january 17 streetcar letter

8/2/2019 January 17 Streetcar Letter

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January 17, 2012

Mark Mallory, Mayor

City of Cincinnati801 Plum St.,

Cincinnati, OH 45202

Dear Sir:

I do not believe that you have properly assessed the full impact ofownership of the 1.6-mile streetcar system, which starts at FountainSquare and ends in Over-the-Rhine. Several major assumptions havenever been resolved:

All financial summaries include an asterisk the costs to relocateutilities have not been included. In the fall of 2010, newspaperarticles indicated that this cost would be at least $20 million. Wherewill these funds originate?

I do not understand the cash flow assumptions. If the Streetcarloses money every year, how will the $64 million of bond debt berepaid? What are the annual cash flow assumptions?

The revised daily ridership numbers are nearly equal to the original,longer route assumptions, and they begin in year one. Do you

assume that these daily riders will come immediately from Over-the-Rhine, one of the most economically distressed areas in the UnitedStates?

All financial summaries indicate that streetcar fares can range fromfree to $1.00. Considering special events and programs, thisrepresents a range of revenue from zero to about $1 million, or up to50% of the annual operating costs. What are the current fareassumptions, and how will revenue changes be accommodated?

Have you identified the source of private funding, assumed to be$6.5 million?

Executives would not proceed with this project, with incomplete costestimates and revenue assumptions equal to ten-of-millions of dollars.Since you are proceeding, I assume that you have answers and willprovide a written response to my questions by Friday, January 27, 2012.Ive used this as a key date since you are moving to break ground sourgently.


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Background

Some factors that must be considered before you proceed with a $100+

million project:

You only cite successful streetcar systems, and assume that everyproject is a success. A recent opinion article (WSJ Jan 14-15, 2012

see attached) by Steven Malanga, Senior Fellow at the ManhattanInstitute, clearly describes Buffalos $530 million rail systems failureto reinvigorate the central city. How have you considered suchfailures in your assessment of Cincinnatis proposal?

I have not met a single city resident who believes the streetcar is aworthy investment, considering the current state of our roads,

bridges, schools and other infrastructure (storm and sanitary sewers,water lines etc.) some of which were built in the 1800s.

The NAACP and COAST are also against the streetcar. Who wantsthe system?

John Kasich determined that the streetcar was not a priority in a timeof government deficits and crumbling infrastructure.

Some of the critical project assumptions that require resolution:

Numerous articles indicate that initial capital costs have been grosslyunderestimated. The existing utilities affected by this projectinclude Gas, underground and overhead Electric, underground andoverhead Telephone, Water, Storm Sewers, Sanitary Sewers, StreetLighting, Traffic Control, and other Telecommunication systems.Existing utility records were obtained from the various utility ownersand these records were overlaid on the proposed streetcar routes.The proposed streetcar route will impact existing underground andabove ground utilities its entire length. 1 Every cost estimate usedby the city includes an asterisk The City and the utility companies

continue discussions over how many of the utilities must be movedand how far they must be moved in order to reach an accurate costfor each party. 2 What is the cost and who will pay?

The city assumes $64 million proceeds from issuing bonds to build

1 Source: http://cincinnati-oh-gov/noncms/projects/streetcar/docs/feasibility_study.pdf2 Source: http://cincinnati-oh.gov/noncms/projects/streetcar/streetcar_cost.cfm


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the first phase. Operating costs include labor for streetcaroperators, for maintenance of the streetcars, track and otherfacilities, and for ongoing management and administration of the

service.3 There is no mention of depreciation. If the streetcaroperates at an annual deficit, where will the city get the cash to

repay the bonds? A 30-year amortization would require an averageannual cash cost of at least $2 million. At one point, you proposed a$25 million from tax increment financingfrom downtown propertytaxes. Is that how you intend to resolve the cash shortfall?

The current streetcar route will begin in Over-the-Rhine, one of themost economically distressed areas in the United States, and end atFountain Square. While city management may believe, If we buildit, they will come,my question is When will they come? and, Howmuch will we spend awaiting their arrival? Estimated first yearridership totals 3,700-5,600 daily riders. 4 Do we expect riders toimmediately come from Over-the-Rhine to the center city? BeforeOver-the-Rhine is populated with those upwardly mobileprofessionals.

Current ridership estimates of 3,700-5,100 for the abbreviatedlineare virtually the same as ridership in the longer route originallyproposed (Findlay Market to The Banks). How have these estimatesbeen updated to reflect the shortened line, which ends at FountainSquare? 5

A recent Cincinnati Enquirer article stated that historically, the first

streetcar segment in a successful route is 3.2 miles. What makes usbelieve that 1.6 miles will be successful? The current plan shows about a $2 million operating deficit ($2.6

million operating costs less $.6 million of Fare Boxreceipts. 6 Thedeficit will be funded by $3 million of Casino revenue, and $.4 millionof Parking Meter receipts. Are you still satisfied that we shouldspend these funds on the streetcar rather than on schools, roads,sewers, water lines, bridges etc. some of which were constructed inthe 1800s?

