Tram Life Cycle Cost Analysis
Guest Author
Periodically, we ask guest authors to post on our blog. This post is written by Rob Barnard, the PDOT project manager who has taken the reins of the Tram project on Sam's request. He has had a challenging job but is handling it terrifically. We asked Rob to write a post about something that we have been hearing requests for for quite some time: a lifecycle cost analysis of the tram which outlines its annual operating costs.
It has taken a while for us to compile this analysis because we lacked a few pieces of important information until recently. Most notably, we needed to wait for both the final capital cost of the project and for the tram operations and maintenance contract to be bid out and finalized. Now that these things have both happened, we are happy to share the lifecycle cost analysis with the public.
_____________________________________________________
Post by Rob Barnard, Project Manager,
Bureau of Transporation Engineering and Development
Life cycle cost analysis is a tool used to determine the total costs of design options to facilitate decision making. The analysis calculates the cost of owning and operating an asset from installation throughout its useful life. It calculates the cost of building a facility plus the net present value of on-going maintenance and operating costs. Net present value (also called Discounting) is a calculation that allows future costs to be compared to one another regardless of when they occur during the life of the asset.
The life cycle cost analysis for the tram includes information from many sources. In an effort to be as accurate as possible, resolution of the final capital cost of the project was needed. Receipt of the tram operator’s last and final best offer to operate and maintain the tram was obtained. Consultation with a knowledgeable tram way specialist to develop estimates for a Major Maintenance Reserve fund was performed. Discussions were held with an elevator consultant on the annual cost to operate and maintain the elevator plus estimated future modernization costs. Estimates were also developed for security services, special structural inspections, City and OHSU staff costs, roof replacement, tower painting, ticket machine replacement, utilities, engineering, training and other related items.
In today’s dollars the annual life cycle cost of the tram is estimated at $2,735,200 of which the City’s share is $409,280. The City’s share contains the annual cost of $170,000 for construction of the tram plus $239,280 for operation and maintenance. (This assumes a 50 year lifespan for the tram facilities and 4% inflation.)
You look at more specifics on a pdf spreadsheet of the tram lifecycle cost anlaysis here.
Posted by Guest Author on June 6, 2006
(19) Comments | Permalink | TrackBack (0)
Filed Under Front Page, Tram, Transportation
Comments by site visitors
Only $46k/year for alternative service?
How many days of "tram down time" does that cover?
Why is there no provision for liability insurance and no cost of financing?
Posted by: Alice | Jun 6, 2006 10:23:30 AM
Yes,
Where is the debt service and the rest of the documentation?
The design competion, land dedicated to the Tram, etc???
How did you get to the 50 life span?
Posted by: Steve Schopp | Jun 6, 2006 10:43:33 AM
Portlanders ought to stop picking nits with this tram. It's a great idea, it is progressive thinking, and a bargain at twice the price.
Stop thinking small, Portland is doing a great job making a great City.
Keep up the good work!
Former Oregonian in SoCal.
Posted by: TJ | Jun 6, 2006 4:55:52 PM
TJ: Portlanders ought to stop picking nits with this tram. It's a great idea, it is progressive thinking, and a bargain at twice the price.
JK:Yeah! Great at twice the $65 per ride!!!
TJ: Stop thinking small, Portland is doing a great job making a great City. Keep up the good work!
JK: Waste like that makes the pentagon look like a bargan.
Thanks
JK
Posted by: jim karlock | Jun 6, 2006 5:08:56 PM
TJ -
Although I am somewhat supportive of the tram, and anyone who has followed recent threads around here knows that I am not a friend of the "nit pickers", I find your post lacking.
For starters, we are already paying "twice the price", more than twice, in fact.
I consider myself a proud progressive, and I for one do not consider large cost overruns in excess of 100% of the original project estimates to be "progressive thinking".
The _idea_ of the tram, to me, is great. (Others strongly disagree on that point!) The implementation of the project, especially the budgeting process, has been, shall we say, less than laudable.
I believe the project should proceed, having come this far, but the problems that the public process and budget process of the tram have highlighted jeopardize other future "progressive" public infrastructure projects.
- Bob R.
Posted by: Bob R. | Jun 6, 2006 6:08:35 PM
Fifty years?? What is the basis for this estimated life of the tram? Is this based on actual experience elsewhere, or just a guess?
