XpressWest, a high-speed rail line that will connect Southern California to Las Vegas, won $200 million of private activity bonds from Nevada, a critical final public allocation that allows the company owned by Wall Street investor Wes Edens to raise an additional $800 million for the project.
The Nevada State Board of Finance’s approval for the project, a unit of Edens’ Florida-based Brightline passenger rail service, comes after California awarded it $600 million of private activity bonds in April. XpressWest can sell four times the value of the awards as tax-exempt bonds to private investors, meaning it’s now lined up $3.2 billion of funding from the two states. Including a $1 billion U.S. Department of Transportation allocation in March, XpressWest has lined up $4.2 billion of the 170-mile rail line’s total $5 billion construction cost.
“This plan creates jobs without using taxpayer dollars and without impacting our state’s ability to finance future projects, and will allow a new, convenient mode of transportation between Nevada and California,” Nevada Governor Steve Sisolak said. XpressWest says the project will create a total of 30,000 construction jobs and 1,000 permanent jobs in the neighbouring states once the line is up and running in a few years.
Brightline operates the only privately owned U.S. passenger rail line, currently connecting West Palm Beach to Miami, and is building an extension to Orlando. Edens’ has told Forbes he sees a big opportunity in the U.S. for rapid trains links between middle-distance cities that are too close to fly but a little too far to drive, modelled on the Paris-to-London Eurostar and other private European trains.
The company estimates its West Coast and Florida rail projects will cost a combined $9 billion build but Edens says they will eventually generate “spectacular” profits. Brighten estimates the two projects may haul nearly 20 million passengers in 2026, generate annual revenue of $1.6 billion and operating profit of almost $1 billion a year.
“The lack of passenger travel by train in this country is a travesty,” Edens told Forbes early this year. “It’s a gigantic opportunity.”
The XpressWest line will be built near Interstate-15 and operate electric trains travelling at speeds up to 200 miles an hour to move people between Southern California and Las Vegas in 85 minutes. Construction is to start late this year and the company estimates it will attract 10 million riders annually.
“Large-scale construction projects are a critical piece of rebuilding our economy, and private activity bonds are a perfect mechanism to incentivize the private sector to deliver public benefits,” said Sarah Watterson, chief development officer for XpressWest.
Currently, the California terminus for the XpressWest line is Apple Valley, a high desert community about 90 minutes from Los Angeles, but the project is in talks to extend it to Rancho Cucamonga, a Los Angeles suburb that’s connected to downtown LA via the Metrolink commuter rail service.
Private activity bonds, created by the federal government for high-cost infrastructure projects, are tax-exempt but do not use public funds.