Friday, December 12, 2003

ODU's maglev problems raising red flags
By Bill Burke and Debbie Messina

NORFOLK — State, federal and university officials have become increasingly concerned about how Old Dominion’s stalled maglev project was managed and whether taxpayers could be on the hook for millions of dollars if it doesn’t work.

The Virginia Department of Transportation is worried that a $7 million state loan to fund the magnetic levitation train may not be repaid by the company that designed and built the train, American Maglev Technology.

The federal government wants assurances that taxpayer money will be wisely spent before it frees up $2 million that would be used to fix problems with the vehicle’s control system.

And members of ODU’s Board of Visitors have questions about how the project was managed and why there were no safeguards to prevent $800,000 in lawsuits that have been filed by project subcontractors. Some of those issues may percolate when ODU’s Board of Visitors meets today.

Supporters of the project say they remain optimistic that American Maglev will fulfill its commitments to ODU and to the state. All that is needed is more money , they say.

The vehicle was to have begun carrying passengers across the ODU campus in September 2002, but technical problems have prevented the bullet-nosed train from moving from its perch on its concrete-and-steel elevated guideway overlooking tennis courts.

So far, $14 million has been pumped into the project. Half of that money came from private companies, including Dominion Virginia Power and Lockheed Martin. The other half was a loan to ODU approved in November 2000 by the Commonwealth Transportation Board, which sets policy for VDOT.

The loan agreement calls for repayment by 2014 with an interest rate of 3 percent per year, compounded annually. Interest begins to tick next month, and the first payment of about $210,000 is due by the end of next year. American Maglev hopes to pay back the loan from revenue it generates from selling its maglev technology.

“We are concerned about Maglev’s ability to repay the loan and are disappointed that things have not gone better in its development for commercial use,” Whittington Clement, Virginia’s secretary of transportation, said this week.

Clement said the setbacks are unfortunate “because it is an innovative approach to moving people in an innovative and efficient way.”

Tony Morris, American Maglev’s president, said the company “would have problems” making the interest payment if it were due now.

“We don’t have the money today … but fortunes can rise very quickly,” Morris said Thursday. “We expect to stand up to our commitments.”

American Maglev’s assets consist of a series of patents Morris and his engineers have been granted in the still-developing technology — plus “some tools and screwdrivers.”

The corporation, registered in Florida, is listed as inactive, a result of the company’s failure to file an annual report this year. It will cost $750 to reinstate the corporation, said a spokeswoman for the Florida Department of State. Morris insists that will happen.

Of the ODU project, he said, “I’m confident the system will work.” And when it does, he said, “We expect to have a long line of people to come to see this.”

The most vexing issue for Ross A. Mugler, secretary of the ODU Board of Visitors, is the lawsuits filed by companies hired to build three passenger stations along the guideway.

The three companies allege in the lawsuits that there was no performance bond that would have paid the contractors if American Maglev was unable to.

“The board of visitors acted to make sure this company put forward a bond, but there was no follow-through by the university to make sure that happened,” said Mugler, Hampton’s commissioner of the revenue. “It was poor contract administration on the part of the university.”

William M. Lechler, another board member, said the board insisted from the outset that the university should not be liable for debts the project might incur. During a September 2000 meeting, the board made clear its insistence that university money not be used in the experimental project.

“The intent of board was to put an iron curtain” between American Maglev and the taxpayers, Lechler said.

Lechler, a retired Sumitomo Corp. executive with an engineering background, said he has been skeptical of the technology from the outset. He said he became familiar with maglev technology years ago when his duties took him to Japan.

“They spent half a billion spent in Japan and couldn’t make it work,” he said. Of the vastly less expensive ODU project, he said, “It sounded like it was going to be a difficult process. They really had to have a breakthrough in technology.” Still, Lechler said, “It will be marvelous if they can make it work.”

State transportation officials said they would not lend money for another such project today because of tight budgets, but they stand by the investment.

“There is a risk, but I’m comfortable with the risk we have on the books,” said Philip A. Shucet, a Virginia Department of Transportation commissioner. “If they’re successful, we’ll get our $7 million back eventually.

“I know they’ve got their challenges. It’s awfully tough when you’re moving from a research experimental stage to the implementation stage. But we can’t throw up our hands and give up on it now; it gets us nowhere as a partner.”

Two members of the state transportation board voted against approving the loan three years ago.

Ulysses X. White gave it a thumbs-down because he had researched American Maglev, he said, and found that “there had been problems with the company, and I had not seen anything that demonstrated that those problems had been cleared up.”

“The governor appointed us to safeguard the taxpayers’ money, and I tried to uphold that responsibility,” said White, who was an at-large board member from Northern Virginia who left the board in 2001.

The other no vote was cast by J. Kenneth Klinge, who had served as special assistant to U.S. Secretary of Transportation Drew Lewis during the Reagan administration. Klinge said that in 1982, he sat through a maglev presentation in Washington and felt it was not close to being deployed as a transit system. The company that made the proposal was not American Maglev.

When American Maglev made its pitch in 2000, “I didn’t feel the technology had advanced in 20 years,” he said. “It wasn’t showing any prospects of working anytime soon.

“It’s a wonderful concept,” said Klinge, who is still on the transportation board. “They’ve just never figured out how to do it.”

Supporters of the project continue to include state Sen. Charles R. Hawkins of Chatham, who co-sponsored legislation in the General Assembly that authorized the state loan.

“I’m still very enthusiastic about that project,” Hawkins said. “It’s a dependable, fast and inexpensive alternative to the automobile. We can’t pave our way out of our problems.”

If the system gets up and running, its maintenance will be a fraction of the cost of other modes of transportation, he said.

Since a maglev vehicle floats on a cushion of air above its guideway, there is no friction and little wear and tear on the train or track.

Hawkins acknowledged that there is an element of risk in such a project, but added, “If you wait for the perfect meal to be delivered to your table, you may starve to death.”

ODU, Morris and their partners remain confident they have come up with solutions to the technical problems and are eager to use the $2 million federal grant to implement them.

But that money is in limbo. Concerns about the lawsuits prompted the Federal Railroad Administration to issue a stop-work order on the project Nov. 18. Federal authorities will not release the money until the legal issues are resolved and assurances are made that the money will used to move the project toward completion, said John T. Harding, chief maglev scientist for the railroad agency.

“We’re somewhat disappointed that this wasn’t being watched more carefully,” Harding said.

The agency insists that the federal money cannot be used to pay off the project’s legal debts. When the lawsuits were filed, Harding said, “We got nervous and wanted to check and be sure things would be able to proceed.”

He added: “We don’t want to take the money away, but we can’t waste it. We need to make sure the money doesn’t go down a rat hole.”

Harding said the money could be released in a few weeks. And Harding said the railroad administration is committed to the project.

“We think they can probably handle the situation and get the job done,” he said. “They have the technical capabilities to do it. If they didn’t, we wouldn’t proceed.”

Reach Bill Burke at 446-2589 or Reach Debbie Messina at 446-2588 or

© 2004

The maglev train during a test run in August 2002 on a section of the track next to the Field House
at Old Dominion University.


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