Have you identified the source of the $6.5 million Private Funding?

3Source: http://www.cincinnati.oh.us/city/downloads/city_pdf16342.pdf4Source: http://www.cincinnati.oh.us/city/downloads/city_pdf16342.pdf).5Source: http://cincinnati-oh.gov/noncms/projects/streetcar/docs/updateMay2011.pdf6Source: .http://Cincinnati-oh.gov/noncms/projects/streetcar/docs/updateMay2011.pdf


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The summary of funding is as follows: 7

Urban Circulator Grant $25.0 million 8

OKI Grant 4.0

City Financing 64.0 9

Private Funding 6.5

Total $99.5 million

Certain news articles suggested that the city may use proceeds fromthe sale of Blue Ash Airport, which would subject the city to litigationwith the FAA. Do you intend to subject the city to such litigation?

Perhaps you misinterpreted the 2011 referendum (see example in Exhibit

1). The 2011 vote did not endorse the streetcar. It was a vote againstprohibiting any rail investments until 2020. Rather than construct anobfuscated referendum, why not directly ask the taxpayers, Do you wantthe streetcar, that will provide transportation from Findlay Market toFountain Square, at a cost of $100-$125 million, and an annual fundingrequirement of $2-2.5 million?

I would appreciate your response to these questions by Friday, January27, 2012.

Regards,

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http://cincinnati-oh.gov/noncms/projects/streetcar/streetcar_cost.cfm8Source: Urban Circulator Granthttp://www.bizjournals.com/cincinnati/stories/2010/07/05/daily28.html9Source $64 million City Financinghttp://news.cincinnati.com/article/20111214/NEWS01/312140189/LaHood-expected-announce-streetcar-funds-during-Thursday-visit


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Cc: Roxanne Qualls (Suite 352)Cecil Thomas (Suite 356)Laure Quinlivan (Suite 349)Chris Seelbach (Suite 350)Yvette Simpson (Suite 346 B)P.G. Sittenfeld (Suite 354)Christopher Smitherman (Suite 346 A) (registered mail return receipt)Charlie Winburn (Suite 351)Wendell Young (Suite 348)


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Exhibit 1

NOTICEWhoever knowingly signs this petition more than once, signs a name other

than his own,or signs when not a legal voter, is liable to prosecution

WHOEVER COMMITS ELECTION FALSIFICATION IS GUILTY OF A FELONY OF THE

FIFTH DEGREE

PETITION

For submission of Proposed Amendment to the Charter of the City ofCincinnati

To the Council, the legislative authority of the City of Cincinnati, Ohio:We, the undersigned, Electors of the City of Cincinnati, Ohio, petition your honorable body to

forthwith provide by ordinance, for submission to the electors of the City of Cincinnati, the followingproposed Amendment to the Charter of the City.

A M E N D M E N T(Streetcar Spending)

TITLE:AN AMENDMENT TO THE CHARTER OF THE CITY OF CINCINNATI TO

PREVENT

SPENDING TO BUILD AND OPERATE A STREETCAR SYSTEM THROUGHTHE YEAR 2020

.

TEXT:Be it resolved by the people of the City of Cincinnati that a new Article XVI of theCharter is hereby added as follows:

Section 1.The City shall not spend orappropriate any money on the design, engineering,construction or operation of a Streetcar System, or any portion thereof. Further, the City shallnot incur any indebtedness or contractual obligations for the purpose of financing, designing,

engineering, constructing or operating of a Streetcar System, or any portion thereof.Section 2.

This Amendment applies from the date it is certified to the Charter, and willcontinue in effect until December 31, 2020. This Amendment will have no force or effectafter December 31, 2020.

Section 3.For purposes of this Amendment, (i) the term Streetcar System means asystem of passenger vehicles operated on rails constructed primarily in existing public rights


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of way, (ii) the term City includes without limitation theCity, the Manager, the Mayor, theCouncil, and the Citys various boards, commissions, agencies and departments and (iii) theterm money means any money from any source whatsoever.

Section 4.In the event that any provision of this Article XVI is found to be unconstitutional

or impermissibly in conflict with state or federal law, only such provision found to beunconstitutional or impermissible will be stricken, and the remainder of this Article XVI willremain in full force and effect.

The following persons are designated as a Committee to represent the petitioners in all mattersrelating tothe petition or its circulation.

Robert W. Buechner, 2475 South Rookwood Court, Cincinnati, OH 45208Thomas E. Brinkman, Jr. 3215 Hardisty Avenue, Cincinnati, OH45208

Michelle Edwards, 7309 Scottwood Ave., Cincinnati, OH 45237Mary Kuhl, 2436 Homestead Place, Cincinnati, OH 45211

Christopher Smitherman, 1000 Lenox Place, Cincinnati, OH 4522

january 17 streetcar letter

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