BLOG: Cost of steel lifts tram's price tag
Sam Adams
With one correction, Oregonian reporter Fred Leeson does his usual good good of reporting the complex challenges we face with the South Waterfront Tram project.
The one correction is, "He [that would be me] said he would not seek more money from property owners in local
improvement districts at both ends of the tram." I assume the misscommucation with Fred is mine because I have already asked property owners who will benefit from the Tram project for help with the project cost overruns. Those talks will continue. The last set of cost overruns were paid for by the OHSU.
Having inheretited management this important but very unique and challenging project, I intend to provide Portlanders with an open-book report of this project's status. I will post the spreadsheets showing the line item cost increases early next week.
Sam
_______________________________________
Cost of steel lifts tram's price tag
Unexpected high bids for steel have raised the price tag of Portland's aerial tram by $5 million and launched another City Hall scramble to find extra money.
The steel bids, which came in at almost twice the estimates, could push the total cost to $45 million, or close to triple the estimated price from three years ago.
Portland City Commissioner Sam Adams, who manages city transportation matters, said project officials are trying to cut costs while preserving tram safety and the original design "within reason."
World demand for steel, driven in large part by fast growth in China, has pushed prices well above general inflation, said Vic Rhodes, project manager for Portland Aerial Tram Inc., a nonprofit company created by city government to build the tram.
Adams said he is talking with property owners, Oregon Health & Science University, the Oregon Department of Transportation and the Portland Development Commission about additional construction dollars. He said he would not seek more money from property owners in local improvement districts at both ends of the tram.
The 3,250-foot tram system would ferry passengers between the South Waterfront district and the Marquam Hill campus of Oregon Health & Science University.
Adams said he hopes to have a revised funding formula in place by Nov. 7. Time is urgent because 80 percent of the tram materials and labor have been committed, and construction is under way at all three tram locations -- two terminals and an intermediate tower.
The project completion date remains Sept. 30, 2006, but Rhodes said that is "an extremely tight schedule." He said a November opening might be more likely.
A $45 million budget would leave a contingency fund of approximately $3.7 million. Adams said the contingency is essential because the project is technically complex and more surprises could occur as work progresses.
Tram estimates started at $15.5 million during a design competition in 2003, then rose to $24 million, $28.5 million and $36.38 million. The last figure was part of a $40 million package approved by the City Council in April with a contingency fund.
Tied to OHSU plan
OHSU is constructing a 16-story building that will house medical offices, research facilities and a wellness center adjacent to the tram's eastern terminal in the South Waterfront district. It is on schedule to open next September.
The tram is a key element in OHSU's operations at the new building. "We are very concerned about getting both projects in on time," said Steve Stadum, OHSU's chief administrative officer. "But we realize there are always going to be scheduling issues."
The OHSU project is expected to be the first of several possible OHSU buildings on the Willamette riverfront. In addition, several high-rise condominium projects are under construction or in the planning stages in the South Waterfront urban renewal district near the tram's eastern terminal.
A funding formula approved by the City Council in April relied on property assessments on land at both ends of the project, tax increment urban renewal money from the South Waterfront, energy tax credits and a $4 million contribution from OHSU. The formula did not include any city general fund money.
Stadum said he doesn't expect the university to offer more than the $28.7 million it already has committed through property assessments and the cash donation. "I think they are satisfied with our contribution to date," he said of the city.
A new plan is likely to rely more heavily on urban renewal revenue from rising property taxes in the South Waterfront area. Urban renewal contributions amount to $3.5 million so far. However, a larger contribution would mean less money available for streets, parks and other capital improvements normally funded by tax increment money in renewal districts.
Commitment to design
Rhodes said directors of the nonprofit tram company considered changing the design of the 185-foot intermediate tower that will lift tram cars over Southwest Macadam Avenue and Interstate 5. A lattice tower, looking like those that carry electric lines, was a cheaper alternative.
But Rhodes said the board wanted to keep its commitment to follow the design by Sarah Graham, a Los Angeles architect who won a design competition on the tram project in 2003.
Adams agreed with keeping the more expensive design. Otherwise, "what you would be left with would be something that looked like a cheap ski lift at a bad ski resort," he said. Adams added that he didn't want to leave the city with an "ugly postcard" that could last 100 years.
Adams said the city also could face legal problems from property owners paying tax assessments for the tram if the project doesn't substantially comply with the plan adopted by the City Council.
