CINCINNATI -- A confidential memo given to Cincinnati’s city manager more than two years ago states the city likely will have to reimburse Duke Energy for all costs stemming from relocating utilities for the streetcar project.
If the memo is accurate, it means the cost of the streetcar project could increase to at least $148 million.
The memo’s analysis was never shared publicly and possibly not with members of Cincinnati City Council by ex-City Manager Milton Dohoney Jr. – even as Dohoney insisted publicly the city would win its dispute with Duke and would not incur additional costs.
Duke and the city of Cincinnati are embroiled in a legal battle about the relocation costs.
The city is willing to pay $6 million to relocate Duke's utility lines, but Duke insists it will cost at least another $15 million and possibly more.
City attorneys accidentally gave a copy of the memo to Duke earlier this year during the discovery process in the firm’s lawsuit against the city.
In September a Hamilton County Common Pleas judge ordered Duke to destroy its copy. Judge Carl Stich ruled the memo was still subject to attorney-client privilege and shouldn’t have been disclosed.
WCPO obtained a copy of the memo Tuesday.
The two-page memo is dated March 15, 2011 and was written by Jonathan Brodhag, an attorney in Cincinnati's Law Department. Brodhag wrote the memo for Dohoney.
The memo cites a legal precedent from 1930 made by the Ohio Supreme Court in a case involving streetcars in Cincinnati.
“In 1930, the Ohio Supreme Court held that the city was responsible for reimbursing (Cincinnati) Bell for relocation costs necessitated by the city’s desire to relocate certain streetcar tracks,” the memo stated.
“The court determined that, because the relocation in question accrued solely to the city’s advantage, and because nothing in the ordinance required Bell to pay for such relocation costs, ‘no sound reason (was) apparent why the city should not make good the loss which will be suffered by (a) public utility company by reason of such an order by the city,'” the memo added.
Dohoney and former Mayor Mark Mallory were strong advocates for the controversial streetcar project.
On various occasions, the pair tried to assure streetcar opponents – which included some City Council members – that costs for the project wouldn’t increase too much as it was built.
When WCPO contacted Mayor John Cranley about the memo Tuesday afternoon, he was disturbed by its contents.
Cranley, who took office Sunday, opposes the streetcar project and vowed to cancel it. The memo’s contents, he said, vindicates his position.
“The memo cites a Supreme Court case that’s directly on point,” Cranley said. “I have not been shown any other Supreme Court ruling or state law that indicates its analysis isn’t correct.
“That means the administration misled the public when they said they had a good legal basis to win the (current) case,” the mayor added.
Asked if the memo had been shared with City Council members in office during 2011, Cranley replied, “I don’t know. I do know the administration publicly stated Duke would have to pay these costs. Yet they knew that wasn’t true when they said it.”
Attempts to reach Dohoney and Mallory on Monday were unsuccessful.
In February Duke and the city agreed to let a court decide who is responsible under Ohio law for paying utility relocation costs stemming from the project.
The two sides want a declaratory judgment in Hamilton County Common Pleas Court, and agreed to abide by the ruling after any appeals are exhausted.
City officials placed $15 million in an escrow account, pending the outcome.
When Duke tried to persuade a judge this summer to let the company use the memo in its lawsuit against the city, its attorneys argued the document was an “embarrassment” for the city.
A sharply divided City Council will vote Wednesday whether to suspend work on the streetcar project pending an independent audit.
Discussed since 2007, project construction began in August with crews relocating utilities and installing tracks. About $32 million has been spent on work so far.
Among the firms moving utility lines are Duke, Cincinnati Bell, Time Warner Cable and Level 3 Communications.
City officials agreed to pay $3 million to Cincinnati Bell to move its utilities. As of mid-November, $383,397 of the amount has been paid.
So far, Duke has sent bills to the city totaling $2.18 million. Per the lawsuit, nothing has been paid until the case is resolved.
If the first phase of the streetcar project is completed as scheduled in 2016, the system will feature a 3.6-mile looped route with 18 stops in downtown and Over-the-Rhine.
Supporters think Cincinnati’s project will spark redevelopment of vacant or dilapidated parcels along its route, like similar projects have done in Portland, Ore., and Tacoma, Wash.
Opponents counter the project’s benefit is too uncertain and the estimated $3 million to $4 million in annual operating costs will strain the city’s budget.