SORTA willing to assume responsibility for streetcar's operating costs, Cranley skeptical

City Council members split on the offer

CINCINNATI -- Cincinnati Mayor John Cranley and some city council members struck down SORTA's offer to pay for the operating costs of the streetcar, calling it "too risky."

The region's transit agency signaled Tuesday that it is willing to assume responsibility for the streetcar’s operational costs.

The Southwest Ohio Regional Transit Authority (SORTA) announced its Board of Trustees voted to make the offer to city officials.

But Cranley and other council members said at a Tuesday press conference that If SORTA ever became defunct , the city would get the assets and liabilities, and that the city budget would ultimately be "on the hook for this."

SORTA's willingness is based on assurances from private enterprise and philanthropic groups in Cincinnati to assist in securing the funding, the agency said, but Cranley echoed Tuesday afternoon that only the Haile Foundation has come forward with a specific dollar amount.

SORTA said businesses and organizations would work with them to create a public-private partnership to fund the costs of the streetcar in the short- and long-term, a prepared statement said, “to the extent other sources of streetcar revenue, such as fares, advertising, sponsorships, etc., are inadequate."

The project's annual operating cost is estimated between $3.5 million and $4.5 million.

Under SORTA's proposal, all streetcar assets would be given to SORTA upon completion of construction or some other mutually agreed upon date.

Cranley and some city council members, who took office Dec. 1., wanted private sources to guarantee the funding before they would commit to resuming the project's construction.

Council members will meet Wednesday and Thursday to discuss the offer, and review an audit of the project. The audit is expected to be completed late Tuesday or early Wednesday.

Cincinnati City Council Members Christopher Smitherman, Amy Murray and Kevin Flynn joined Cranley in the skepticism of the offer.

But earlier Tuesday, other city council members were cautiously optimistic about SORTA's offer.

"It's a very exciting possibility," said Vice Mayor David Mann, who had been undecided about the project. "I look forward to learning the details. It certainly seems to be a step in the right direction."

Among Mann's concerns, he wants to know what liability the city would have if SORTA ever defaulted on its obligation.

Councilman Wendell Young, a streetcar supporter, praised the offer.

"This is wonderful, I'm elated," Young said. "What this means is Cincinnati is going to continue the progress we've been seeing recently."

He added, "Everybody is at the table doing everything the can to keep the project going. The SORTA board is to be commended."

Councilman P.G. Sittenfeld echoed Young's remarks.

"A scenario where the city finishes construction, SORTA handles operations, the federal government sustains its financial commitment and the private sector puts real skin in the game represents everything a productive partnership should be," Sittenfeld said.

"It's a win-win-win that prevents the waste of tens of millions of dollars, prevents real harm to our national reputation, delivers a positive return on our investment, and mitigates the long-term operating burden on the city," he said.

But Cranley said Tuesday that Sittenfeld's idea for a special assessment district is unworkable, citing that downtown already has one and would be able to opt out of a new one.

Cranley elaborated on the relationship between the city and SORTA, saying that the city provides SORTA with $45.7 million in funding each year, which comes from the city's earnings tax.

The rest of SORTA's $91.9 million annual budget comes from various sources including bus fares, contracts and state and federal grants.

The Federal Transit Administration (FTA) gave city officials until Thursday to decide on the project's fate, or indicated it would rescind $44.9 million in federal grants.

For the past week, streetcar supporters have been scrambling to raise donations to cover operating costs. They had been trying to get binding commitments for roughly $80 million in funding -- a feat some deemed improbable.

"We believe this is a viable solution for our region," Metro CEO and general manager Terry Garcia Crews said in a release.

"The city will not be responsible for the future operating costs of the Cincinnati streetcar. Our business and philanthropic leaders have demonstrated leadership, and we are confident they will deliver," Crews added. "Importantly, because of SORTA’s involvement, discussion of the Cincinnati streetcar can now be considered in the context of this region’s comprehensive public transit needs."

SORTA also announced that it received a $1 million commitment from The Carol Ann and Ralph V. Haile, Jr. US Bank Foundation to seed an operating reserve fund. Cranley said Tuesday the offer is "woefully insufficient" to cover the costs.

As a condition of its proposal, SORTA's board pledged the decision would not affect bus service.

The board also said a consultant has

identified several viable financial models to fund streetcar operations.

The FTA has agreed to assist SORTA in developing a viable funding model and to share best practices from other cities with streetcars.

In a letter sent to council members Tuesday, FTA Administrator Peter Rogoff said the federal government doesn't require a firm operating plan to be in place until the system opens. That is slated for September 2016, or 33 months from now.

"As such, the City Council will have a considerable period of time to develop and secure alternate funding sources prior to the initiation of operations," Rogoff wrote.

"That said, following the resumption of construction, it would be advisable to establish a designated funding source sooner rather than later -- well in advance of 2016 -- so that sufficient operating reserves can be secured and cash flows can be monitored."

Representatives for the nonprofit Haile Foundation strongly advocate for completing the project.

“We are committed to seeing the streetcar through to completion and beyond," said Eric Avner, Haile's vice president. "SORTA has stepped up and is more than qualified to serve in this role. This is another great example of community collaboration helping move to region forward.”

SORTA officials who released the statement said the plan requires further refinement but the essential elements would be:

  • SORTA will not permit operation of the streetcar to adversely impact the existing Metro bus system;
  • The city will resume construction of the streetcar and will remain responsible for completion of the construction project as required under existing grants, plans and contracts; SORTA’s role in the construction phase will not change from the current status;
  • At a yet-to-be-identified trigger point (likely substantial completion of construction), SORTA will assume all responsibility for providing operating funds necessary to operate the Streetcar; the city will not be responsible for any streetcar operating costs;
  • All streetcar assets will be conveyed to SORTA upon completion of construction or some other mutually-agreed upon date;
  • The city will remain a party to all utility relocation agreements and will remain liable for any related litigation;
  • The Cincinnati business and philanthropic communities will work with SORTA and the city to provide adequate and firm financial assurances and guarantees to fund operation of the streetcar to the extent other sources of streetcar revenue, such as fares, advertising, sponsorships, etc., are inadequate; and,
  • The Cincinnati business and philanthropic communities will work with SORTA to establish a “Streetcar Advisory Committee” or similar oversight group to assist SORTA in the implementation and operation of the streetcar.
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