$8 Billion Project Could Boost Housing, Commercial Development in Southern California’s High Desert and Beyond
A 170-mile rail line from Las Vegas, Nevada, to Victor Valley, California, could eventually extend to the Inland Empire and greater Los Angeles. (Brightline West)
By Randyl Drummer CoStar News January 19, 2021 | 4:09 P.M.
A four-decade vision of opening a high-speed rail line to shuttle tourists and conventioneers between Southern California and the hotels and casinos of Las Vegas could advance to the groundbreaking stage as early as this spring. Economic development officials in San Bernardino County’s Victor Valley, however, have much grander goals, asserting that the Brightline West train project could eventually carry commuters between their cities and towns in Southern California's High Desert and job centers in greater Los Angeles, another 80 miles south. "This is more than a tourist train," said Orlando Acevedo, economic development director for Apple Valley, California, a desert community where rail line developer DesertXpress Enterprises LLC plans to terminate the first segment of Brightline West. "We've only began to the see the incredible potential of this project for opening our area to residential, multifamily, commercial development." Brightline is one of several rail lines and loop systems across the United States aimed at alleviating traffic congestion, a costly nationwide problem that public and private entities have been trying to solve for years. Entrepreneur Elon Musk is investing billions in new systems that drill under cities to bypass roads, and another billionaire, Virgin's Richard Branson, is investing in regional high-speed “loop” rail systems to connect major cities. Brightline West, which was previously branded as XpressWest, was part of the Virgin Trains system before Branson pulled out of the deal last summer, according to project documents. Public transit stations often spur additional development nearby, particularly for retail and apartment projects as workers increasingly view mass transit as an attractive alternative to freeways. Governments often foster transit-oriented development, which is among the most popular forms of development, by providing density bonuses and other incentives around the transit stops to help reduce the cost of projects. Other developers are also seeing the benefits of building near public transportation. The Brightline passenger rail service in Florida to the downtown areas of Miami, Fort Lauderdale and West Palm Beach has inspired developers to construct apartments, shops and offices near public transportation, and Acevedo expects to see a similar effect in the High Desert and Los Angeles Basin. "We're already planning for apartments and housing near the future station in our town," Acevedo told CoStar News. "We're optimistic that this will be a game-changer for the High Desert." Brightline West, which could begin carrying passengers by 2024, is expected to begin construction of the 170-mile rail line along Interstate 15 between Las Vegas and Apple Valley early in the second quarter. That's what DesertXpress President Sarah Watterson said in a letter this month to the Nevada High-Speed Rail Authority, the five-member state authority responsible for facilitating the $8 billion project. Long Delayed Plans to build magnetic-levitation rail from Las Vegas to Southern California date back to the late 1970s. Environmental laws, inability to finance the billions necessary to acquire right of way and bickering between cities over where stations would be located derailed or slowed previous efforts to build a Las Vegas train as well as a separate high-speed line between Los Angeles to San Francisco. California Gov. Gavin Newsom scaled back the publicly funded plan for the high-speed rail project that would have allowed travel from Los Angeles to San Francisco in less than three hours. Now, a shorter train line is under construction from the Central Valley to Southern California for the project that has faced criticism and calls for its cancellation after a decade of delays and billions in cost overruns. Brightline, which operates an inter-city rail route in Florida, is back on target to begin construction after a delay caused when private-equity group Fortress Investment Group, DesertXpress’s parent company, postponed a groundbreaking scheduled for last fall due to its inability to sell private bonds to finance the project amid economic uncertainty caused by a surge of COVID-19 cases and the pending national election. The company planned to sell the private activity bonds, which let states give developers access to lower financing costs by issuing federal income tax-free bonds. The U.S. Department of Transportation and the states of Nevada and California have allocated the bonds to acquire right-of-way and fund construction and environmental permitting. "By the time we were prepared to go to market in the fourth quarter, however, election uncertainty, the lack of approval of a COVID-19 vaccine and lack of liquidity in the market, did not allow us to price the bonds to provide long-term stability for the company," Watterson said in the letter. The company is preparing a revised financing plan that is expected to include additional equity and a relaunch of the bond sale in an improved economy and more stable financing market, Watterson said. In December, for example, Brightline Florida completed $950 million in tax-exempt bonds that reflected improving market conditions and strong interest in private passenger rail projects, she added. Watterson said Brightline is speaking with local officials about potential projects to connect the high-speed rail line from Apple Valley to Los Angeles, including continuing the tracks south to Rancho Cucamonga and building to Palmdale in Los Angeles County, where they could connect with Metrolink and other commuter rail lines. "Such projects would increase passenger rail connectivity and deliver additional safety, economic, and environmental benefits for the region," she said. Plans by Branson’s Virgin Hyperloop to develop a $500 million, 800-acre testing and certification facility for its high-tech rail system on a former coal mining site in West Virginia is aimed at sparking a new system for moving passengers and cargo across the country, which could affect real estate development. The Boring Company, a tunnel construction firm founded by Musk, is expanding a major underground transportation project in Las Vegas and adding a corporate location in Austin, Texas, as the startup tries to test superfast hyperloop transit across the United States.