Cincinnati streetcar manager: Cost to cancel project is unknown, no funding plan yet for uptown

L.A.'s project has seen costs double from estimate

CINCINNATI -- One of the most contentious issues on the campaign trail for Cincinnati’s mayoral and City Council candidates is the long-planned streetcar system.

For the two mayoral candidates – John Cranley and Roxanne Qualls -- there may be no clearer difference in positions than on the controversial $133 million project. Cranley opposes the streetcar, while Qualls supports it.

Based on information provided by the person hired to manage the streetcar project, much of the campaign rhetoric about it is often misleading at best, inaccurate at worst.

In an interview with WCPO, Streetcar Project Executive John Deatrick outlined the project’s current status and dispelled some of the misinformation.

According to Deatrick:

  • Although some candidates have said the city’s return on investment from the project would be 14-to-1 or 34-to-1, the city’s own study indicates a more modest 2.7-to-1 return on investment. Even that number, however, needs to be updated;
  • Some streetcar supporters have said it would cost as much to cancel the project as it would to build the system, but Deatrick called that scenario “unlikely;” and
  • Recent media reports indicating businesses would pay for a planned system expansion to uptown and that an uptown route has been identified are premature.

Cranley wants to cancel the streetcar, calling it a bad investment. He contends local funding could be better spent on other projects like building an interchange at Interstate 71 and Martin Luther King Drive.

Qualls strongly supports the project. The streetcar will spark redevelopment along its route, as similar projects have done in other cities, which will add jobs and expand Cincinnati’s tax base, she argues.

For the past few months, Cranley, Qualls and various City Council contenders have been busy making numerous claims about the project – pro and con – at candidate forums, neighborhood meetings and elsewhere.

City Council hired Deatrick in April after construction bids for the project came in higher than estimated, causing a $17.4 million funding shortfall. He began his job in August, tasked with daily oversight of the project with a focus on containing costs and improving efficiencies.

Deatrick, 68, previously was the city’s transportation and engineering director, before retiring in 2002. He managed the multimillion-dollar reconstruction of Fort Washington Way in the 1990s.

Later, Deatrick worked on Washington, D.C.’s streetcar system and Baltimore’s light rail project, before returning in 2008 to be project manger for The Banks riverfront district for Hamilton County.

Deatrick supports mass transit and thinks Cincinnati’s streetcar project would provide ample benefit to taxpayers once completed.

But he said some comments about the project need a “reality check.”

 

Asked about what would be involved in cancelling the project, Deatrick said, “It is unlikely that we would have to pay out the entire value of the contracts, but it is equally unlikely that we could recoup every dime of funds currently encumbered.”

A city report states $22.1 million already has been spent on the project through August. Also, another $95.1 million has been encumbered against open contractual obligations.

Most of the latter amount -- $71.4 million – is for installing tracks, building shelters and buying ticket machines. That is the work begun in August by a contractor, Messer/Prus/Delta (MPD).

In December, City Council approved a $20.5 million contract with a subsidiary of Spain-based CAF to manufacture five streetcars and provide related spare parts.

“The (financial) hit (from cancellation) would be substantial from MPD and CAF, and the legal costs substantial as well,” Deatrick said.

“There may be taxpayer lawsuits,” he added. “MPD and CAF have considerable dollars wrapped up in their progress to date. We would have to cover their sunk costs. For unused materials bought by the contractors, the restocking charges are always more than you think they should be, but they are very difficult to challenge.”

A suggestion that Cincinnati could simply sell any streetcars and related items to other cities building such systems is unrealistic, Deatrick said.

“For materials already fabricated into something per the contracts or partly fabricated, we would likely have to pay to have them scrapped,” he said. “They would have no worth because they were produced per our specifications and under our conditions, not another city’s.”

The city also may have to hire consultants “for expert opinions to strengthen our case on multiple issues” if the project were ended, Deatrick added.

When Qualls returned to City Council in 2007 after a break from politics, she initially withheld her support from the streetcar project unless council included a commitment to build a future segment to the uptown area.

Uptown includes the University of Cincinnati and several hospitals, which are among the city’s largest employers.

Earlier this year, City Manager Milton Dohoney Jr. told City Council the project wouldn’t

be a worthy investment unless the uptown segment eventually was built.

This week the African-American Chamber of Commerce and the Hispanic Chamber of Commerce both endorsed the project. After the event, some streetcar supporters alleged Deatrick had said the second phase would be built with donations from businesses along the route.

Although that is a possibility, Deatrick told WCPO no talks have occurred so far.

“We do not know how we will finance the run up the hill or subsequent phases,” Deatrick said. “Obviously, we’re going to look inside all of the piggy banks and under all the rocks for money.

“The method being used in Detroit where the private sector finances and builds is one extreme and certainly will be evaluated,” he said. “There are multiple iterations of private sector involvement, including in a project with some federal money. We are open to whatever works.”

Similarly, some supporters’ claims that an uptown route has been identified aren’t accurate.

Deatrick called drawings of an uptown route circulated by some supporters as a “30 percent plan.”

“It gives you a pretty good idea of what you want to do, but it is not final,” he said. “It’s one of the options.”

Ultimately, subsequent streetcar phases could be built to Mount Auburn, Walnut Hills and perhaps other neighborhoods, although Deatrick concedes those extensions could be decades away.

“The vision is still getting between the river and the zoo,” he said. “And then, eventually, even beyond that.”

In recent debates, Qualls has cited streetcar systems that have provided large returns on investment – anywhere between $14 and $34 for every dollar in taxpayer money spent.

Cincinnati’s feasibility study, though, said the city should expect about $2.70 in benefit for every dollar invested.

The study was done in July 2007 and is outdated, Deatrick said. Newer numbers will be calculated soon.

“They’re all projections and we’re in the process of redoing it,” he said.

As a result, when Deatrick was asked about a specific return on investment, he replied, “I really can’t speak to that.”

The data is important because at least one streetcar project has seen its costs skyrocket since its initial study.

Los Angeles began planning for a four-mile streetcar route in 2006. Its estimated cost at the time was $125 million.

Newer estimates now show the cost have more than doubled, up to $327.8 million.

Los Angeles’ original estimate was drafted by HDR Inc., a global engineering consultant – the same firm which did Cincinnati’s study.

Part of the reason for Los Angeles’ jump in price was due to complications from moving utility lines and pipes under the streets, and city officials there are under fire for trying to hide the problems from voters.

Similar utility work is now underway here in downtown and Over-the-Rhine.

“Our construction meeting today really bore down on any loose ends,” Deatrick said Thursday. “It’s a battle every day. You’ve got to be open about it and not keep it secret.”

Deatrick has instructed workers to engage in “potholing,” which entails exploratory excavation to vacuum out material from the streets and see exactly what lies underneath before having crews begin moving utilities.

There haven’t been any surprises so far, he said: “Right now, we’re fine.”

Another misconception about the local project is that passengers will be able to ride the streetcar once a test track is completed in March 2015 or the Over-the-Rhine segment is done in June 2015.

In fact, although some streetcars will operate to test the tracks and drivers might be trained, passenger service isn’t slated to begin until Sept. 15, 2016.

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