[0] The Portland tram is over budget.
No one likes to deliver this kind of news. I recognize that many Portlanders struggle to meet their monthly household budgets. I seek to be frugal and value each public dollar under my oversight. I know that when the stated budget for any public project increases as much as this project has it undermines the trust you all place in city government.
As the newest Commissioner-in-Charge of the tram project, I am determined to be very open-book about why the costs are going up again, what we are doing about it and ask for your feedback and suggestions.
What led up to this problem?
I asked the Portland Office of Transportation to come up with a general history of the project [0].
In April 2005, City Council [0] approved the contracts with an estimated project cost of $40 million. The City had an independent cost estimator under contract at the time of this City Council action. I am investigating whether or not they should have better predicted the cost overruns we are now facing.
The Architectural Team completed final design in August, 2005 and the contractor, Kiewit Pacific Company, sent out request for bids on the steel and other key items in late August/early September.
The bid prices we received [0]were significantly higher than the estimates contained in the April, 2005 contract with Kiewit Pacific.
The increased costs were primarily associated with line item costs for structural steel, drilled shafts, site excavation and structural concrete – the four items that are the most critical structurally, and the most difficult to construct.
Why did these cost overruns happen?
What we have been told by our contractors: Upward cost pressures come from China’s ongoing voracious appetite for steel, a “hotly competitive” local construction market, and since April, oil price spikes caused by world events and 3 hurricanes.
We do know from our own surveys that we are not alone feeling construction price spikes; Bids on other city, county, and state transportation projects between 15 and 30 percent over the project estimates.
What we are doing to control costs.
This project must move forward. Without the Portland tram, we risk losing hundreds of family wage jobs at Oregon Health Sciences University. Without the tram City government, will be liable for potential damages.
I do not want this tram to look like a ugly ski lift at a bad ski resort, but I believe we can cut up to
[0] $800,000 from the Overall Tram Budget [0] while maintaining architectural design integrity.
As you can see from the attached budget summary, that leaves an estimated $2.1 Million shortfall to complete the project.
Given the difficulty of this project, I cannot guarantee against more surprises. Trams do not come off assembly conveyor lines. So, I want to keep $3.4 Million in contingency.
Having said that, I do not want to pay one penny more than we have to for this project. We will publicly account for each dollar, and if we do not use the contingency, we will return it.
I am working with the City Commission, City staff and the Portland Aerial Tram Inc (PATI) Board to manage the cost increases, as well as to seek additional funds.
One small bright note, as you can read from the attached history of the project's funding [0]; the taxpayers costs have thus far DECREASED even though the cost of the project has increased. Oregon Health Sciences University has picked up the bulk of the tram cost increases to date.
- Sam