High-Speed Rail Project Linked to Sen. Reid on Verge of Landing $4.9B Fed Loan

DesertXpress, a privately held company with links to Senate Majority Leader Harry Reid (D-NV), is spearheading a high-speed rail project aimed at connecting tourists from Southern California to Las Vegas and says it needs a $4.9 billion federal loan to do it.

Along with Sen. Reid, the project is being advanced by casino developer and contractor Anthony Marnell II, who heads Marnell Companies, the majority shareholder in DesertXpress; project consultant Sig Rogich, a Republican adviser to two presidential campaigns who founded Nevada's most influential lobbying and advertising company; and Canadian transportation giant Bombardier, a DesertXpress strategic adviser that wants to supply its rail cars.

But how, exactly, is Sen. Reid attached to the project?

Sen. Reid initially backed a rival project that planned to use magnetic power to reach Orange County, but he jumped ship shortly after Rogich became co-chair of Republicans for Reid, a Nevada group with ties to the gambling industry that helped Reid win re-election in 2010.

The senator's office disputes any connection between his flip and Rogich's involvement in the campaign. Spokeswoman Kristen Orthman says Reid's decision was based on the viability of DesertXpress, while the other project languished.

This Jan. 25, 2012, photo shows the site of a proposed station for the DesertXpress high-speed rail line to Las Vegas, background, at the end of the Dale Evans Parkway exit from Interstate 15, on the far outskirts of the Mojave Desert city of Victorville, Calif. (Photo: Reed Saxon/AP)

Marnell, another member of Republicans for Reid, is president of one of several companies under the DesertXpress corporate banner. He and his son, M Resort, Spa and Casino President Anthony Marnell III, are also investors.

Federal records show the elder Marnell has donated at least $15,000 to political committees connected to Reid since 2010, including a $5,000 donation in May to the senator's Searchlight Leadership Fund.

Furthermore, DesertXpress has spent at least $270,000 since 2006 lobbying at the House, Senate, and federal offices, according to the Associated Press.

Other investors include North Dakota businessman Gary Tharaldson, who donated $10,000 to a Reid committee in March, and transportation expert Tom Stone, who organized DesertXpress with partner CEO Andrew Mack in 2005.

Simply put, several of the major backers behind the DesertXpress project have either directly campaigned for or financially contributed to Sen. Harry Reid -- the most powerful man in support of the project.

The 150 mph train could act as something of a lifeline to an area that has been hit particularly hard by the recession. However, because there are some issues with the plan, the loan could also end up being a waste of money.

Take, for instance, the fact that the project hinges entirely on the idea that Californians are willing to drive approximately 100 miles from the Los Angeles area to board a train bound for Las Vegas.

"It's insanity," says Thomas Finkbiner of the Intermodal Transportation Institute at the University of Denver. "People won't drive to a train to go someplace. If you are going to drive, why not drive all the way and leave when you want?"

Then there’s the fact that the Federal Railroad Administration (FRA) – which is considering awarding what would be, by far, the largest loan of its type – doesn’t believe the methods used to gauge how many people will ride the train are accurate, which means revenue projections are hazy (at best).

Construction cost projections have soared to as much as $6.5 billion, not including interest on the loan. Some fear taxpayer subsidies are inevitable.

And although Sen. Reid and other supporters point to research that shows “80,000 new jobs” will be created, FRA documents show virtually all those would be temporary — no more than 722 would be permanent.

This photo Jan. 25, 2012, photo shows the site of a proposed station for the DesertXpress high-speed rail line to Las Vegas, foreground, with Interstate 15 in the background, on the far outskirts of Victorville, Calif., the Mojave Desert city on the route from Los Angeles to Las Vegas, (Photo: Reed Saxon/AP)

A decision on the loan is not expected until mid-year, but the company has spent some $30 million sharpening its plan and refining ridership projections.

The low-interest loan would be about three times the combined amount the FRA loaned 32 other projects through the Railroad Rehabilitation & Improvement Financing program since its inception in 2002. Transportation Secretary Ray LaHood has publicly blessed the train — it means jobs, he says — and it has already cleared several regulatory hurdles in Washington.

The Associated Press contributed to this report.