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. The remaining $4 million in federal funds would fall under the discretion of Gov. John Kasich, who could shift the money to other parts of Ohio.
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:
Despite promising to
move on after he failed to cancel the $132.8 million streetcar
project, Mayor John Cranley continues criticizing the
project in interviews and social media.
Most recently, Cranley appeared on Local 12’s Newsmakers program and threatened
to eventually replace the Southwest Ohio Regional Transit Authority (SORTA)
board, which manages local Metro bus services, in response to board members’
defunct offer to take up streetcar operating costs. (City Council sets SORTA
appointments, not the mayor.)
“The fact is they were
willing to cannibalize bus service,” Cranley said,
contrary to SORTA’s insistence that their offer would not have affected bus
services. “I just felt that was a huge violation of what SORTA is supposed to
be about and what Metro is supposed to be about and what public transportation
is supposed to be about.”
Throughout the 24-minute
interview, Cranley referenced the
streetcar project when discussing the city’s parking meters and other subjects
— a continuation of repetitive anti-streetcar tactics Cranley
deployed on the campaign trail and in mayoral debates against former Vice Mayor
“I think the project is
wasteful and not worth the investment,” Cranley said
when asked about the project. “I think we would have been better off making the
hard decision to cut bait.”
Still, Cranley later added, “Obviously, since the supermajority of
council went against my wishes, I have to respect the process. So I’m not going
to try to sabotage the streetcar.”
The interview also
follows comments on social media. After the former head of the Cincinnati Art
Museum criticized the streetcar, Cranley tweeted on Dec. 27, “(N)ow some Orwellian commentators
will say art director not ‘progressive.’”
The continued anti-streetcar rhetoric comes despite promises to move on that Cranley made after Councilman Kevin Flynn announced he would provide the final vote needed to veto-proof City Council’s decision to continue the streetcar project.
“As I tell my son when he doesn’t get his way, it’s time to move on,” Cranley
said on Dec. 19.
heated rhetoric is nothing new in his campaign against the streetcar project.
After the Nov. 5
election, Cranley told The Cincinnati Enquirer
the streetcar debate “is over.” Cranley’s comments
marked a high level of confidence after voters elected a mayor and council
supermajority that seemingly opposed the streetcar project, but his statement
to The Enquirer proved to be wrong after Council Members Flynn, David
Mann and P.G. Sittenfeld decided to continue the
Cranley also called city officials “incompetent” after
they projected that canceling the streetcar project would cost nearly as much as
completing it. Once again, Cranley’s comments proved
to be wrong — an independent audit found city officials were largely correct in
their assessment — but still showed the level of confident, heated rhetoric
that follows the mayor’s campaign against the streetcar project.
At the very least, Cranley’s rhetoric proves that while the policy debate over the streetcar is over for now, the public discussion is not. The question is whether the messaging will work as the project moves forward and the streetcar becomes a reality of Cincinnati.
The three measures set up $15 million to front to Duke Energy to move utility lines out of the proposed path; changes the source of funding to repay some $25 million in bonds used to pay for the streetcar; sells $14 million in bonds for streetcar improvements; and changes the municipal code to clarify that it is the responsibility of a utility to relocate its structures.
The $15 million comes from the $37 million sale of city-owned land near the former Blue Ash Airport.
Council voted 6-3 to approve the front money, improvement bonds and bond repayment, a vote that largely mirrored a Monday Budget and Finance Committee vote. Councilman Chris Smitherman was the sole “no” vote on the ordinance to change the municipal code.
Councilmembers Cecil Thomas, Wendell Young, Roxanne Qualls, Laure Quinlivan, Chris Seelbach and Yvette Simpson voted to pass funding, while Councilmembers Smitherman, P.G. Sittenfeld and Charles Winburn voted against.
“My concern with all of these votes … in particular the Blue Ash Airport dollars, these were promises that you made to the neighborhoods and I don’t have the confidence that the legal battle against Duke Energy is going to yield a 100 percent win for the city of Cincinnati, so there’s no assurance that these dollars are going to come back,” said Councilman Chris Smitherman, one of the most vocal opponents of the streetcar.
“I want to be clear that it’s something that I don’t support.”
The $15 million would be fronted to Duke to move its lines while the city and utility work out who is responsible for funding the move.
Duke estimates the full cost at $18 million and argues
that the lines would not have to be moved if the streetcar wasn’t being
built. The city maintains that it has always been the responsibility of
utilities to move or upgrade their structures — which the third measure
clarified in the municipal code. If the city loses a legal battle against Duke, it will not
recoup the $15 million.
The second proposal switches the source of funding for
streetcar bonds from money coming into city coffers from southern
downtown and the riverfront area to a 1995 fund set up to collect
service payments from the Westin/Star, Hyatt and Saks. The measure wouldn't use any additional new money for the streetcar.
