Friday, March 1, 2013

The fraudulence of the Vegas X-Train

A recent article on the Las Vegas X Train, a conventional train from Fullerton to Las Vegas, exposes some of the massive issues involved in this project.

In order to launch this service, they need to raise a total of $150 million by the end of this year, a task that I consider to be essentially impossible given that they possessed only $332,123 in cash assets as of December 31st. The situation is actually grimmer than that: If they do not pay Union Pacific $27 million of the $56 million owed for track improvements and use by the end of this month, March 31st, they will lose their $600,000 deposit and likely the track use agreement as well. With low cash on hand and no demonstrated ability to raise those funds, I am extremely doubtful that this will go forward. To a certain degree I'm doubtful that they want to move forward; seeking only $2.5 million in bridge funding when a critical $27 million payment is due in a month does not strike me as good business practice.

Then we come to the ridership expectations.
Barron said he sees a demand for this kind of targeted limited service. About 12 million Southern Californians drive to Las Vegas every year. He says that if Las Vegas Railway can attract just 237,000 travelers or about 2 percent of that traffic, the venture can be successful.
By way of contrast, in 1992, when Amtrak's Desert Wind still ran a daily service, only 84,000 passengers took the train from Southern California to Las Vegas. Even using Talgo trains with three daily frequencies from Los Angeles to Las Vegas via Montclair, San Bernardino, Victorville, Barstow, and Primm expected only 362,000 passengers per year and still a financial loss (page 107). To claim expectations of 237,000 annual passengers on a non-stop service from Fullerton, without through ticketing from other corridor rail services I might add, on a twice weekly train, and that it would reach this level within four to six months of beginning service can most charitably be described as delusional. It flies in the face of every sound rail study or rail planning methodology and would be based entirely on wishful thinking.

Of course, I did title this as "the fraudulence of the Vegas X-Train" and not "the delusion of the Vegas X-Train" and I did so because fraud seems to be the operating factor. For instance, their website claims "At $4.00 per gallon, a round trip from LA to Las Vegas by SUV costs $300. As prices rise, travel by rail becomes even more economical." This is a blatant lie; such a fuel expense belongs to a bus, not to an SUV. Even the worst performing SUVs, at $4 per gallon, would have a fuel expense of $177; a far cry from $300. "Initial train fares will be $99 each way. Barron notes that the rates compare favorably with Orange County-to-Las Vegas air fares, which recently averaged about $225 each way on Southwest Airlines and its subsidiary AirTran." While it is true that average fares at peak travel times and short notice for Southwest may be $225 each way through John Wayne, Fullerton is, time-wise, about equidistant from John Wayne, Long Beach, and Ontario airports, the latter two of which are substantially cheaper than John Wayne for traveling to Las Vegas.

In addition to those grave deceptions, the fact that what appears to be an essentially fictitious company (Rail Enterprises, Inc. of Orlando, Florida)  handling the rebuild of their cars raises additional issues. While some rebuilds can be associated with the name of the owner, Donald Primi, they are almost universally under a different company's name (Royal Rail) and do not appear to be allowed on the rail network. I do not believe that that this was a competently bid out project or that any of the rail cars will be refurbished as described, much less on time and on budget. Rather, it strikes me as essentially paying a buddy rather than any real project.

As a final bit of evidence of fraud, while $99 is claimed to be the ticket price, with "Vegas class food and beverage" included in the price, the actual numbers are different. Per this presentation, (also available here in case they take it down), the expected ticket price per traveler is $198, escalating to $278 within five years, and an anticipated revenue of $278.40 per rider, escalating to $352.99; a far cry from an inclusive $99 fare. However, it must be said that this also works admirably as proof of simple incompetence. The ticket price works out if you assume all riders are round trip, however, this plays merry hell with their ridership numbers. Adjusting to what any other company would report ridership as, they're now claiming 454,112 passengers in the first year and that they are cramming over two thousand riders into each and every train (while they confusingly refer to "Two trains making two round trips 2 days a week (Thursday, Friday –Sunday)" in this presentation, and portray four round trip services in the finances, their proposed schedule clearly indicates that they mean four trains with two trips total each way per week).

At the end of the day, none of the potential explanations for the X-Train look good. Either they are completely delusional in their projections and expectations; they are involved in some sort of fraudulent, or at least grossly unethical, enterprise in a throwback to 19th century railroading; or they have single-handedly managed to put together the most incompetent American passenger rail project in recent history.

3 comments:

  1. While I agree 100% with your conclusion, the $300 number for the SUV is not unreasonable. Nothing in that section claims that $300 is the fuel cost alone. If you consider all the costs of operating a vehicle and the share of depreciation applicable to those 500+ miles, it's not difficult to get to a figure of $300. Perhaps it would be clearer if the line on the website was rewritten to say "At $4.00 per gallon, (the fuel costs have risen to a point where adding them to the other apportioned share of operating and ownership expenses means) a round trip from LA to Las Vegas by SUV costs $300". That's a little too unwieldy, though.

    I tell you what, even if you accept that $300 figure as gospel, all you have to have is one passenger sharing the cost, or zero passengers and a slightly more economical car, and you'll already have them beat on price.

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    1. The plain reading of it is the fuel cost alone and going off the AAA cost, it would actually be $400. I will admit that I absolutely hate it when people use the AAA cost of driving in comparisons as their methodology is horrible and the marginal cost of driving against taking a train or plane is the more relevant basis of comparison. The most I'd really want to add to the bare fuel cost is oil, which is recommended on mileage and has a sufficiently low mileage replacement basis that a trip such as this factors as a large percentage of its lifespan. In my view, it's deceitful to even use AAA, but sufficiently common and accepted that I wouldn't knock them if they had said they were using the AAA methodology.

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    2. "...all you have to have is one passenger sharing the cost, or zero passengers and a slightly more economical car, and you'll already have them beat on price."


      Of course, given that approach, you'll still be driving and not riding the train; but, your point's well taken - and none of this negates the basic thrust of the essay.

      Garl B. Latham

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