January 17, 2012

Mark Mallory, Mayor City of Cincinnati 801 Plum St., Cincinnati, OH 45202 Dear Sir: I do not believe that you have properly assessed the full impact of ownership of the 1.6-mile streetcar system, which starts at Fountain Square and ends in Over-the-Rhine. Several major assumptions have never been resolved: All financial summaries include an asterisk the costs to relocate utilities have not been included. In the fall of 2010, newspaper articles indicated that this cost would be at least $20 million. Where will these funds originate? I do not understand the cash flow assumptions. If the Streetcar loses money every year, how will the $64 million of bond debt be repaid? 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-theRhine, one of the most economically distressed areas in the United States? All financial summaries indicate that streetcar fares can range from free to $1.00. Considering special events and programs, this represents a range of revenue from zero to about $1 million, or up to 50% of the annual operating costs. What are the current fare assumptions, 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 cost estimates and revenue assumptions equal to ten-of-millions of dollars. Since you are proceeding, I assume that you have answers and will provide 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 so urgently.
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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 every project is a success. A recent opinion article (WSJ Jan 14-15, 2012 see attached) by Steven Malanga, Senior Fellow at the Manhattan Institute, clearly describes Buffalos $530 million rail systems failure to reinvigorate the central city. How have you considered such failures in your assessment of Cincinnatis proposal? I have not met a single city resident who believes the streetcar is a worthy 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 wants the system? John Kasich determined that the streetcar was not a priority in a time of government deficits and crumbling infrastructure. Some of the critical project assumptions that require resolution: Numerous articles indicate that initial capital costs have been grossly underestimated. The existing utilities affected by this project include Gas, underground and overhead Electric, underground and overhead Telephone, Water, Storm Sewers, Sanitary Sewers, Street Lighting, Traffic Control, and other Telecommunication systems. Existing utility records were obtained from the various utility owners and these records were overlaid on the proposed streetcar routes. The proposed streetcar route will impact existing underground and above ground utilities its entire length. 1 Every cost estimate used by the city includes an asterisk The City and the utility companies continue discussions over how many of the utilities must be moved and how far they must be moved in order to reach an accurate cost for each party. 2 What is the cost and who will pay? The city assumes $64 million proceeds from issuing bonds to build
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Source: http://cincinnati-ohgov/noncms/projects/streetcar/docs/feasibility_study.pdf 2 Source: http://cincinnati-oh.gov/noncms/projects/streetcar/streetcar_cost.cfm 2

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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 the service.3 There is no mention of depreciation. If the streetcar operates at an annual deficit, where will the city get the cash to repay the bonds? A 30-year amortization would require an average annual cash cost of at least $2 million. At one point, you proposed a $25 million from tax increment financing from downtown property taxes. Is that how you intend to resolve the cash shortfall? The current streetcar route will begin in Over-the-Rhine, one of the most economically distressed areas in the United States, and end at Fountain 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 year ridership totals 3,700-5,600 daily riders. 4 Do we expect riders to immediately come from Over-the-Rhine to the center city? Before Over-the-Rhine is populated with those upwardly mobile professionals. Current ridership estimates of 3,700-5,100 for the abbreviated line are virtually the same as ridership in the longer route originally proposed (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 first streetcar segment in a successful route is 3.2 miles. What makes us believe 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 Box receipts. 6 The deficit will be funded by $3 million of Casino revenue, and $.4 million of Parking Meter receipts. Are you still satisfied that we should spend these funds on the streetcar rather than on schools, roads, sewers, water lines, bridges etc. some of which were constructed in the 1800s? Have you identified the source of the $6.5 million Private Funding?

Source: http://www.cincinnati.oh.us/city/downloads/city_pdf16342.pdf Source: http://www.cincinnati.oh.us/city/downloads/city_pdf16342.pdf). 5 Source: http://cincinnatioh.gov/noncms/projects/streetcar/docs/updateMay2011.pdf 6 Source: .http://Cincinnatioh.gov/noncms/projects/streetcar/docs/updateMay2011.pdf

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The summary of funding is as follows: 7 Urban Circulator Grant OKI Grant City Financing Private Funding Total $25.0 million 8 4.0 64.0 9 6.5 $99.5 million

Certain news articles suggested that the city may use proceeds from the sale of Blue Ash Airport, which would subject the city to litigation with 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 against prohibiting any rail investments until 2020. Rather than construct an obfuscated referendum, why not directly ask the taxpayers, Do you want the streetcar, that will provide transportation from Findlay Market to Fountain Square, at a cost of $100-$125 million, and an annual funding requirement of $2-2.5 million?

I would appreciate your response to these questions by Friday, January 27, 2012.

Regards,

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http://cincinnati-oh.gov/noncms/projects/streetcar/streetcar_cost.cfm Source: Urban Circulator Grant http://www.bizjournals.com/cincinnati/stories/2010/07/05/daily28.html

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Source $64 million City Financing http://news.cincinnati.com/article/20111214/NEWS01/312140189/LaHoodexpected-announce-streetcar-funds-during-Thursday-visit

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)

Exhibit 1

NOTICE Whoever 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 of Cincinnati 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 following proposed Amendment to the Charter of the City. AMENDMENT (Streetcar Spending) TITLE: AN AMENDMENT TO THE CHARTER OF THE CITY OF CINCINNATI TO PREVENT SPENDING TO BUILD AND OPERATE A STREETCAR SYSTEM THROUGH THE YEAR 2020 . TEXT: Be it resolved by the people of the City of Cincinnati that a new Article XVI of the Charter is hereby added as follows: Section 1. The City shall not spend or appropriate any money on the design, engineering, construction or operation of a Streetcar System, or any portion thereof. Further, the City shall not 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 will continue in effect until December 31, 2020. This Amendment will have no force or effect after December 31, 2020. Section 3. For purposes of this Amendment, (i) the term Streetcar System means a system of passenger vehicles operated on rails constructed primarily in existing public rights

of way, (ii) the term City includes without limitation the City, the Manager, the Mayor, the Council, and the Citys various boards, commissions, agencies and departments and (iii) the term 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 be unconstitutional or impermissible will be stricken, and the remainder of this Article XVI will remain in full force and effect. The following persons are designated as a Committee to represent the petitioners in all matters relating to the petition or its circulation. Robert W. Buechner, 2475 South Rookwood Court, Cincinnati, OH 45208 Thomas E. Brinkman, Jr. 3215 Hardisty Avenue, Cincinnati, OH 45208 Michelle Edwards, 7309 Scottwood Ave., Cincinnati, OH 45237 Mary Kuhl, 2436 Homestead Place, Cincinnati, OH 45211 Christopher Smitherman, 1000 Lenox Place, Cincinnati, OH 4522