Monday, September 24, 2012

Committee approvals keep streetcar on track

Following three-and-a-half hours of discussion and public comment, Cincinnati City Council's Budget and Finance Committee advanced three ordinances meant to keep the City's $110-plus million streetcar project on track for a summer 2015 opening.

The first ordinance establishes a $15 million account which the City will use to relocate Duke Energy's electrical and gas lines along the route between The Banks and Findlay Market.

A second, related ordinance clarifies the respective rights and obligations of both the City and public utilities in relation to City rights-of-way, a tool used by other Ohio cities such as Cleveland, Columbus, Dayton and Toledo to assert its rights in requiring utilities to pay the full cost of utility relocation to accommodate public improvements.

The City had expected Duke to share in the relocation costs and had budgeted $6 million for the work, but Duke has insisted that the City is responsible for the full cost – which it has estimated at between $15 million and $20 million.

The City and the utility have been unable to settle the dispute, and Duke has not yet developed a schedule for performing the work – essentially stalling the project. Final project design has been completed, and the City is ready to issue a solicitation for bids for a general contractor to build the system.

"This will hold down the issue of cost escalation by just sitting idle for an indefinite period of time," said City Manager Milton Dohoney. "Simply delaying the project drives the cost up."

The City remains confident in its position that state law requires Duke to shoulder the cost, and that the money that it's fronting eventually will be repaid.

"Our overall relationship with Duke has always been positive," Dohoney said. "But on this issue we have a disconnect."

Critics aren't so sure.

"Nobody believes the City is going to get the money back from Duke," said former Councilmember John Cranley. "Don't insult our intelligence by saying that it will."

A tradeoff?

The $15 million comes from last month's sale of 130 acres of Blue Ash Airport property to the City of Blue Ash for $37.5 million.

Of the more than 50 speakers at today's meeting, nearly 60 percent opposed the expenditure. The majority of those opposed cited a 2009 campaign pledge by Mayor Mallory to use the airport proceeds for neighborhood development.

"You don't move that money around without any tradeoffs," said Councilmember P.G. Sittenfeld.

Dohoney said that the only tradeoff is the timing in which other projects will happen.

As an example, he cited the funding of Stetson Square improvements with money from an account dedicated to a project in Avondale that has yet to be specified. When the Avondale project comes to fruition, money would be identified to fund that, he said.

"There is no 'hard list' of projects to be funded with the Blue Ash Airport money," Dohoney said.

"At the end of the day, it's about a broken promise," said Councilmember Christopher Smitherman. "There are no guarantees that I've heard here today that this money is going to be returned and go back out to the neighborhoods."

Councilmember Yvette Simpson said that she was saddened that the debate had turned into a battle of "streetcars vs. neighborhoods".

"The fact of the matter is, we support both," she said. "I think this will be a benefit not only to our core, but to our entire City."

Bond servicing

A third ordinance would change the source of repayment for $14 million of the $25 million in bonds issued as part of the project's original financing from the Downtown South/Riverfront tax increment financing (TIF) district to surplus funds in a 1995 account established to collect service payments from the Westin Hotel, Hyatt Regency Cincinnati, and Saks Fifth Avenue.

Valuations in the TIF district dropped 62.8 percent between 2010 and 2012, largely due to a decline in office lease rates.

The remainder of the $11 million repayment will be made through a bond issuance supported by the revised revenues of the TIF district, which is expected to rebound over the next 20 years.

Previous reading on BC:
Consultant sought to work with streetcar manufacturer (9/10/12)
Blue Ash considering restructuring of airport deal (8/6/12)
City declares intent to acquire properties for streetcar facility (5/7/12)
UC lecture to examine broader effects of streetcar project (5/1/12)
Cincinnati selects preferred vendor for streetcar vehicles (4/11/12)