However, Rhodes said engineers have found ways to achieve some savings on the intermediate tower by bolting instead of welding some steel plates, and by using different paint. Erection of the tower poses difficulties because of its unusual shape and angles. "There isn't a right angle in it," Rhodes said.
Posted by Sam Adams on October 22, 2005
(22) Comments | Permalink | TrackBack (1)
Filed Under Downtown Portland, Front Page, Office of Transportation, Tram, Transportation
Comments by site visitors
Mr Adams - This thing is as bad as PGE Park. I mean there are two possibilties for how this happened to go from $15M to now $45M:
1) Fraud in the inducement
2) Gross incompetence in managing this project
Come on, this is taxpayer money that people have to work very hard to generate for you to spend. Can you:
1) Show us how you are going to get the beneficiaries of this $30M overrun (viz, OHSU) to pay for this?
2) Tell us who is responsible for this mismangement so he/she can be fired and not commit this again on the taxpayers' dime? At any private business this wouldn't be tolerated.
If I sound upset - I am. We have bad streets and excessive water bills and city fees and now an overpriced gondola.
Posted by: Steve | Oct 22, 2005 5:01:00 PM
In today's Oregonian, Fred Leeson reports that the Tram funding formula "did not include any general fund money".
Now that may be the conscience coddling city official's like to use while spending hundreds of millions of tax dollars but there is no place in the press for such inaccuracy.
The North Macadam URA, http://www.pdc.us/ura/sowa_n-macadam.asp
created in 1999, consists of 409 acres. Most of which is long ago developed and property tax paying real estate.
http://www.pdc.us/pdf/ura/north_macadam_ura.pdf
Every annual property tax assessment increase on the entire 409 acres, since 1999 has been diverted from entering the general fund.
Nearly all of those increases would have occurred WITHOUT any SoWa plan and Urban Renewal SPENDING.
Let's be clear and straight with the citizens of Portland and the region.
Those would be general fund dollars, instead of supporting schools, libraries parks and public safety, are being spent on the Tram and other infrastructure for SoWa developers. Publicly funded City officials and planners are free to advocate the wisdom in such plans and spending decisions but they are not free to mislead and distort the truth.
Urban Renewal is indeed general fund money. Taken away to be used elsewhere just prior to entering basic services accounts.
Claiming or reporting otherwise is misleading and unacceptable.
Steve Schopp
Posted by: Steve Schopp | Oct 22, 2005 6:00:51 PM
Why not stop the Tram?
There is still 40 million to be saved.
Stop the Burnside redo and there's $50 million more.
Stop the Convention Center Hotel and there's another $100 million at least.
Suspend all PDC project spending and property transfers and there's at least another $50 million.
Stop the Port of Portland from building a new administration office. There's at least 20 more.
Make the Portland Office of Sustainable Development and other agencies use city owned office space.
there is much more but you have to
stop listening to people at portlandtransport.com telling you what makes sense.
They have none.
They only recently discovered that commerce mobility involves more than semi trucks and freight rail.
However their new discovery that goods and services also get stuck in congestion was immediately disregarded as they continues their push for more of the same lousy transportation policies now choking our commerce, commute and driving freedom.
They represent a minuscule percentage of people who use bicycles and are opposed to every road system mobility improvement.
Stop letting the bicycle lobby dictate
transportation policies.
We are witnessing daily the proof that it has been incredibly stupid.
Posted by: Real world advice | Oct 22, 2005 9:10:09 PM
Will the city staff never listen and learn? I participated in the Tram task force and was one of two critical commenters of the failure to 1. hedge the cost of steel and the Swiss Franc, and 2. to provide a reasonable contingency for a project that was a. new to Portland, and new to our PDOT managers.
In the first case, our comments were completely ignored. Then when the exchange rate for the Swiss Franc caused a $800,000 or so increase in costs, there still was no move to hedge the prices of steel, something that could have been done for a modest cost.
Finally, OHSU in effect took responsibiltiy for the size of the contingency by saying that they thought the PDOT estimates were fine and saw no need to increase the contingency.
The habit of the missing financial projections on major projects by
City of Portland project management needs to stop. The public needs to have a full understanding of the costs of a project before we go into approval mode, and we need to hold the managers feet to the fire when they consistently ignor good advice and counsel. Some of us have had personal experience with issues like commodity price increases, foreign exchange rate changes and the costs one can expect from unanticipated things happening on new designs.
Where was Portlands risk management group when all this was happening? Still doing CYA lawyer briefs and not seeing what was happening!