Also - isn't there a lot that's been left out of this analysis? Interest? Land? City Staff time? What else is not in this "life cycle cost analysis"?
Why not get an independent analysis? Wouldn't it make the anser more credible?
Posted by: Mr. Magoo | Jun 6, 2006 6:30:17 PM
An independent analysis might be "more credible," but it would also make it more expensive.
We had an independent audit for the sake of credibility re: the construction costs (at a time when they were still increasing and ambiguous), but at this point, paying more for an independent contractor to conduct an analysis of the lifecycle costs seems to me to have minimal benefit and cost too much to have any real merit.
Posted by: Roland | Jun 6, 2006 7:35:38 PM
A member of Sam Adam's staff actually wrote that it "costs too much" to conduct an independent analysis of the lifecycle costs?
On the Tram that quadrupled in constructions costs from the first City Council approved "we'll fix it later" budget?
Ironic, isn't it? Can I open a tab, bartender.
Awwww, who cares anyway. The taxpayer's of Portland are just picking up 15% of the tab. Another round of drinks for everybody (two for Homer)!
Nice work, boys.
Posted by: Alice | Jun 6, 2006 8:56:21 PM
15% of the tab that probably 90% of Portlanders will NEVER use. EVER.
Sad sad sad. Requisition money from people and then spend it on something they don't need.
Don't get me wrong I support the tram, but not at the cost to those that will never use it. It benifits the 5000 or so that "might" live in the south waterfront and it might last 50 years.
I would NEVER take money from taxpayers for such a contrivance. :(
Besides, I spoke to someone recently, and in fact, Portland is getting screwed. I don't know what the deal is, but aerial trams don't cost fifty million plus to build. They just don't. Someone has screwed the design and financing.
Maybe they're fired by now? Who knows.
blagh.
Who is John Galt?
Posted by: Adron | Jun 6, 2006 9:02:44 PM
90% will never use???
Now come on, OSHU needs to grow. Pill hill cannot hold any more growth. If OHSU is still going to provide the STATE with a world-renound public health facility, we need to keep in mind that the cost of the tram will work it's way back to us in the growth of OHSU.
If anyone who rides the 35 bus knows, the #8 to OHSU goes through every 5 minutes, not to mention the traffic jam every day at 5. These people need alternative ways to get to one of the largest employers in the state.
OHSU's contribution to the quality of life in Portland cannot be forgotten. What business would pick-up the % that OHSU has put in for a public transportation system???
Tram is great. I agree those who argue the cost are nit-picking and not seeing the benifit to the state and metro area.
~n
Posted by: nick | Jun 6, 2006 9:40:01 PM
I and may other people would like to know what's going on here.
Did Commissioner Sam instruct Roland to post this reason why a professional life cycle cost was not prepared?
Has Mr. Barnard ever prepared a project life cycle cost before?
Who instructed Mr. Barnard to exclude debt service and other fundamental costs?
Who told Mr. Barnard what to include?
Was there an earlier draft or two?
Who Ok'd the final draft?
Did Mr. Barnard use professional Life Cycle cost estimating software or any other helpful means?
Is Mr. Barnard free to openly discuss his estimate?
Can Mr. Barnard be interviewed by a local journalist?
Can Commissioner Adams office obtain the full life cycle debt service costs?
If a professional company is willing to complete a thorough and complete full life cycle cost for a nominal fee will the city pay for it?
Will it take months to get
any more basic information?
Who keeps track of money spent on SoWa?
Where can one get a list of all SoWa payments to date with names or recipients and what the payment was for?
How many other projects in SoWa are over budget?
What is the current estimated budget overrun?
Where is a genuine SoWa budget to be found?
What is the current TIF interest rate the city is paying? What rate was used in the original 1999 SoWa plan estimates?
Should the city answer these question?
Posted by: Steve Schopp | Jun 6, 2006 10:01:13 PM
Nick:
OHSU isn't a business; it's a non-profit teaching hospital. If you're a shill, you should know that already (turn to page 2).
Please say you don't care about the rate at which health care costs are growing in the United States, because you want the best health care that money can buy! If you can drive the best, drive a Cadillac.
The 85% of Tram expenses covered by OHSU, plus the art, leather furniture, rare hardwoods (IN A HOSPITAL!!!) are all OPTIONS that increase the sticker price on your health care Caddy.
Posted by: Gecko | Jun 6, 2006 10:07:58 PM
Pete Kohler may have recklessly endangered OHSU's fiscal stability right along with the PDC risking the city's.
His commitment of OHSU millions every year for decades towards this boondoggle Tram will hobble funding for all of their core missions.
OHSU employees should probably be up in arms.
Well, not the doctors.
The first SoWa OHSU building is owned by the OHSU doctors group, a 501c3, will pay no business taxes, no property taxes and no TriMet taxes. It will house doctors offices, a clinic, a health club, administration offices and "some research space."
All of which could have been acquired without the insane Tram.
But, it's not just the Tram.
The city is also providing the streets and other infrastructure as they poor millions into SoWa. The 1999 SoWa plan called for $288 million in projects and another $160 million in debt service over the first 20 years with millions more needed to retire the debt and to cover cost overruns.
It may be that the debt service itself is a much larger cost overrun than the Tram or the rest of the project overruns.
If the 1999 plan did not assume rising interest rates it may be that debt service is well on it's way to doubling.
ALL of which will be paid for decades with property taxes desperately needed by basic services general fund budgets.
That's why it is important to maintain updated and complete budgets.
Putting a happy face on this is no substitution for prudent management.
Posted by: Steve Schopp | Jun 6, 2006 10:26:35 PM
50 years seems like a very short period of time for such a large expenditure. Will fares be accurately priced so that users actually cover the costs for this short period of operation? What happen 2056? Will the tram be replaced with another heavily subsidized and modernized replacement mode? Will one of the tram gondolas be placed on the top of Council Crest as an exhibit of the past like was done with Council Crest trolley car after discontinuing operations in 1949? (The trolley car was removed several years later after much vandalism) Will the other gondola be given or sold to a non-profit group for a club house also like one of the Council Crest trolley cars that became a Boy Scout clubhouse?
If the 50 year life cycle had been publicly aired prior to the decision being made to build the tram, maybe this expensive boondoggle would not have gone forward.
Posted by: Terry Parker | Jun 7, 2006 10:16:11 AM
"...paying more for an independent contractor to conduct an analysis of the lifecycle costs seems to me to have minimal benefit and cost too much to have any real merit."
Roland, c'mon buddy, are you kidding me? Outside, independent analysis of a project that has spiraled out of control and that has resulted in some SERIOUS loss of confidence in city officials would have "minimal benefit" and no "real merit"???
That might be one of the most ill-advised statements I've heard out of a Portland city employee.
Sam, please tell me you don't agree with that statement.
That's like a business with back tax problems saying they see no reason to hire a tax professional - they'll just continue doing their taxes themselves.
And if it turns out that you have to revise your LCC analysis because land, staff time, and debt service (among other items) were left out, the resulting increased "loss of face" will probably make you wish you spent a few thousand bucks to get it done independently.
Posted by: Larry | Jun 7, 2006 12:54:39 PM
One very huge expense and very careful part of planning the MAX tunnel under the West Hills had to do with emergency escape routes. What is the emergency access plan for the OHSU tram? The four+ hour evacuation of one passenger at a time witnessed at the recent Roosevelt Island Tram breakdown doesn't seem like a particularly well thought out escape system.
Posted by: G Laubaugh | Jun 7, 2006 11:05:49 PM
Haven't you heard, G?
Our Tram will never get stranded because we have multiple redundancies and superior technology.
Plus, the Portland Fire Bureau has been practicing their repelling, and they say the can handle it.
Posted by: Gecko | Jun 7, 2006 11:38:00 PM
The voice of the public majority was ignored in greenlighting the Tram.
The subsequent quadrupling of construction costs has never been explained, merely renegotiated with OHSU.
We are afraid the construction budget fiasco will be repeated in the operating, maintenance, and safety costs. This WILL adversely impact future general fund budgets.
If we build a white elephant, we have to feed it and shelter it.
Posted by: Publius | Jun 8, 2006 12:38:57 PM
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Mr. Barnard -
Thank you for posting this information.
Can you also provide the latest ridership projections? What service hours and service frequency does the operating contract provide?
One aspect of the debate about the tram has involved the question of which alternative modes (electric trolleybus, conventional bus, tunnel/elevator, etc.) might have also served this purpose.
Now that the costs are known, it might be interesting for some folks to calculate and compare per-rider costs and per-passenger-mile costs, etc. for various modes.
Thanks again,
Bob R.
Posted by: Bob R. | Jun 6, 2006 10:04:59 AM