Sunday, May 5, 2013

Let's just say it now -- there will be very many cost overruns on the Streetcar project

COAST has made the point over and over through the course of the Great Streetcar Debate that the cost estimates floated by the City are, shall we say, fluid, and absolutely guaranteed to be lower than the actual costs incurred.

This is so for the simple reason that the politicians are selling us on a project we do not want, and are "puffing" the numbers (low on the cost side, high on the benefit side) to convince us to accept the project.  One of the funniest moments during the project was when the estimates were opened, $26 to $43 million over budget, the Manager admitted that he knew in advance that his budget was low, he just did not think that low.  (Why would someone make a budget they knew was wrong?)

This problem of mis-underestimating-costs is compounded by other motivating factors:
  • Mayor Mallory, Milton Dohoney, and Solicitor Curp will be long gone from the City before the Streetcar becomes a reality.  Thus, when the sky is falling on the project, the people to blame will be long gone.
  • We saw last week the "selling benefit" of mis-under-estimating the cost of a project.  This week, the biggest selling point is the sunk costs we would have to walk away from in order to cancel the project --"we already have wasted $42 million; if we cancel the project now, that money is lost!"  It's hard to believe, but people fall for this crap.
But COAST wanted to make 100% sure we are on the record now, if we have not been clear already, that the $26-$43 million gap that has appeared so far (later claimed to be trimmed to $17.4 million) is just the beginning.  Here are just a few issues:
  • It is almost universal that federally-funded transportation projects come in over-budget by 40% to 80%.  This is just how the system works.  The City HAS NOT provided for this in its capital cost estimates, in "miscellaneous" or "contingency" categories.
  • The Duke Energy litigation has the potential of adding as much as $12 million in costs to the project of currently-known utility relocation costs.  That number could escalate higher.
  • COASTer Jeff Cappell has challenged the Blue Ash Airport sale that is yielding between $10 and $30 million for the Streetcar project.  If he is successful, the City will be deprived of that revenue and need to make it up in another way.
  • As construction progresses, there inevitably will be change orders, unknowns, regulatory problems, delays, and massive cost overruns.  On federally-funded projects, these tend to range from 40% to 80% of project costs.
  • Importantly, the bid of Messer Construction that resulted in the recent cost overrun-crisis has expired, and when the City actually determines to proceed -- guess what -- the numbers will change and change for the worse.
  • The City has consistently lied to the public about the operating costs (and net operating losses) of the Streetcar, which they peg at $2.5 million annually.  But they refuse to release the operating budget, which we know intentionally excludes repair and replacement of the tracks and rolling stock, among other things.  Thus we can say with confidence that this number will exceed $5 million, and likely be above $8 million per annum.  
Ladies and gentlemen, boys and girls, we are being lied to, and we are being lied to to induce us to proceed with a plan that is bad for our City.  The politicians figure that when the actual costs become known, they will be long gone, and it is someone else's problem to address.

The events of the past 90 days, revealing cost overruns, a patchwork plan to fill that gap, a project held together with spit and glue, lies and inducements, is nothing more than a game of smoke and mirrors, for which Cincinnati will be paying a steep price for decades to come.  And the politicians and professional bureaucrats that foisted all this upon us will be long gone when the house of cards comes crashing down.

Put a stop to it before it goes any further.  But low that as of May 5, 2013, COAST told you so.  Now, we just sit back and watch it all unfold.


  1. These are not problems. If the streetcar costs more than anyone expects, all we have to do is raise taxes! I would gladly pay more taxes, lots more taxes, to get a streetcar.

  2. There is no Streetcar development anywhere in the USA that was not accompanied by a tax increase, and Cincinnati is no exception. We already have had two property tax hikes for the Boondoggle, and we are about to have our third to help plug the $17.4 million hole in the project.

    And these are just the beginning of the "surprises" on the Streetcar that City Hall will be springing on us.


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