Don Baack
Posted by: Don Baack | Oct 23, 2005 9:43:42 AM
Thanks for the comments. Believe you all me, I share your anger and frustration.
In reply:
• The spreadsheets will show all overruns since City Council approved project.
• I am looking into exactly how this project was estimated and if these mis-estimates could/should have been avoided. The current project manager took over about the time I inherited this project. He has my trust.
• I will not cut transportation projects in other parts of the City to pay for this cost overrun.
• I do not have the choice to cancel this project. The City of Portland is contractually required to deliver this project and is subject to fines and damages if it does not.
• I do not have the authority on my own to cancel the SoWa tax increment district, nor would I support doing so at this time.
• I have asked for a 20 percent contingency moving forward with this project.
• I have added new members to the PATI board and asked them to review this project with fresh eyes -- to look for savings or new resources.
Sam
Posted by: Sam Adams | Oct 24, 2005 10:55:38 AM
Any community that does not invest in projects that facilitate the expansion of its largest employer is looking to self destruct.
The tram is a bargin when weighed against the cost of other regional transportation projects.
How many jobs are the result of the $50 million spend on the first phase of I-5-217 interchange? Zero.
Widening I-5 at Delta Park...another $50 million waste of money...will make freight movement worse and just dump more cars on to N. Porland's streets.
The high density development along the river, the expansion of OHSU and the tram that will connect them are just common sense...essential pieces of this City's future.
Hang in there Sam!
Posted by: Lenny Anderson | Oct 24, 2005 4:22:05 PM
The tram is a bargin when weighed against the cost of other regional transportation projects.
Again, my issue is not so much the tram as it is the ongoing pattern of telling taxpayers something will cost $8M (I think that was the first est) and then all of a sudden it costs $45M and we can't stop. I am sure OHSU is aware of this and will ignore Mr Adams requests for extra money.
I only am asking for openness. For the CC Hotel, everyone should know that a PDC insider (Mr Ashforth) is the leading candidate and that he wants CoP to bond him $180M, pay for half of his debt service if he doesn't make enough profit and pay no property/room taxes (at least according to his proposal on PDC's WEBsite. What does accepting this behavior say to legitimate hoteliers who paly by the rules and don't get these breaks? Mainly, not to build in Portland.
Posted by: Steve | Oct 24, 2005 7:03:13 PM
Sam Adams Oct 24:
I do not have the choice to cancel this project. The City of Portland is contractually required to deliver this project and is subject to fines and damages if it does not.
JK:
You have to know when to fold'em.
1. How much are the fines and damages? How do they compare to the waste if this project continues.
2. Buying our way out might be a good deal at this point - how much would it cost.
3. Has the contract(s) been looked over for possible outs due to?? - cost over-runs, insider dealing, fraud, etc.
4. Are these over runs changeable to negligence on the part of the contractor? Some one did a study, world wide, and found that such over-runs were standard operating procedure on civic projects.
5. Any evidence of unseemly contractor influence on the Portland agency that issued the obligations? (Notice that I asked for evidence, as I assume that there was.)
Thanks
JK
Posted by: jim karlock | Oct 25, 2005 2:12:16 AM
Lenny Anderson Oct 24, 2005:
Any community that does not invest in projects that facilitate the expansion of its largest employer is looking to self destruct.
JK:
Lenny, didn’t you once claim to have had a part is shutting down some logging in Oregon. Wasn’t logging once one of Oregon’s largest employers?
Lenny Anderson Oct 24, 2005:
The tram is a bargin when weighed against the cost of other regional transportation projects.
How many jobs are the result of the $50 million spend on the first phase of I-5-217 interchange? Zero.
JK:
Have you considered the value of people’s time wasted in congestion? Time away from their family? Do you not care about other people’s time?
Lenny Anderson Oct 24, 2005:
Widening I-5 at Delta Park...another $50 million waste of money...will make freight movement worse and just dump more cars on to N. Porland's streets.
JK:
Of course Lenny is (or was?) associated with (and paid by?) a Swan Island organization trying to make life better for truckers. If that was at the expense of cars (you and me) so be it (in my opinion). If I recall, at one point he argued for keeping the I-5 Southbound, two lane bottleneck, in place in order to protect the truckers “on ramp” near Columbia Blvd. (That on ramp was an “add lane” so the truckers liked it.)
Lenny Anderson Oct 24, 2005:
The high density development along the river, the expansion of OHSU and the tram that will connect them are just common sense...essential pieces of this City's future.