That downtown area wasn’t bringing in as much cash as
expected but the city hopes to repay the other fund once the downtown
district — which includes the Banks and the casino — rebounds.
Mayor Mark Mallory will join fellow streetcar supporters Thursday to discuss how the project is coming along and where it’s headed.
The event is the monthly streetcar social, hosted by Cincinnatians for Progress. Organizers expect to pull in nearly 100 people from around the city to discuss topics and issues surrounding the project. It will take place on Thursday, July 18, between 5:30 p.m. to 8 p.m. at Rhinegeist Brewery, 1910 Elm St., Cincinnati, Ohio, 45202. For more information, check out the event’s Facebook page.
Mallory, who’s term-limited from running for reelection this year, has spearheaded efforts to build a streetcar in Cincinnati. He’s been joined by a steady Democratic majority in City Council, which most recently approved $17.4 million more in funding for the project alongside several accountability measures that will require the city manager to regularly update council and the public on the project’s progress.
CityBeat’s cover story for the week of July 10 debunked the top 10 misrepresentations surrounding the Cincinnati streetcar project.
Streetcar supporters argue the project will foster economic growth and development in Cincinnati, particularly downtown — a claim backed by studies from advising company HDR and the University of Cincinnati.
Opponents claim the project, which now stands at $133 million after recent cost overruns were fixed, is too expensive. They doubt it will succeed in spurring growth and development.
The company in charge of building Cincinnati's streetcars says the city would incur substantial costs if it cancels the streetcar project after it's already gone through some construction and design work.
The Nov. 30 letter from CAF USA Vice President Virginia Verdeja to former Mayor Mark Mallory arrived just one day before Mayor John Cranley, who opposes the streetcar project, and an anti-streetcar majority were sworn in.
"CAF will have to recover all the incurred expenses as well as all the additional cost of cancelling the contract, which would be substantial too," Verdeja writes in the letter.
The letter explains that, on top of the sunk expenses on design work, cancellation would require CAF to pull back on various established deals with subcontractors, which would spur further costs.
For streetcar supporters, the letter renews fears of litigation that could crop up if the project were canceled and contractors decided to pursue their full payday. Those legal costs would fall on the already-strained operating budget that pays for day-to-day services like police and firefighters instead of the capital budget that finances big capital projects like the streetcar, according to city spokesperson Meg Olberding.
On Nov. 21, Streetcar Project Executive John Deatrick warned the costs of canceling the $132.8 million streetcar project could nearly reach the costs of completion after accounting for $32.8 million in estimated sunk costs through November, a potential range of $30.6-$47.6 million in close-out costs and up to $44.9 million in federal grant money that would be lost if the project were terminated.
Earlier on Sunday, hundreds of streetcar supporters rallied in Washington Park and walked the planned streetcar route in support of the project. They're threatening a referendum if the new City Council moves to pause or cancel the project.
City Council plans to vote on pausing the project on Monday. Because of threats from the federal government that a mere delay could lead to the loss of federal grants, streetcar supporters claim a pause would equate to cancellation.
Read the full letter below:
Updated at 6:13 p.m. with the PDF of the letter.
The streetcar project’s chances of survival grew on Thursday after Mayor John Cranley announced he’s willing to allow the $132.8 million project move forward if the annual operating costs for the streetcar are underwritten by private contributors.
But streetcar supporters might have as little as one week to provide assurances to Cranley that the operating costs can be underwritten by the private sector, given the federal government’s Dec. 20 deadline for up to $44.9 million in grants financing roughly one-third of the project.
Still, a representative of the Haile Foundation, a major private contributor to city projects, said private-sector leaders are already working on meeting Cranley’s offer and solving the issue.
The concern for Cranley — and even some streetcar supporters — is that annual operating expenses for the streetcar would hit the city’s already-strained operating budget, especially if the annual operating expenses are higher than the previous estimate of $3.4-$4.5 million.
Although the city wouldn’t need to pay for the full operating costs until the streetcar opens for service in 2016, Cranley and some council members are concerned finishing the project now would force the city to make payments it won't be able to afford in the future.
“We know the streetcar is a very expensive project,” Cranley said. “This community cannot afford a new, ongoing liability that goes on forever.”
Streetcar supporters argue Cranley’s view misses the streetcar’s potential for economic development, which could bring in more city revenues as more people move and work in the city.
The streetcar project would produce a 2.7-to-1 return on investment, according to a 2007 study from consulting firm HDR that was later verified by the University of Cincinnati.
Councilman Kevin Flynn, one of the two potential swing votes on council, said Cranley’s offer could provide “a way forward.” He previously told CityBeat that the operating costs remain a prominent concern for him because they could translate to cuts in the city’s budget, particularly to police and firefighters.
