from the Las Vegas Sun:
Las Vegas Monorail’s failure may drive down state’s credit
Ratings agencies have taken notice of bankruptcyBy Steve Kanigher
Tuesday, Feb. 16, 2010 | 2 a.m.
When Nevada issued bonds to finance the Las Vegas Monorail 10 years ago, one of the objections was that the state was, in effect, putting its good credit rating at risk by banking on the success of the monorail.
Now that the monorail is in default on those bonds and has filed for bankruptcy protection, it could force Nevada taxpayers to pay higher interest rates on money that the state borrows through bond financing, an attorney for a major creditor in the bankruptcy case warns.
The state sells bonds to finance big-ticket projects such as highways. The state’s bond rating affects the interest rate it gets on those bonds. The increased amount of interest taxpayers would have to pay for state public works projects could easily add up to millions of dollars over the duration of a bond if Nevada’s rating dropped.
In 2000, the state issued $650 million in industrial development revenue bonds on behalf of the monorail. This type of bond is intended for nonprofit corporations that serve a public benefit — in this case, to relieve traffic congestion from the adjacent Strip — and are to be paid from revenue generated by those projects instead of from taxpayers. It is general obligation bonds — which are issued by the state to build roads, schools and other public works projects — that taxpayers are responsible for paying off. ............(more)
The complete piece is at:
http://www.lasvegassun.com/news/2010/feb/16/monorails-failure-may-drive-down-states-credit/