Feds approve $2.5 billion in tax-exempt bonds for Las Vegas-to-California high-speed rail

The U.S. Department of Transportation has authorized $2.5 billion in private activity bonds to help finance the Brightline high-speed rail project connecting Las Vegas and Southern California, the department announced Tuesday. 

Bondholders don’t pay federal taxes on interest earned from private activity bonds, and so are willing to accept lower rates of return when they buy them, in turn allowing project developers to borrow money at low interest rates.

The $2.5 billion bond allocation announced Tuesday is in addition to a $1 billion allocation in 2020. 

The project also received $3 billion in federal funding in December, made possible by the Infrastructure Investment and Jobs Act of 2021, commonly referred to as the bipartisan infrastructure bill.

Touting that $3 billion in infrastructure law spending during a trip to Las Vegas last month, Pres. Joe Biden said the project is expected to create 35,000 construction jobs, and 1,000 permanent jobs in operations and maintenance once in service. An agreement between the California and Southern Nevada Building Trades will ensure the high-speed rail is built using union labor, while a separate agreement with unions representing railroad workers will ensure operations and maintenance is also carried out by union labor.

The private activity bonding authorization coupled with the federal infrastructure law grant funding totals a little more than half the $12 billion estimated cost of  the 218-mile, high-speed rail line between Las Vegas and Rancho Cucamonga. The project’s completion still hinges on Brightline attracting additional private investment, including finding buyers for the private activity bonds.