CINCINNATI - A company selected to build Cincinnati’s streetcar system wants $492,993 more for the work, a price increase it attributes to a delay in beginning the project.
Messer/Prus/Delta Railroad said the extra cash is needed to cover increases in the costs for material and labor since the original start date of April 8.
City Manager Milton Dohoney Jr. outlined the increased costs in a memo Friday afternoon to Mayor Mark Mallory and City Council.
“The project team has reviewed (the company’s) request and has concluded that the costs are reasonable and represent estimated costs associated with the delay in contract award as well as the risk that Messer and (the) city are willing to take due to this delay,” the memo stated.
Although the work was scheduled to begin three months ago, bids submitted by companies interested in installing the tracks, building shelters and buying ticket machines for the system were $26 million to $43 million higher than estimated.
City officials had estimated the cost would be about $44.6 million. Messer/Prus/Delta submitted the lowest bid, which was $70.9 million. The highest bid was $87.5 million.
City Council approved hiring John Deatrick – a former city employee who helped oversee the reconstruction of Fort Washington Way and The Banks district – as project manager to reduce costs on the streetcar project, but none have occurred so far.
Deatrick hasn't yet started his job.
"He is not officially on board," said Meg Olberding, city spokeswoman. "We are working on finalizing this in the next two weeks or so."
In late June, City Council voted 5-4 to approve an additional $17.4 million in funding for the project to cover the shortfall.
The extra funding came from $6.5 million take from a Tax Increment Financing (TIF) district, designed to pay for improvements near the Horseshoe Casino Cincinnati area; and $5.4 million borrowed from an account to help pay for remodeling Music Hall, which isn’t needed until 2016.
Also, $400,000 was taken from a traffic signal replacement account; and $500,000 from a water main replacement account. The remaining $4.6 million will be generated by issuing capital debt bonds.
In June, the U.S. Transportation Department pledged another $5 million toward the streetcar, as long as the project’s scope isn’t reduced.
The streetcar project’s estimated cost is now roughly $133 million.
“The administration was not able to negotiate the final contract provisions and associated costs until the money was available,” Dohoney’s Friday memo stated. “No reductions to contract scope are included in this contract.
“We’re very glad that the (Messer) team has remained committed over the last few months and it underscores our confidence that they are the right choice for our project,” the memo added.
The latest $492,000-plus increase will likely come from a $10-million contingency account set aside for the project.
Also, city officials have placed $15 million into an escrow account pending the outcome of a legal battle with Duke Energy over relocating utilities for the project.
City officials said the cost for relocating utilities would be about $6 million, but Duke insists the cost is $18 million or more. If the city prevails in the court case, part of the money in the escrow account could be used to cover any potential future cost overruns.
The streetcar project has become the central issue in this year's Cincinnati mayoral campaign. Vice Mayor Roxanne Qualls strongly supports the project, while ex-Councilman John Cranley is adamantly opposed.
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.