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Despite $17.4M shortfall, mayor says Cincinnati's streetcar project isn't dead

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CINCINNATI - Cincinnati officials are reacting warily to news that the city's long planned streetcar project has a $17.4 million shortfall in funding.

As WCPO Digital first reported Tuesday evening, City Manager Milton Dohoney Jr. wrote a memo to City Council explaining the project needs more cash due to higher than expected bids for its construction.

"I'll tell you we're still very committed to that project and we need to figure out how to close that gap," said Mayor Mark Mallory on Wednesday.

Mallory emphasized that funding for the streetcar project comes from the city's capital budget, not the general fund budget that pays for daily operating expenses of municipal government.

Still, Mallory wouldn't rule out taking money from the city's General Fund, although he said there currently are no plans to do so.

"We don't want to cause further problems with our deficit," Mallory said.

Streetcar opponents dislike that the $125.4 million project needs more money at a time when the city is trying to avoid a $35 million deficit.

Among the options for dealing with the deficit are laying off 344 city workers, including 189 police officers and 80 firefighters.

Vice Mayor Roxanne Qualls, another streetcar supporter, will hold a public hearing April 29 at City Hall on the streetcar project's status.

Qualls has asked Dohoney and his staff to explain both the full costs of moving forward with the project and possible funding sources, and the full cost to the city if the project is canceled.

"It's time to step back and have a robust and transparent public discussion about the best way to move forward," Qualls said. "Council has the responsibility to ensure that our public resources are invested prudently, and that major public infrastructure investments bring a return that justifies their expense."

Qualls, who is running for mayor this fall, isn't ready to give up on the project.

"I am committed to building a 21 st Century transportation system that serves the Cincinnati region. It is essential to our economic competitiveness," she added. "I am just as committed to making sure that we are getting the most value for our public investment as we work to make that goal a reality."

City Councilman P.G. Sittenfeld was more skeptical.

"We need to say what are our overall priorities," Sittenfeld said. "As council members, we need to be clear-eyed that we can't do every single thing."

In December, City Council approved a $20.5 million contract with CAF USA to build five custom designed streetcars.

But Dohoney told a 9 On Your Side reporter Wednesday that actual construction of the streetcars hasn't yet begun.

"The project is financially challenged, to be sure," Dohoney said.

A total of $39.9 million of the project's funding comes from federal grants. The remainder comes from various sources including $64 million in bond financing – or issuing debt – by the city.

One of the funding sources is casino tax revenue. City Council has approved spending 25 percent of the revenues for the streetcar.

Cincinnati officials expect $12.7 million in casino tax revenue annually, although Dohoney recently revised the estimate downward to $10 million.

Some council members, however, believe the estimate is too conservative; at one time, the city anticipated $14.7 million annually.

Regardless, Mallory cautioned against using more casino tax revenue for the streetcar project or to help solve the city's deficit.

"That's just not a reliable source for right now," the mayor said.

Various city records about the project obtained by WCPO Digital reveal city officials considered asking Duke Energy to allow it to use $15 million set aside in an escrow account.

Duke and the city disagree on how much it will cost to relocate utility lines along the streetcar route.

The city is willing to pay $6 million to relocate Duke's utility lines, but Duke insists it will cost at least $18.7 million and possibly more.

The two sides have taken their dispute to Hamilton County Common Pleas Court, and agreed to abide by whatever decision is handed down by a judge.

As part of the deal, the city put $15 million in escrow in case it has to pay Duke the higher amount.

Using the escrow to help cover the project's shortfall was briefly considered, Mallory said.

"We had conversations with (Duke) but we mutually decided that's not the way to go," the mayor said. "We need to ensure the resources are there for utility relocation."

Cincinnatians for Progress, a private group that supports the project, urged city officials to stay the course.

"These are challenging moments for Cincinnati's administration and City Council regarding the streetcar," the group said in a prepared statement. "Bids came in higher than anticipated. However, even at a slightly higher cost, the economic benefits of the system far outweigh these costs."

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.

"Naysayers argued against The Banks, Fort Washington Way, Fountain Square, the Aronoff and, of course, Over-the-Rhine renewal," the group added. "They have been proven wrong time and time again. These projects are extremely successful and are fueling new growth that benefits everyone in the city. The streetcar will be no different."

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.

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