JK:
1. The high density development will only benefit the developers, while the rest of us get to pay for it in higher taxes or less services. Such projects are part of a pattern that is leading Portland into a bankrupt future. Already the signs are there : we can no longer pay for basic services like education (evidence: talk of shortest school year in the country, talk of new tax), police, fire (ticket car thieves while a brand new jail is empty), transportation (we had the worst increase in traffic congestion in the country last year)
2. The tram will benefit OHSU - let OHSU pay for it.
Thanks
JK
Posted by: jim karlock | Oct 25, 2005 2:47:07 AM
Too bad this is getting personal...
*I worked for a paper company and developed test methodologies to keep two old paper machines in St Helens running...keeping a lot folks at work.
*If people choose to live far away from where they work yet insist on driving by themselves, why sould public resouces be used to save them time?
*The widening of I-5 at the Slough will remove the existing "add lane" and thereby penalize freight movement off Columbia Blvd. It is not a "freight" project, but is being done to calm commuters from Clark county and save them a minute or two.
*A community can thumb its nose at its largest employer, but the cost is high in lost property and income taxes that all those folks pay, not to mention their employer. Do the math.
Posted by: Lenny Anderson | Oct 25, 2005 12:36:25 PM
"I do not have the choice to cancel this project. The City of Portland is contractually required to deliver this project and is subject to fines and damages if it does not."
Pay them and let's be done with this before the city winds up next to the Catholic archbishop in the bankruptcy line.
Posted by: Jack Bog | Oct 25, 2005 12:46:44 PM
Lenny Anderson | Oct 25, 2005
Too bad this is getting personal...
*I worked for a paper company and developed test methodologies to keep two old paper machines in St Helens running...keeping a lot folks at work
JK:
I’m pretty sure I heard you take partial credit for stopping some logging during your public testimony at an I-5 meeting. Did that keep a lot of folks at work?
Lenny Anderson | Oct 25, 2005
*If people choose to live far away from where they work yet insist on driving by themselves, why sould public resouces be used to save them time?
JK:
Because that is what we pay road user fees for (those are the “public resources” that you refer to). Roads are for all of us, not just your truckers. People are choosing to live in Vancouver because Oregon’s land use policies have created an artificial shortage of land and raised costs for everyone, which hurts us all, especially low income. Do you wish to force them into high density hell in the Portland area, when they prefer a back yard at lower cost in Vancouver? Should we build a “Portland wall” to keep them in?
Lenny Anderson | Oct 25, 2005
*The widening of I-5 at the Slough will remove the existing "add lane" and thereby penalize freight movement off Columbia Blvd. It is not a "freight" project, but is being done to calm commuters from Clark county and save them a minute or two.
JK:
How is helping commuters save time not a good thing? That is the function of our transportation system: to serve all people as efficiently as possible, not just your truckers. BTW I have heard that those commuters from Vancouver are the second largest class of income taxpayers in Oregon.
Lenny Anderson | Oct 25, 2005
*A community can thumb its nose at its largest employer, but the cost is high in lost property and income taxes that all those folks pay, not to mention their employer. Do the math.
JK:
OHSU is a government agency, so it DOES NOT PAY PROPERTY TAXES. I doubt that OHSU pays income taxes either. And it probably gets lots of government subsidies. Please post the math that you suggest, so we can all see it (or a link to it)
Thanks
JK
Posted by: jim karlock | Oct 25, 2005 2:42:44 PM
Sam,
Stopping the Tram will take leadership which the masses would immediatley stand behind and suppert.
Same with the Burnside one way street plan, CC Hotel and new abatments.
Side with the vast majority of voters and lead.
LEAD.
& Stop listening to Lenny.
He is a fabricator.
Posted by: Stop the madness | Oct 25, 2005 2:56:32 PM
Come on folks, deal with the substance of this issue, refrain from calling each other names. Use whaterver post name you want but if you use your real name and actual email address it carries more weight with me and others.
Sam
Posted by: Sam Adams | Oct 25, 2005 10:46:03 PM
Mr Adams - One more question, your statement:
I have asked for a 20 percent contingency moving forward with this project.
Does this mean possibly another $9M (=20% of $45M) on this project?
Posted by: Steve | Oct 26, 2005 7:20:28 AM
Sam,
When the Tram was first proposed, I was dubious, but I figured this would be a "postcard" project that helped OHSU. And I don't mean "postcard" in a negative way--the Tram would become a distinctive and attractive part of the Portland skyline, something that would appear on every "silhouette" of the skyline, somethng that would mark us as a city.
