At a Budget and Finance Committee meeting today, City Council members grilled City Manager Milton Dohoney Jr. on how the city will fix the streetcar project’s $17.4 million budget gap and whether paying for the cost overrun to save the project is worth it.
Supporters of the streetcar pushed questions and comments that suggested the streetcar will provide the city with a large return on investment, which was supported by Dohoney’s testimony and previous studies from HDR, a consulting firm, and the University of Cincinnati (“Back on the Ballot,” issue of Jan. 23).
Opponents suggested the cost overruns were too much, and the project, which the city manager said now stands at an estimated $132 million to $133 million, is too expensive.
In a memo issued April 30, Dohoney recommended various capital funding sources to fix the streetcar budget gap, including a temporary reallocation of Music Hall renovation funds and money that would have otherwise gone to infrastructure projects around the Horseshoe Casino.
Dohoney clarified that funding for Music Hall is not being permanently pulled; instead, his recommendations would delay Music Hall funding until 2016, which is when the Music Hall project will need the funds, and use currently allocated funding on the streetcar project.
Dohoney added that Otto Budig, president of the Music Hall Revitalization Company, raised no concerns about the streetcar plan after it was explained to him.
Dohoney also clarified that his recommendations would not raise taxes.
A few council members, particularly Councilman Chris
Seelbach, asked whether the streetcar project could face future cost
overruns. Dohoney said it’s possible, based on the project’s scope.
“For major projects like this … there is usually an anticipation that something other than the exact plan may occur somewhere along the line,” Dohoney said.
For the streetcar project, there are a few remaining uncertainties.
Another uncertainty is exactly how much laying down the tracks will cost. Dohoney said it won’t be possible to gauge the exact cost until Messer or any other company contracts with the city and begins actual work on the project.
But for those situations, Dohoney said the streetcar project has a $10 million contingency fund available, as required by the federal government.
Councilman Chris Smitherman, who opposes the streetcar project, asked whether there’s a funding ceiling that, if breached, would make Dohoney stop supporting the streetcar project. Dohoney said he could not provide a number without further thought and analysis. When Smitherman later asked if the streetcar should be built at any cost, Dohoney said no.
When asked what would happen if the project’s cost overruns were not covered, Dohoney said the project would effectively end.
Smitherman asked how the city administration can be pushing forward with the project, given the cost overruns: “How is the administration continuing to move forward with a project that without a vote of council is dead?”
Dohoney responded by saying the city administration does not have to stop by law until it is directed to do so by City Council.
Ending the project would come with its own costs of about $72 million, according to Dohoney: $19.7 million that was already spent, $14.2 million in close-out costs and $38.1 million in federal grants that would have to be returned to the federal government.
Dohoney said stopping would also make the federal government reluctant about working with Cincinnati in the future: “They’ve let us know they would not be pleased if we did it.”
The city administration is currently working with the federal government to obtain another $5 million that could be used for contingency or to undo some of the overrun fixes being looked at, but federal officials are waiting to see how the city government reacts to the current cost overrun problems before a decision is made, according to Dohoney.
Much of the City Council discussion focused on the streetcar’s merits,
particularly whether the first phase of the project, which would run
from The Banks to just north of Findlay Market, could be successful on its own. The
city plans to eventually expand the route to the University of
Cincinnati and hospitals uptown — a route originally part of the first phase of the streetcar project that was cut after Gov. John Kasich pulled $52 million in state-distributed federal funding in 2011.
“If the intent of the streetcar would only be to go from The Banks to just north of Findlay Market, then I never would have said it's a project worth doing,” Dohoney said. “The intention has always been to connect the two major employment centers of the city and go beyond that.”
But Dohoney later clarified that the first phase of the project would help invigorate hundreds of vacant lots and buildings in Over-the-Rhine, which he said would make that phase of the project a success by itself.
Some opponents of the streetcar have incorrectly attempted to tie the streetcar project to the city’s $35 million operating budget deficit, which will likely be closed in part by laying off cops, firefighters and other city employees. But the streetcar project’s funding comes from the capital budget, which can’t be used to balance the operating budget because of limits established in state law.