Eric Avner, vice president and senior program manager of community development at the Haile Foundation, called the deal “an olive branch” to streetcar supporters. He said he’s “very, very confident” the private sector will be able to find a solution.
“I don’t think we can solve it in a week. What I heard is he needs assurances,” Avner said.
Cranley said he doesn’t expect someone to come to city leaders next Wednesday with a check paying for 30 years of operating costs, but he said the commitment has to be serious and long lasting for the city to move forward with the streetcar.
Avner discussed bringing together a commission of private-sector leaders with some long-term assurances.
In what he described as an “organic” movement, Avner said he’s heard from various private-sector leaders that they want to keep the project going, but he claimed most of them don’t want to engage in a public “food fight” that could hurt their relations with the mayor and other city officials.
For Avner, it’s a matter of sticking to a project that’s already well into development and construction.
“We don’t have the luxury to waste that kind of money in this town,” he said.
Streetcar Project Executive John Deatrick on Nov. 21 told council members that canceling the streetcar project could save only $7.5-$24.5 million in capital costs after accounting for $32.8 million in estimated sunk costs through November, $30.6-$47.6 million in close-out costs and up to $44.9 million in federal grants that would be lost if the project were stopped.
After Cranley’s announcement, Councilwoman Yvette Simpson questioned Cranley’s motives and said the solicitation might be very difficult to meet in just one week.
Cranley said he’ll reach out to the Federal Transit Administration to try to get an extension, perhaps until the end of the year, on the deadline for federal grants.
“It’s obviously a huge, huge hurdle to try to pull this together in seven days,” Cranley said.
Cranley cautioned he wouldn’t be upset if his offer fell through. Flanked by union representatives for police, firefighters and other city workers, Cranley reiterated that his priorities still lie in basic city services.
Councilman P.G. Sittenfeld previously proposed setting up a special improvement district to pay for the operating costs. But Cranley called the approach unworkable because it would require property owners to opt in — an effort that would presumably take much longer than one week.
Cranley’s announcement came as streetcar supporters move to place a city charter amendment in support of the streetcar project on the ballot. The campaign vowed to gather 12,000 signatures by the end of the week.
Former Ohio governor Ted Strickland, who rose to the governorship with the help of the National Rifle Association, says gun rights and gun control can co-exist. The claim is in light of the massacre at Sandy Hook Elementary School in Newtown, Conn., which killed 20 children and six adults. Many have called for stricter gun control in light of the past year’s bouts of gun violence, but Republicans are typically opposed to such proposals. A recent poll from The Washington Post and ABC News found 59 percent of Americans support banning high-capacity ammunition clips, much like the ones used in the Newtown shooting. Another 52 percent back the ban of semi-automatic handguns.
Still, Gov. John Kasich isn’t changing his mind on the Second Amendment. He says he will sign a bill that allows guns in the Ohio Statehouse parking garage. The bill will also change the definition of an unloaded gun, allowing gun owners to carry loaded clips in their vehicles as long as they are in a separate compartment from the gun, and make concealed carry permits from other states easier to validate in Ohio.
Despite denials from city officials, mayoral candidate John Cranley and Councilman Chris Smitherman insist city government is trying to use the transit fund to fund the streetcar. But Mayor Mark Mallory in an op-ed for The Cincinnati Enquirer said it will not happen. Mallory said the dispute dates back to a lawsuit filed by Southwest Ohio Regional Transit Authority (SORTA), which runs the Metro bus system. The lawsuit demands transit funds be solely dedicated to SORTA.
Cincinnati’s U.S. Rep. Steve Chabot has vowed to continue trying to kill the streetcar. Even though voters have approved of the streetcar twice, Chabot, who also represents Warren County in district boundaries that were redrawn by Republicans, says he would rather focus federal funding on other projects, like the Brent Spence Bridge.
A conservative northern Kentucky lawmaker is supporting a bill that expands prisoners’ rights to DNA testing. The bill would allow a Cincinnati man to push for DNA testing that he claims will exonerate him of a 1987 rape and murder in Newport. Ky. Sen. John Schickel argued, “If DNA testing is good enough to send you to prison it should be good enough to get you out of prison.”
Cincinnati-based Fifth Third Bank bought another $100 million in stock from Credit Suisse International. The deal is part of a larger program to buy back 100 million shares.
Cincinnati State is in line to obtain $123,000 from the state government. The funding could create 51 new or expanded co-op jobs.
The United Way of Greater Cincinnati announced $50.7 million in investments for 2013, a slight increase from 2012. The increase will help boost funding to prepare children for kindergarten by 5 percent. It will also fund 288 programs at 146 agencies, with seven becoming new United Way agency partners.