But now that the cost has more than tripled; now that the difference between the Tram and the alternatives (such as a dedicated natural gas bus transport system) are yawning; now that we face so many other budgetary difficulties; I find it hard not to see the Tram as the last great boondoggle from the 1990s.
I know the budgets aren't fungible in this way, but when I see 50 million proposed to fix a "problem" on Burnside that I don't see; another 35 million on a Tram; uncounted millions extending a charming but transit-inefficient streetcar...
meanwhile I wonder whether what is going to happen next year in my childrens' schools when a 25% budget axe whacks the PPS ...
well, maybe you understand my frustration.
Posted by: paul gronke | Oct 26, 2005 9:22:48 AM
Mr Adams - How do intend to vote on the TrammellCrow/PioneerOaks request for an abatement?
Posted by: Steve | Oct 26, 2005 9:33:09 AM
PDOT and the planning bureau both in the press and to our CTLH neighborhood association initially stated about 3 years ago that the tram projected cost was about $8.5 million.
The $45M total now was even higher just a few weeks ago, but the parties involved have been trimming costs by re-engineering several aspects of the job to get the price down even to $45M. The public is getting a much different product than the design competition sold us. Besides the mid-tower being a much different animal, the lower tram terminal has been altered in several ways to cut costs.
No matter how one figures the costs, most of the cost comes from taxpayer's dollars But the story doesn't end there. The $45M cost is only the construction costs. The land costs, operation costs, depreciation costs, maintenance costs, financing costs, city staff costs, architectural and engineering costs, (life cycle costs) , etc., are not figured into the total tram costs. PSU Professor Jerry Mildner and others about one year ago did a quick actual tram costs analysis based on $30M tram construction cost and all the other above mentioned costs which any prudent business or even city agency should use in determining "costs" of a project, and they came up with a life cycle cost of approximately $152M. This met that each trip on the tram would cost over $57 dollars per trip. Now with the construction cost being at least and growing $45M, the trip cost is even much higher. Why is it that our public agencies, like PDC, PDOT, Planning, City Council, Metro, Auditors Office, even our media doesn't look at issues like this and do critical analysis? I think we know the answer. It doesn't pencil out. And that is what so many of our taxpayers do every day as they go about their daily lives: they discover something doesn't pencil out and make a decision.
At what dollar amount does the Tram not make sense?
$60 million? When all costs are included we're there.
$80 million?
How about $100 million.
Is there anyone who would be left standing in support of the Tram at $100 million?
I would have to assume not.
So at what dollar amount does the Tram fail the fiscal test?
It has to be somewhere between the now $45 million and $100 million.
I suggest that point was passed by a while ago. Somewhere around the $15 million because that figure did not include all of the costs.
But now the price is soaring without any acknowledgment of a price too high.
Is this approach to governance and appropriation of public funds reasonable?
Posted by: Steve Schopp | Oct 27, 2005 3:27:41 PM
Steve Schopp
This met that each trip on the tram would cost over $57 dollars per trip.
JK:
Is this per vehicle one way trip, round trip, per passneger one way or round trip?
Thanks
JK
Posted by: jim karlock | Oct 27, 2005 3:38:14 PM
Okay I know that I am beating an old drum, but what would it cost to open the transportation marketplace to other providers be they taxis, ride-sharing cabs, jitneys, private buses or something else? And how would that cost compare to the tram? If it is feasible why not do it? Does the City Council have to protect the taxi cartel, or Trimet's monopoly?
I see shuttles running everyday from the hotels and many of the motels in this city to the airport, but we seem to overlook the possibility of using the same size vehicles for more transit services in the city.
Michael Wilson
Posted by: Michael | Oct 27, 2005 4:22:07 PM
That's $57 per person per one way trip.
Commissioner Adams does cost matter.
Posted by: Steve Schopp | Oct 27, 2005 11:02:21 PM
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Sam:
I have already asked property owners who will benefit from the Tram project for help with the project cost overruns.
JK:
How about those people pay 100% of the FULL COST. This toy will have little benefit to the rest of the city.
Sam:
I will post the spreadsheets showing the line item cost increases early next week.
JK:
Hopefully the starting point will be the $9 million cost that report idly was given to the planning commission, assuming that, no lower, earlier figure was given to anyone else. Also, try to estimate future over-runs and get promises from some one besides the city to pay them.
Thanks
JK
blog@saveportland.com
Posted by: jim karlock | Oct 22, 2005 2:39:44 PM