Let the market work: Las Vegas monorail edition
And the market working doesn't involve businesses seeking government bailouts.
Despite the promises of nine years ago, monorail officials now acknowledge they have quietly begun seeking public dollars in a bid to keep the financially troubled train running.Let's review how the market is supposed to work. Businesses and individuals make investments. If a business succeeds, it makes money. If a business fails, it loses money. If it loses enough money, the business goes away. Or in the case of the monorail, it gets sold off to the highest bidder, who would be able to run it as he pleased.
"We're looking at all potential funding sources," said Ingrid Reisman, a vice president of the Las Vegas Monorail. "We wouldn't be doing our due diligence if we weren't.
"Is there any determination what those solutions could be? No."
Reisman said the monorail is looking at federal loans through the Transportation Infrastructure Finance and Innovation Act. Other sources with knowledge of the discussions said monorail officials are also looking at room tax money to help repay debt.
And, all things considered, that's a good thing, because failing businesses are using limited resources (people and materials) inefficiently. The profits or losses of a business send a signal to other businesses and individuals. Profits tell other businesses to produce more of a certain product. Losses tell other businesses to stay away for losing products.
But if the government steps in and saves failing businesses, the signals change. Suddenly, more businesses are looking to produce a product that shouldn't be produced, because the government will reward them for it. (See also stimulus and bubble, housing)
And in the case of the Las Vegas Monorail, the reward for failure could be staggeringly large.
Fitch Ratings on Monday downgraded $450 million in bonds for the Las Vegas Monorail project to "C" from "CC," which means the credit rating agency believes a default "appears imminent or inevitable."That's a lot of money for 3.9 miles of track. Makes me shudder to think about how much taxpayers will be on the hook for if the Harry Reid-backed, Sig Rogich-sponsored train to Victorville gets approval.
The project has $200 million in other debt, which can be repaid only after the $450 million "first tier" is repaid.