California again delays Virgin Trains decision on bond approval

California Treasurer Fiona Ma postponed a decision that had been expected next week on whether Virgin Trains USA could sell as much as $2.4 billion in tax-exempt debt for a railroad to Las Vegas.

The delay gives the company more time to secure an affirmation from the Federal Railroad Administration that it won’t require more environmental review for the project, which has been in the works for more than a decade under different owners. Virgin Trains, backed by Fortress Investment Group’s private equity funds, plans to build a rail line to the gambling hub from Apple Valley, a desert town 90 miles (145 kilometers) northeast of Los Angeles.

In a letter to the company last month, the federal agency said it’s “continuing to analyze whether the current project modifications trigger the need for additional environmental review.”

Ma is postponing putting the matter before the state’s Debt Limit Allocation Committee next meeting on Feb. 12 “until we get the federal letter to proceed with the project,” her spokesman Mark DeSio said by email. The matter may come up in the March meeting of the committee, he said. A decision from the committee had been expected during its Jan. 15 meeting, but officials pushed it back until this month.

By getting $600 million of California’s allocation for private activity bonds, the company can leverage that four times to $2.4 billion in bonds because of federal rules extending that special boost to railroads. A California agency, combining that with a federal allocation, would issue as much as $3.2 billion of tax-exempt debt on the train’s behalf.

The company is also asking Nevada to sell as much as $800 million for the railroad, plus another part of the federal allocation, so the company’s tax-exempt financing plans total $4.2 billion. Virgin Trains would be on the hook for debt payments, not the government agencies selling the bonds.