Maglev Inc. boards train to bankruptcy
By Matthew Santoni
Published: Thursday, July 28, 2011
The company that once planned a high-tech, magnetically levitating train from Pittsburgh International Airport to Greensburg has come off the rails.
McKeesport-based Maglev Inc. this week filed for Chapter 11 bankruptcy in an effort to reorganize, get out from under its debts and continue waiting for about $28 million in federal grants that were promised but hadn't been signed over to the company, President Fred Gurney said.
"It's just part of the economy being down. We've got the money out there, but the funds aren't being released," he said on Wednesday. "If we were shutting down entirely, we'd have done it long ago; we believe in what we're trying to do."
Gurney declined further comment on the advice of his attorney.
For the past decade, Maglev has been planning to design and build a $5.25 billion, 54-mile high-speed train from the airport to Downtown, Monroeville and Greensburg. It would use high-powered electromagnets to hover centimeters above an elevated steel guideway.
Unanswered are questions about money needed to continue Maglev's operations. The bankruptcy filing showed it received operating loans from a variety of sources who now are creditors.
"It's a reorganization, so I'm still looking for the jobs," said Donald Dunlevy, state legislative director of the United Transportation Union. He was listed as one of the creditors in the bankruptcy filing, having given Maglev a $21,573 operating loan.
"The longer things drag out, the more fuel it gives to skeptics ... but in the end, I think the technology will win out," Dunlevy said.
According to the bankruptcy filing, the company reported $50,000 or less in assets, although Gurney said that number may be revised as bankruptcy proceedings continue to reflect some of the robotic welding and manufacturing equipment the company has developed.
Among the largest debts it owed was $310,911 in unpaid rent to the Regional Industrial Development Corp. for the company's warehouse-like space in McKeesport. Gurney himself was listed as being owed $285,395 in unpaid wages, and had put $71,000 of his money into the company as a loan for operating funds.
Former state Rep. Richard J. Cessar of Hampton is owed $30,000 for his service as chairman of the board from 1995 to 2008. He said he became an advocate for the project before leaving the General Assembly in 1994 but retired from the board because of his age and poor health.
"This would have been a showcase for Pittsburgh and Allegheny County. Imagine people going to the convention center Downtown, going from the airport to Pittsburgh in eight minutes, tops," said Cessar, 82. "But right now, with what's going on in the country, I don't see the money there."
The project always had doubters.
"I always thought it was a little pie-in-the-sky. ... It was just such a huge expense," said Jake Haulk, president of the Allegheny Institute for Public Policy in Castle Shannon. "This thing's been around so long now, I don't know what new ideas they'll have to sell it."
Haulk said the project never made sense for the Pittsburgh area, since it would be so expensive acquiring more than 200 properties along the track's right-of-way, and the trains could never reach their maximum, 300-mph speed between the proposed stations.
Since its inception in the 1990s, the federal government set aside about $23 million in earmarks to plan the project and develop some of the technology for manufacturing the guideway. The state contributed $7 million. But $28 million in federal transportation money for updating the project's financial plan and performing some of the preliminary engineering has yet to be released because Maglev and PennDOT are working on matching funds, said Toby Fauver, deputy secretary for local and area transportation.
PennDOT and the Department of Community and Economic Development offered $1.9 million for Maglev to keep working on automated welding systems and to develop its plans for using the $28 million federal grant.
"They needed the cash in hand, but it's a reimbursement agreement," said Fauver. "They have not been able to work with members of the board, banks or other financial institutions to come up with a line of credit."
Last year, the company completed a final environmental impact statement for the project that outlines what effects construction would have along the 54-mile route, but it was turned down for $2.3 billion in federal high-speed rail funding for the first leg between the airport and Downtown. Plans haven't advanced much since then, Gurney said.
"I don't know if the cavalry's going to be coming along with the money any time soon," said Martin Pietrucha, director of the Thomas D. Larson Pennsylvania Transportation Institute at Penn State.
Federal spending on surface transportation is likely to be sparse, and the investment in high-speed rail projects has been concentrated on traditional trains in California and the Northeast after Florida and Ohio turned down their projects.
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