The Prince Hall Shriners, which describes itself as “the world’s oldest African-American fraternal organization,” is returning to Cincinnati in 2015. The convention was in Cincinnati in 2011.
Duke Energy’s local management is being shaken up. Jim Henning will take over as president for Duke Energy Ohio and Kentucky.
Ohio Board of Regents Chancellor Jim Petro is retiring.
Did you know our solar system is sort of like a phoenix? It apparently rose from the cumulative ashes of countless stars, not one supernova.
Somewhat of an agreement, anyway. Mallory said that the city and Duke will go before a judge in Common Pleas court, who will make the final decision as to who should pay for the utility relocation. According to the agreement, Duke Energy will begin moving its utilities in the next few weeks, and the court decision will determine cost responsibility later. The city and Duke are expected to file in Common Pleas court within the next few weeks, although the court decision could take years to finalize.
Roxanne Qualls, city council member and Democratic mayoral candidate, has long been a supporter of the streetcar project, which she values as an indispensable economic investment for the city of Cincinnati. Yesterday, Qualls announced her request for the city to ramp up the streetcar construction timeline in order to have the project completed in time for the All-Star Games, which will take place in Cincinnati July 2015. Her announcement came just weeks after the city revised its timetable to delay project completion until April 2016.
In a letter from Qualls to Mallory and Dohoney, she explains: “This may present a
challenge, but it is one I am sure the administration is capable of
meeting. The streetcar will serve a critical role in efficiently and
effectively moving visitors to and from Great American Ballpark and
allowing them to conveniently visit other venues such as Fountain
Square, Horseshoe Casino, Over-the-Rhine, Washington Park, etc.”
At the meeting, Mallory announced that the city would shoot for construction to be completed prior to the games, but there were no guarantees. The streetcar builder will ultimately set the timeline for the project, according to Jason Barron, Mallory's director of public affairs.
CityBeat recently covered the streetcar project's delays and how the 2013 mayoral race could affect its progress here.
Meg Olberding, city spokesperson, attributes the delay to “a number of scheduling issues.”
“There’s so many moving pieces,” she says. “There are issues with utility and we have to order the cars. We have to get a contractor on-board for the work. So we still have a couple of things that are taking longer than we thought.”
The delay, which was announced Sept. 10, is
the latest in a history of plan and schedule changes for the Cincinnati
streetcar, which saw $52 million pulled by Gov. John Kasich last year and forced
the city to abandon its Uptown connector lines. Kasich, who has been against other rail projects in the state, claimed the move was necessary to balance the 2012-2013 budget.
Today, a feud between the city and Duke Energy is causing more trouble. The city and utility company disagree over who should pay for moving utility lines to accommodate the streetcar. On Aug. 29, the city said it was considering a lawsuit to resolve the issue. Olberding says the conflict played a role in the delay.
“We need to resolve that quickly because, obviously, the longer we can’t get utility work done, it’ll cause delays and cost overruns,” she says. “So we want to get that done as soon as possible.”
Before the current spat, the city and Duke could not agree on whether manhole covers and utility lines should be eight feet from streetcar tracks or three to four feet. The city claimed the smaller number was fine, but Duke disagreed, citing fears for its workers. In a previous look at the issue, CityBeat found the city’s standard was supported by experiences in other cities (“The Great Eight Debate,” issue of March 6). The city eventually won out, and manholes will only be required to be three to four feet from streetcar tracks.
The streetcar has faced consistent opposition from other Republicans besides Kasich. U.S. Rep. Steve Chabot of Cincinnati successfully amended the 2013 transportation bill to ban federal funding from going to the streetcar and other light rail projects. Councilman Charlie Winburn, the lone Republican on Cincinnati City Council, said the city should stop its threat of lawsuit against Duke Energy.
City Council today approved funding and accountability measures for the Cincinnati streetcar project, allowing the project to move forward.
On Monday, the Budget and Finance Committee approved the measures, which CityBeat covered in further detail here. The funding ordinance closes the streetcar project's $17.4 million budget gap by issuing more debt and pulling funding from various capital projects, including infrastructure improvements around the Horseshoe Casino.
The accountability motion will require the city manager to update City Council with a timeline of key milestones, performance measures, an operating plan, staffing assessments and monthly progress reports.
Council members Roxanne Qualls, Laure Quinlivan, Chris
Seelbach, Yvette Simpson and Wendell Young voted for the measures.
Council members P.G. Sittenfeld, Chris Smitherman and Charlie Winburn
voted against both. Councilwoman Pam Thomas voted against the funding
ordinance, but she voted for the accountability motion.
City Council also unanimously approved funding for a development project on Fourth and Race streets, which includes a downtown grocery store, luxury apartment tower and parking garage to replace Pogue's Garage. CityBeat covered that project in further detail here.