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January 17 Streetcar Letter

January 17 Streetcar Letter

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Published by COAST

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Published by: COAST on May 06, 2012
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05/06/2012

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 1
January 17, 2012Mark Mallory, MayorCity of Cincinnati
801 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 youassume 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-million’s 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.I’ve used this as a key date since you are moving to break ground sourgently.
 
 2
BackgroundSome 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 Buffalo’s $530 million rail system’s failureto reinvigorate the central city. How have you considered suchfailures in your assessment of Cincinnati’s 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 1800’s.
 
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 companiescontinue 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.pdf 
2
Source: http://cincinnati-oh.gov/noncms/projects/streetcar/streetcar_cost.cfm
 
 3
the first phase. “Operating costs include
labor for streetcar operators, for maintenance of the streetcars, track and other facilities, and for ongoing management and administration of theservice.”
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 financing 
from 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 build it, they will come,” 
my question is
”When will they come?” and, “How much 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
abbreviated 
lineare virtually the same as ridership in the longer route originallyproposed (Findlay Market to The Banks).
How have these estimates been updated to reflect the shortened line, which ends at Fountain Square 
?
5
 
 
A recent Cincinnati Enquirer article stated that historically, the firststreetcar 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 ($2.6million operating costs less $.6 million of
Fare Box 
receipts.
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 in the 1800’s? 
 
Have you identified the source of the $6.5 million Private Funding? 
 
3
 
Source: http://www.cincinnati.oh.us/city/downloads/city_pdf16342.pdf 
 
4
 
Source:http://www.cincinnati.oh.us/city/downloads/city_pdf16342.pdf).
5
 
Source: http://cincinnati- oh.gov/noncms/projects/streetcar/docs/updateMay2011.pdf 
 
6
 
Source: .http://Cincinnati- oh.gov/noncms/projects/streetcar/docs/updateMay2011.pdf 
 

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