years behind schedule and billions over budget, was scaled back to a 119-mile segment between the California cities of Bakersfield and Merced by Gov. Gavin Newsom.
However, what was estimated to be no more than $18 billion for the one Central Valley stretch has now ballooned to more than $20 billion. The Federal Railroad Administration has decided that the obstacles facing the bullet train will prevent it from meeting the deadlines included in a $929 million funding agreement, so it has rescinded the grant.
