City manager: Streetcar has $17.4M shortfall, project needs more money
Dohoney: 'Gap cannot be closed using cuts' alone
Kevin Osborne, WCPO Digital
7:48 PM, Apr 16, 2013
4:14 PM, Apr 17, 2013
CINCINNATI - As Cincinnati ponders layoffs of police and firefighters to avoid a deficit, administrators concede the city's troubled streetcar project will need more than $17 million in additional funding to become a reality.
The funding problems facing the project were outlined in a memo given to City Council offices late Tuesday afternoon, after most of them had left for the day.
Written by City Manager Milton Dohoney Jr., the memo states the project had a $22.7 million funding shortfall due to construction bids being higher than expected.
Read the memo
Two rounds of value engineering were conducted in March to reduce the project's scope and delete some items.
The sessions reduced the shortfall to $17.4 million.
"After the re-engineering of the scope and budget saving $5.3 million, it is clear the project will need more funding," Dohoney wrote. "We continue to work with out federal partners to identify options."
But the memo doesn't indicate securing any extra federal grants are likely. That means the city would have to get private donations or allocate the money itself.
"The reviews conducted by the project team … all agreed that the resulting budget gap cannot be closed using cuts to the project alone," Dohoney wrote.
Under the city's original schedule, construction should have begun April 8. But that date quietly passed without any contractor selected to do the work.
That's because bids submitted in February to install tracks, build shelters and buy ticket machines for the system were $26 million to $44 million higher than estimated by the city.
If the work doesn't begin soon, the project will face more delays and higher costs because the work will have to be put out to bid again, the memo states.
"Since that date has passed and the city is not able to issue the contract because of a continued funding gap, it cannot be guaranteed that the lowest bidder – or any of the bidders – will wait indefinitely nor be able to honor their bid submission," Dohoney wrote.
The lowest bid was submitted by Messer Construction Co. WCPO Digital contacted the firm April 11 about what impact missing the April 8 startup date would have.
"Because this is a pending bid project, we are not able to provide comment," said Jessie Folmar, a Messer spokeswoman.
Too many delays could prompt the federal government to pull its grants for Cincinnati's project, the memo added.
"The longer the city waits to issue a construction contract, the higher the risk that the city will miss (the schedule) milestones and find itself in violation of the grant agreements," Dohoney wrote.
Cincinnati's streetcar system is estimated to cost $125.4 million. Of that amount, about $39.9 million comes from federal grants.
In December, the city signed a contract with CAF USA to buy five custom-designed streetcars for $20.5 million.
Streetcar opponents said the action was taken to try to commit future officials to completing the project. Elections for mayor and City Council will occur this fall.
One of the opponents, Councilman Christopher Smitherman, said the funding shortfall should cause City Council to reconsider and cancel the project.
"For many years, I've been concerned about the rising costs on this project," Smitherman said. "I am a big advocate for mass transit, but this isn't the right investment to make with taxpayer money."
Also, Smitherman – who is a financial planner -- believes the funding gap is higher than $17.5 million. City staffers aren't including enough contingency money for the cost overruns that happen with every construction project.
"I've never felt the administration has come clean with us on the true cost of the streetcar," he said. "We need that so we can determine the (return on investment)."
Two of the projects biggest supporters are Mayor Mark Mallory, who can't seek reelection due to term limits and Vice Mayor Roxanne Qualls, who is running for mayor this fall.
In February, when the bids came in above estimates, Qualls said the project doesn't have a "blank check."
"Whether people support or oppose the streetcar project, everyone has a vested interest in getting the most for our public dollars, and in having the highest confidence in the management of the project," Qualls said at the time.
Earlier this month, City Council voted 5-4 to hire John Deatrick, the city's former transportation and engineering director, to oversee the streetcar project and try to reduce costs.
According to Dohoney's memo, Deatrick participated in the March meetings with staffers to look at possible cuts.
Qualls' opponent in the mayoral race, ex-City Councilman John Cranley, wants to cancel the project.
"This is becoming an enormous boondoggle," Cranley said. "It's time to say enough is enough and stop it."
Dohoney's memo was prompted, in part, by a series of questions submitted to him last week by WCPO Digital. Some of the questions were used verbatim in the memo.
Planned since 2007, Cincinnati's streetcar system would follow a 3.6-mile looped route.
It would extend from the riverfront through downtown and north to Over-the-Rhine, ending near Findlay Market.
Supporters contend the system's primary benefit is as an economic development tool. It would spark redevelopment of vacant or rundown properties along the route, as a similar project did in Portland, Ore., they argue.