Cincinnati could lose up to $45 million in federal funds if it cancels the $133 million streetcar project, according to a new letter from the Federal Transit Administration released on Thursday by Mayor Mark Mallory.
The letter confirms much of what was stated in a previous June 19 letter to Mallory, and it presumably acts as a warning to Mayor-elect John Cranley, who intends to permanently cancel ongoing construction on the streetcar project once he takes office in December.
Cranley previously said he could lobby the federal government to re-appropriate the money to other projects, but the FTA letter unequivocally states the money is only for the streetcar project.
“FTA’s oversight contractor for the Project informs me that the City’s expenditures plus committed costs on the Project as of this date exceed $116 million, which is approximately 88 percent of the total project cost,” wrote FTA administrator Peter Rogoff. “These commitments include many construction activities that cannot be easily reversed — the City has relocated utilities, embedded rail in City streets, and purchased streetcars. Should the City choose to prematurely terminate the Project, all cost associated with closing down the project, including any claims from the contractors, will not be eligible for any federal reimbursement.”
The letter confirms that, as CityBeat originally reported, canceling the streetcar project carries its own costs.
Should the city cancel the project, it would first need to return nearly $41 million in federal grant money.
City spokesperson Meg Olberding previously told CityBeat
the city already spent $2 million of the federal funds. Olberding said the $2 million in repayments would need to come out of the operating budget
that pays for cops, firefighters and human services instead of the
capital budget that’s currently financing the streetcar project.
Since the operating budget has been structurally imbalanced since 2001, adding millions in costs could force the city to cut additional services or raise taxes.
Upon cancellation, the city would also need to pay back some of the $94 million in standing contractual obligations for the streetcar project. In many cases, the obligations reflect supply orders and other expenses contractors and subcontractors already took on but haven’t officially billed to the city. If the project were canceled, city officials say the already-spent money would need to be paid back, along with extra costs to close the project — to repave torn-up streets, for example.
Project executive John Deatrick previously told CityBeat that paying back the contractual obligations could involve litigation, which would also be paid for through the operating budget, as the city tries to minimize cancellation costs and private contractors try to recoup as much as they can from the project.
All of that is on top of the $23 million that’s already been billed to the project as of September, which should grow by $1.5 million each month as contractual obligations are turned into official bills, according to Deatrick.
The final decision on the streetcar project rests on City Council. Cranley told The Cincinnati Enquirer on Thursday that he’ll pursue a 30-to-90-day time-out on the project as the city conducts a full accounting of cancellation costs, completion costs and the potential return on investment of the project, following requests from Councilman P.G. Sittenfeld and incoming council members David Mann and Kevin Flynn — three crucial swing votes in the newly elected council of nine — for more information before placing a final vote on the project.
The talk of cancellation already spurred some Over-the-Rhine residents and businesses to launch a campaign to save the streetcar. Cranley insists it’s too expensive and the wrong priority for the city, but supporters tout independent studies and their own experiences to argue it would spur economic development. The pro-streetcar group will meet on Thursday at 7 p.m. at the Mercantile Library, 414 Walnut St. #1100, downtown Cincinnati.
The full letter: