CommissionerSam.com - Tram

A whole lotta engineering, and A little bit of magic...

Jane Ames — Sat, 27 Jan 2007 15:00:36 -0800

What a beautiful Portland day, a blustery sunny winter day with views for all. By the time I decided to sign up for a Tram ticket, they had been long gone. I figured there was no way I would get one of the few tickets that were unreserved, thinking crowds would create long lines. But I couldn't help myself, and drove by on my way to the office for a little catch-up weekend work.

The event looked inviting, and the parking attendant said unreserved tickets were available. So I parked and took my chance. I quickly got a ticket and within 10 minutes, I was stepping onto "Walt" it turns out, with my many other Portland "pod" partners.

How fun was that! Everyone was in a great mood; kids and adults shared that buzz of excitement that can turn a set of complete strangers into a momentary team. We reaffirmed to each other how perfect the day was for our first tram ride; the 3 guys who had already ridden down told us about the bump in the middle; kids manuvered their way to the windows. And our "pilot" indtroduced us to "Walt" and told us to be mindful as we went over the tower because it would be a little bumpy.

The Tram is smoooothe, the vistas are majestic, our city really is beautiful. The "bump" in the middle is so fun I am surprised you don't have to pay extra. I hope all of you who are grouchy about the tram haven't become so wedded to your views that you refuse yourself a ride. Connecting the river and the hill with this futuristic pod is both a whole lotta engineering and a little bit of magic. Actually the tram at its most basic is a simple old pully rig, but it feels like the future when you are soaring up over the freeway.

I can hear the sour blogging voices harping about the cost and that everyone could just be riding buses up and down that hill for a lot less money. I tend to think there are a lot of us who resist change, and I often find myself in that set. This time, the vision and decision was a good one.

The benefits of the tram will long outlive and outweigh the costs. When the price and problems of the tram are long faded in memory, people will still be gliding up and down over the graceful tower connecting the hilltop and the riverside, spending a few quiet minutes viewing the gorgeous region that is our home.

If you are one of those who is really frustrated by all this "tram stuff", I urge you to go in disguise. Take the ride, enjoy the beauty, hold on over the bump, and just don't tell anyone about it.

Proposed Modified Tram Fare Structure

Sam Adams — Mon, 22 Jan 2007 12:57:17 -0800

I want to thank everyone who voted (over 750) or left comments (240) on my blog to share your perspectives on the ideal tram fare. Thanks, in part, to your input, I have been able to look at this issue from most all angles and develop a new propsed tram fare structure.

The Tram Executive Management Committee (TEMC) will meet at 7:30 am, Wednesday, January 24th in the Rose Room in Portland City Hall (1221 SW 4th Ave) to take public testimony and consider the following recommendation.

Rolled out for public comment in November 2006, the initial tram fare proposal was set at $4.00 per rider, per round trip, for all public riders. OHSU will be paying a separate estimated $1.2 million annualy to cover the fares of its employees, patients, students, and other customers who ride the tram.

Today, we propose a modification of this proposed tram fare to include the following provisions:

Tram rides will be free to Annual and Monthly TriMet and Streetcar transit pass holders
The Tram will sell Annual Passes for $100. Annual Tram Passes will be valid fare on the Streetcar System, but not TriMet buses or lightrail
For those without transit or tram passes, the fare will be $4.00 per rider for a round-trip pass. This fare will be valid for one round trip for the entire day on which it was purchased.
Daily tickets from TriMet and Streetcar will not be valid as fare to ride the Tram
Tram rides will be free to the public all day Saturday (9 am- 5 pm) and from 6:00 pm to 10:00 pm on Friday evenings for every weekend through the month of February

This is a more seamless approach than originally proposed, but not a totally seamless one.

The proposed modified tram structure benefits riders who will be using the tram as part of their usual transit. There are an estimated 110,000 TriMet annual and/or monthly pass holders. It also provides local residents with the option of purchasing an annual Tram pass that costs roughly $8.00 per month. Also, it will discourage automobile drivers from driving to the tram.

This has been made possible because OHSU has agreed to modify its existing agreement with the City of Portland and will pay 85% of the operating costs for the next five years, as opposed to the next two years as originally proposed, after which costs will apportioned between the City of Portland and OHSU based on actual OHSU and public ridership. The change limits the City's cost to approximately $240,000 annually (in today's dollars) for the next five years. Under this modified proposal, any fare revenue generated that exceeds the city's share of the operating costs will be split between OHSU and the city.

By 2010, on-street parking meters in South Waterfront are estimated to generate enough revenue to pay the City's portion of the tram not covered by fare revenues.

Why this proposal? Why not a totally seamless approach that also allows daily TriMet and Streetcar tickets to be used as fare on the tram as well?

While I agree with the original vision to make the Tram a completely seamless part of the region's transit system, the history of this project makes a good argument for a careful and conservative approach. There were cost projections that proved wildly inaccurate, and I do not intend to repeat those mistakes.

We need experience under our belt before we can know if we can afford to go to a completely seamless tram/transit fare structure. Since there hasn't been an urban aerial tram built in the U.S. since the 1960's, we simply don't know what ridership to expect. There are no comparable trams to help us forecast the ridership trends with sufficient accuracy. It is prudent to make long-term decisions based on actual experience.

And, we cannot afford to make a mistake and drain money away from other transportation needs. Portland already lacks the dollars necessary to maintain its existing transportation infrastructure, to say nothing of the need to make strategic investments in new infrastructure for our future. That's because the traditional funding mechanisms upon which we have relied to fund transportation no longer keep pace with the increasing cost of providing and maintaining the infrastructure. By example, in the next five years, due to flat revenues and rising costs, I will be required to cut over $60 million from PDOT's budget, on top of millions in cuts prior to these.

So, in considering how to pay for the Tram's annual operating costs, fares must cover the City's $240,000 share of the $1.76 million total annual Tram costs, while keeping the fares as seamless, equitable, and affordable as possible.

$$ The Ideal Tram Fare: What's Your Opinion? VOTE! $$

Roland Chlapowski — Fri, 19 Jan 2007 16:11:32 -0800

We've asked the tram's executive management committee to hold off on making final decisions on what the tram fare will be so that we can make sure that all options to lower the proposed $4.00 round trip fare have been duly explored and considered.

There are a few options, and we'd like your opinion on the course we should take. First though, a little background.

You'll get to see this view very soon!!!

BACKGROUND

Originally, the former tram project managers assumed -- and told the public -- that the tram would be part of a seamless public transit system, and that its fare would be the same as a TriMet or Streetcar ticket. Today, this would mean that the fare would be set at $1.70 and that transfers and passes from streetcar and TriMet would be honored as fare to get on the tram.

But, we've now learned that the operating expenses for the tram will be more than the original project managers estimated. In 2004, the former tram project staff initially pegged the annual operating costs at $900,000, whereas we now know that it will actually cost a about $1.76 million a year to operate the tram. Needless to say, that affects the final calculus - and yet there is still more to consider.

Presently, the City of Portland has a cost-sharing arrangement with OHSU where OHSU covers 85% of the operating costs, while the city picks up the remaining 15%. That means that the city is on the hook for about $240,000 a year.

Current estimates are predicting that there will be roughly 1300-1500 passengers a day. Per passenger, the operating cost comes out to roughly $4 per person.

Some people want to charge a $4 fare to fully cover costs. Others say that the city should just find the $240,0o0 to subsidize the 15% of the operating costs that the city is on the hook for. If that happened, we could seamlessly integrate the tram into Portland's public transit network, accept TriMet and streetcar tickets on the tram, and set the fare for $1.70. Tram car at Tram Tower

(We come to the $240,000 operating cost subsidy figure by assuming that almost all people riding the tram arrive to the South Waterfront with a transit pass of some kind, and therefore do not pay anything directly to the tram.)

Here are some of the real-world wrinkles that make a final decision a little tricky:

While it might seem pretty straightforward: either A) open up the tram to everyone as part of the transit system and subsidize its operations, or B) charge $4 to cover all of the costs, there are a couple additional considerations that make issue a bit more complicated.

First of all, many Portlanders feel like the city, through the statements of the previous tram project managers (who are no longer with the city), promised a TriMet fare, and that it should not go back on its word.

Another Tram ViewThat duly noted, there is another issue at hand. Specifically, the 85%-15&% cost sharing agreement the city has with OHSU will most likely change in about 2 years. At that point, the city and OHSU will split costs based on observed ridership. OHSU will cover a percentage of the $1.76 million operating costs based on whatever the share of the tram ridership comprised of OHSU-related riders. The city will pick up remain operating costs- those of the general public.

That means that if the city makes the tram fare either really cheap or almost free for people to ride, you'd expect that the the public share of the ridership would go up. And, it could go up by a lot. If this were to happen, the city could have to pay a lot more than $240,000 a year.

For instance, if the public ridership accounted for 50% of the overall ridership (650 of the 1300 per day) during the first two years, the City's portion of the tram's annual operating costs would increase from about $240,000 per year to $815,000 per year in 2009-2010. If 15% of the public riders (98 per day) purchased a $1.70 tram ticket, that would provide the city only $55,000 a year in revenue, leaving $760,000 more to cover.

In addition to the cost sharing issue, there are a couple other things to consider. First, since their has not been a tram built in the U.S. since the 1960's, PDOT's ridership estimates are just that- estimates. Potentially, the ridership could be wildly different that the current 1300-1500 per day currently expected. Tram Tower

Of course, if ridership were a lot higher than 1500 per day, this would make the cost per rider go down significantly, though that may or may not end up an important point depending on the fare that gets charged, and how much of it is collected directly by the tram (as opposed to TriMet and Streetcar).

A second consideration is that of parking meter revenues, which in the South Waterfront are expected to bring in up to $600,000-750,000 a year in new revenue ~~by 2009/2010~~ in the future [update: we are reevaluating this date, as the 2009-2010 was a low-confidence, back-of-the-envelope calculation. RC]. This could significantly subsidize the tram's operations, and indeed, it was originally planned that this would be the case.

Lastly, there is an argument out there that says that we should charge the $4 fare in order to capture as much revenue as possible from tourists, who are expected to flock to the tram, though we are unsure of the size of those flocks. Some folks think that it is not good to subsidize tourists, who'd be more than willing to cough up $4 to take the trip.

On the other hand, though, there are those who say that Portland's seamless transit system helps make the city such a great place to live. They want to build on that tradition and include the tram in the current system.

So, what do you think?

We are grappling with this issue, and would love your input. Sam supports the goal of making the Tram part of a seamless transit system, but also wants a financially responsible fare.

He has been meeting with the stakeholders involved--OHSU, TriMet, Streetcar, and PDOT staff--to determine a fare system that works for everyone. There are a lot of things that need to be worked out, and they will have to be worked out by the end of the week, Friday, January 19.

Your vote will help us gage the best path to take. Let us know what you think.

Vote for your preferred tram fare now.

Thanks!

UPDATE: We forgot to mention that The Oregonian editorial board weighed in on Wednesday.

Study: Does Transit Work? A Conservative Reappraisal

Roland Chlapowski — Mon, 21 Aug 2006 17:22:01 -0700

"Read (This Study) and I Think You'll See Why Even Conservative State Governors Want More and Better Public Transit, Not Less."

Tommy G. Thompson
Former Governor of Wisconsin

This is a great study. It addresses some of the common arguments against the efficacy of public transit and shows that such arguments are often based on the wrong question, particularly ridership as a share of total trips. Transit's overall percentage of "Total trips" is not a useful measurement, assert the authors, since the measurement of "total trips" does not consider whether transit is even available. In other words, of course transit cannot compete with a car on a trip to the Oregon Coast- it does not exist as an option!

But, the authors show, when transit is actually available for the trip in question and represents a realistic alternative to the automobile, transit efficacy fares much better. Indeed, the more extensive the public transit system becomes, the higher the ridership. The authors point out the cost effectiveness of transit as well - whereas highways in urban areas often cost up to $100 million per mile, rail transit usually costs a fraction of that.

Further, if you take a hard look at something this study didn't -how much highway automobile congestion hurts the economic health of cities (especially trade-dependent cities like Portland, which depend on high-value-added freight trips, and for which there are often no alternatives to highway travel), getting people off the roads and onto transit seems like a smart move. And when you take maintenance costs into account, the case for transit becomes even clearer.

To policy makers, who are faced with ever-increasingly-congested roadways and only so much land to expand them, the real-world choice is straight forward. It plainly makes sense to move more people more densely - think about how much of demand one person places on the fixed supply of public right-of-way (ROW) space when they drive alone in a large car, versus the amount of that limited supply of ROW someone uses (demands) when they are sitting on a bus or lightrail... Transit simply represents the most efficient use of the public's limited ROW.

Take a look at this study and see what you think about it.

-Roland

"Does Transit Work? A Conservative Reappraisal"

by Paul M. Weyrich and William S. Lind

Foreword by Tommy Thompson

One of the challenges that comes with being a governor is that you have to make things work. The decision you make today is likely to have real world consequences starting tomorrow. I like to think that makes governors more practical and less ideological. As a fellow governor, Lamar Alexander, likes to say, "How do liberal dog catchers and conservative dog catchers catch dogs? The same way."

I found it refreshing when two solid conservatives, Paul Weyrich and Bill Lind, decided to take a fresh look at mass transit. Their previous study, Conservatives and Mass Transit: Is It Time for a New Look?, proved to be the hit of the transit world when it was released a couple of years ago. And with good reason - it said something new. It said that there are sound, conservative reasons to support public transit, when public transit is done right.

As a governor, I know that mass transit is important for a variety of reasons to many people in my state. And I know that rail transit, including intercity rail, could and should play a much larger role than it currently does in serving the people of Wisconsin and the entire nation. That is why, when I was offered a position on the Amtrak board of directors, I took it.

As a conservative, I am sometimes troubled by the studies released by some conservative think tanks that attack public transit. Why do academic conservatives seem to believe that all transit is bad, when as a real world conservative, I know it isn't?

In this new study, Does Transit Work? A Conservative Reappraisal, Weyrich and Lind answer that question. They do so by pointing out something I had sensed but never quite put my finger on: the anti-transit conservative studies ask the wrong question. They base their anti-transit conclusions on the question: what percentage of total trips does transit carry? That number is relatively small. But it is an academic, not a real world number.

In the real world, roughly half of all Americans have any transit available to them and a still smaller number have the high quality transit available that would be utilized versus an automobile. If we look at how transit competes among that group of people, it performs vastly better than the anti-transit studies suggest. As governor of Wisconsin, that reflects transit reality in my state.

Like many officials at the state level, I encourage those in Washington and in various think tanks around the country to go into the field and witness for themselves just how viable rail transit can be and how important it is to working people. The American people need a dependable and affordable means to get to work and back each day. Think about it - the average price of a new car is now over $20,000. Good public transit can help working families keep a portion of that money in the bank instead of spending it at the gas pump. To them, and us, that's important.

So is this study. Read it, and I think you'll see why even conservative state governors want more and better public transit, not less.

Executive Summary

One of the principal arguments against mass transit is the "one percent argument" -- the assertion that transit carries only about one percent of total trips. This argument is relied upon heavily by many conservative and libertarian critics of public transit. In fact, the real figure appears to be somewhat higher.

But this paper argues that the central problem is not the answer but the question. Total trips is a poor yardstick with which to measure the effectiveness of public transit. Instead, the authors propose a new measurement: transit competitive trips. If we ask what percentage transit carries of the trips for which it can compete, we get a very different picture, one that accords much more closely with the real importance of mass transit in urban areas.

The study goes on to apply this new measurement to three transit systems, each of which represents high quality transit: Chicago's Metra commuter rail system and the Light Rail systems in San Diego and St. Louis. In each case, the system does far better than the transit critics suggest. Taken together, the three case studies establish beyond question that when we measure transit with the correct yardstick, transit competitive trips, transit works.

Like the authors' previous study, Conservatives and Mass Transit: Is It Time for a New Look?, this study then goes on to suggest ways in which transit can compete more effectively. If transit authorities are willing to act imaginatively to improve transit quality, America could see another "transit era," a second coming of public transit.

Does Transit Work? A Conservative Reappraisal

A Study Prepared by the Free Congress Research and Education Foundation

The first recorded example of mass transportation was the movement of Adam and Eve from the Garden of Eden. At that time 100% of the human population was moved at once in a single trip, a record never equaled since. 1

In fact, according to most conservative studies of mass transit, it has gone straight down hill. Today, they argue, despite billions of dollars of investment, transit carries a pathetically small number of riders: about one percent of total trips. Does transit work? If that is all the people it carries, the answer would appear to be clear: no.

In our earlier study, Conservatives and Mass Transit: Is It Time for a New Look?, we surveyed three common conservative objections to public transportation: it is a government creation that would quickly disappear in a free market; no conservative constituencies actually ride transit; and transit does not serve any important conservative goals. We noted that each of these perceptions is true in some situations. But there are other situations in which each is not true.

In fact, the dominance of automobiles and highways is a product of massive government intervention in the marketplace, intervention stretching back to World War I. In countries such as Switzerland where government policy has been less one-sided, transit holds a far larger market share.

While few people who can get around any other way will take a bus on a traffic-clogged street, many are willing to take a train. High quality rail systems such as Chicago's Metra carry large numbers of middle and upper-income commuters, people whose demographics indicate they vote conservative. Conservative politicians who disdain any mass transit are neglecting part of their base.

And transit demonstrably does serve some important conservative goals, including economic development, which can be both spurred and shaped by rail transit systems; helping the poor move off welfare and into jobs (which they have to get to somehow); and strengthening the bonds of community, which is important to cultural conservatives.

Does Transit Work?

Well and good, some conservatives (and other transit skeptics) have replied. But in the end, the most important conservative question about anything is, does it work? Welfare did not work, and the country is finally moving to get rid of it (we happily join in the cheers for that!). The National Endowment for the Arts does not work (sorry, but poop is poop, not art), and with any luck we will be rid of it soon too. Why should we keep transit around, when it only carries one percent of total trips? That number seems to make it clear: transit just doesn't work!

The "one percent argument" isn't the only conservative argument against transit. For example, some conservative studies claim that new Light Rail systems all carry fewer riders than projected and cost much more than planned. In response, it is easy enough to point out a contrary fact: two of the country's newest Light Rail lines, those in St. Louis and Dallas, both came in on budget and carry more riders than projected.

But the one percent argument is tougher. And, with variations, it turns up in most critiques of mass transit.

A publication of the Road Information Program, A Mobility Comparison of Investments in Highways and Mass Transit, notes that

Despite a 148.8 percent increase in operating subsidies between 1980 and 1990, mass transit was unable to increase its share of the nation's PMT. In fact, between 1980 and 1990, mass transit's share of the nation's passenger miles of non-marine, surface transportation decreased from 1.43 percent to 1.27 percent...total PMT provided by mass transit exceeded 1 percent of total transportation in only 10 states in 1990.2

A regional conservative periodical, K.C. Jones Monthly, based in Kansas, argued in a skeptical article, "Public Transit: A Worthwhile Investment?," that

Public transit is clearly a declining industry. Ridership peaked during the World War II period at roughly 23 billion trips per year.... As World War II came to an end and life returned to a more normal mode, public transit lost most of its market advantages. Ridership declined by about two-thirds, from 23 billion annual trips to around 8 billion in recent years. Public transit's share of urban passenger miles fell from over 30% in 1945 to barely 2% in 1995.3

The libertarian Reason Foundation's paper, Myths and Facts of Nation's Transit Policy, states that "Early results from the 1990 NPTS (Nationwide Personal Transportation Study) show that public transit accounted for 2.5% of all person-trips in 1990 vs. 2.3% in 1983." The figures are for total trips nationwide, not just in metropolitan areas.4 A 2.2% figure for total trips (in 1980) is given in False Dreams and Broken Promises: The Wasteful Federal Investment in Urban Mass Transit, published by another libertarian think-tank, the CATO Institute.5

The numbers rise, but only slightly, when the same studies look at commuting to work on transit in urban areas. The CATO study says "just over 5 percent of work trips were provided by transit,"6 the Reason Foundation says 5.86%,7 and an article in The Wall Street Journal, "Despite Huge Outlays, Transit Systems Fail to Lure Back Riders," gives a figure of 5.3% in 1990, down from 6.4% in 1980. 8

Are the numbers in these anti-transit studies correct? With minor variations, yes. An official U.S. Department of Transportation study, Journey-To-Work Trends in the United States and its Major Metropolitan Areas 1960-1990, says that in 1990 5.12% of commuters used public transit, down from 6.22% in 1980. 9 Another USDOT study, New Perspectives in Commuting, states that from 1980 to 1990 "the transit share declined from about 6.4% percent to about 5.3% of work travel."10 The Federal Highway Administration's National Personal Transportation Survey, Summary of Travel Trends, dated March, 1992, shows the distribution of work trips for transit as 8.4% in 1969, 4.7% in 1977, 5.8% in 1983, and 5.5% in 1990. The increase from 1977 to 1990 is one of the few shown in any study of transit use. 11

The Eno Transportation Foundation's highly detailed study, Commuting in America II, shows a more interesting variation: while stating that "transit's share of commuters declined from 6.3% to 5.1%" from 1980 to 1990, it also notes that "although bus service, the major mode used in transit, lost riders, other transit modes, specifically subways and commuter railroads, gained riders." The Eno study shows a gain in subway and elevated rail of 14.86% and in commuter rail of 3.61% over the decade.12 As we will see below, the distinction between the performance of bus and rail is important.

And what of the magical one percent, the figure so often cited for transit's share of total trips? The actual number seems closer to 2%, but that's still beggarly enough. If transit only carries 2% of total trips, or around 5% of commuters in urban areas, how can continued funding for transit be justified? Aren't the critics right? Don't the numbers tell us - and we know numbers cannot mislead - that we should just park the buses, scrap the trains and be done with it?

Reality vs. Theory

Well, perhaps not. The rest of this paper will show why these numbers can mislead. But some philosophy may be helpful at the outset.

An old trait of conservatives is their insistence that reality is local and concrete, not airy and abstract. One fine day in the 18th century, that great Ur-conservative talker and man of letters, Dr. Samuel Johnson, went for a walk with his long-time companion, Mr. Boswell, around the Channel port of Harwich. Boswell, ever the quiz, asked Dr. Johnson what he thought of the theories of Bishop Berkeley, who opined that we cannot really know the existence of anything. "I observed," wrote Boswell, "that though we are satisfied his doctrine is not true, it is impossible to refute it." "I refute it thus," Dr. Johnson growled, kicking a large stone.13

The stone we would kick is the hard fact that, if transit suddenly ceased operating in any large American city, commuting would become almost impossible. Rush-hour traffic is already horrendous, to the point where in places like Los Angeles and Washington, drivers are shooting each other. The rush hour itself has become rush many-hours, even "permanent rush hour." In urban areas, there isn't any place to put more highways, never mind the fact that bisecting, trisecting and dissecting cities with limited access freeways makes them die. If all the people now on trains, subways, Light Rail lines and buses suddenly joined the rush hour drive (and most can: in 1990 only 11% of American households had no vehicle, and 59% of those already lived in the center city),14 getting to work might take as much time as the job itself.15

So we appear to have a contradiction. Common sense and experience, those two great conservative tests, tell us transit is important. The statistics that count total trips, even total urban commuting trips, tell us it isn't. What gives?

What has to give is the unit of measurement. The seeming contradiction stems from the fact that counting total trips (or total commuting trips) does not effectively measure the present impact or potential of public transit. The anti-transit studies are applying the wrong yardstick. They are, in effect, trying to measure flour with a ruler, or count inches with a spoon. Their numbers are correct, but the meaning they draw from them isn't. To measure transit's current worth or future potential, we need a different measurement.

What might that measurement be?

Read the rest of this study here:

http://www.apta.com/research/info/online/weyrich2new2.cfm

This study of public transportation by the Free Congress Research and Education Foundation was underwritten by the private sector Business Members of the American Public Transit Association. The views expressed are those of the authors.

May 1999 Washington, DC

UPDATE #2: Tram Life Cycle Cost Analysis

The Office — Fri, 16 Jun 2006 22:39:12 -0700

Here is our office's second round of providing answers to questions raised in blog comments on the tram lifecycle cost analysis we posted about a week ago. In an effort to be as transparent as possible, we will continue to post as quickly as possible as much information as we can get our hands on. Hopefully, in doing so, we can adequately address any and all questions raised on this site. While it sometimes takes a couple days to find the answers to the questions being posted (we are juggling other job responsibilities, as well, after all), we are trying our darn'dest to make sure that nobody feels as though there is a "deafening silence" eminanting from our office. We thank everybody for their patience as we compile the requested information from various sources - and wish to underscore that we will continue to do so and address questions to the best of our ability.

-Roland Chlapowski

(06/15/2006)

________________________________________

6/15/2006

Publius: The voice of the public majority was ignored in greenlighting the Tram.

Sam Adams: Focused on the tram issue, I have completed three public townhalls and attended meetings of those neighborhood associations most affected. These outreach efforts were at my initiative. I listened very carefully. I sought answers to all questions. I still do. I weighed the facts. I voted to proceed with the tram after it became clear that stopping the project would cost a lot more than proceeding.

Gecko: Cost of liability insurance?

Rob Barnard: The City is self-insured. There are no current plans to part with normal city policy and purchase an additional separate liability insurance policy.

Gecko: Status of FHWA Airspace Lease?

Rob Barnard: It has been secured.

Gecko: Was Doppelmayr made aware of your annual operating plan (4,450 hours/year) when they projected a 50 year useful life? How long is their warranty in force?

Rob Barnard: Doppelmayr is fully aware of the intended operation hours. Their proposal assumed operating 365 days per year at 18 hours per day (6,570).

Steve: Aren't these the same group that told us this would originally cost $15M to build? Why would anyone believe them now?

Sam Adams: Obviously, if you are referring to PDOT, yes, they are still providing oversight for the city on the tram project. But, since I have become the new commissioner-in-charge of the project I have disbanded the PATI board and have placed all new staff people in charge. An entirely different group of people are now working on the project, though still within the Office of Transportation.

Steve: "Each piece of their metal is hand formed by Swiss craftsmen who came out of retirement to build this cabin" I can hardly wait to see what replacement parts will cost on this thing.

Rob Barnard: The exteriors of the cabins are handcrafted. The need to replace these items during the 50-year life span is unlikely. Replacement parts are included in the life cycle cost analysis.

Steve Schoop: Why did you mix operating costs with debt service in your answer?

Sam Adams: I asked Rob to provide the LID debt service cost information in his answer as a matter transparency in terms of public costs related to the tram. But the debt payments are not borne by the tram and thus Rob did not include them in his life cycle analysis. The outside consultant will double check that this approach is valid.

Bob B: If it turns out that 60% of the Tram's riders are NOT OHSU staff, patients, visitors, etc. than the City will pay 60% of the Tram's operating costs. Is my understanding correct or have there been changes in the way the City and OHSU will split the Tram's operating costs?

Rob Barnard: For at least two full years, the 85-15% split will be used to allocate costs between the city and OHSU, regardless of actual ridership patterns. After two years of ridership data is collected, the 85-15% split will be recalibrated based on the actual ridership observed.

Gecko: Helllooooo? Constituent service on aisle three, please.

Sam Adams: I wait until we have a bundle of questions before we answer them all at once.

Steve Schopp: They are still covering up the full life cycle cost estimate.

Sam Adams: We have provided more details of the tram project and provided more answers to follow up questions online than I have ever seen provided on any other project. And we will continue to do so.

Steve Schopp: Who told PDOT's Rob Barnard to exclude debt service and other fundemental components of a life cycle cost estimate?

Sam Adams: The City’s treasurer advised that it should not be included in this type of lifecycle cost analysis. We will get that advice double checked by the outside consultant that will review it.

Jerry: With the city being a good negotiator, they will agree to looking at the first year numbers when the novelty of the tram will create a large percentage of riders being tourists, first time- taxpaying riders wanting to see what they paid for, thrill riders, etc. And since there will be only one so-called OHSU bulding (the health club and some doctor offices) the OHSU ridership portion will be very low.

Rob Barnard: We will be basing the operating costs split looking at the actual ridership year-by-year after year two. Both tram cars will have an attendant to check payment or OHSU employee and patient credentials. The income from the tram will be pledged against costs split 50/50, then the remaining costs will be split based on actual type of riders.

Larry: I've been hoping to see a response from one of you on the issues brought forth on this issue. Some of the comments may have been a bit harsh (mine included?), so maybe I don't blame you for not doing so.

Sam Adams: This is a busy week for us given the on the ground work we have to do on the tram. We always try and respond to the questions posted on this blog. Even if the comments or questions are a “bit harsh.”

Steve Schopp: [Cost of] the design competition, land dedicated to the Tram, etc???

Rob Barnard: The entire tram is within the public right-of-way; the project did not have to pay for right of way costs.

Steve's reply: No the "project did not pay for it, the city provided the land and that is a cost and part of any full life cycle cost.

Rob Barnard: We disagree. The outside consultant will review.

Roland Chlapowski: I am going to take a stab at this, too, even though I have an economics background and not one in accounting. That disclaimer aside, if we (the city) are to be charged for the cost of selling the land, then we should also be credited with the payment for it, as well. The public's changing use of the land in this instance makes it both the buyer and the seller - meaning that in effect, no net revenue was expended or earned. As both the party selling the land and buying the land, it is improper to consider the cost of the land as an expense to the city, per se, unless of course you also credit the city for "selling" the land. (This is analagous to homeownership, in as much as the economist's view homeowners is that they are "paying themselves" rent for the use of the property. Yes, they are foregoing the opportunity of renting out their home to someone else [and incurring an opportunity cost because of it], but neither do they have to pay rent to someone else to cover the costs of their own personal lodging.)

Steve Schopp: Your standards are not fundementally sound. You have mischaracterized "debt service" in order to exclude it. I can only assume you were instructed to do so as part of the continued effort to withhold all SoWa debt service costs from public consideration.

Rob Barnard: The city treasurer advised against including it given this evaluation is a life cycle cost analysis. See his blog entry. The outside consultant will review.

Steve Schopp: Rob Barnard: Commissioner Adams has asked for an outside consultant to review my life cycle cost analysis. Steve's reply: Can I pick the consultant?

Sam Adams: I don’t even know who you are.

Steve Schopp: was there an earlier draft with debt service included? Were you ever provided the debt service numbers?

Rob Barnard: No.

Steve Schopp: So none of the Commissioners themselves have never seen any of this information [about PDC finances in SoWa]? And can't provide it?

Sam Adams: I asked PDC for the information two months ago. They say they are working on getting me the info.

Beth: From what I have read here alone, this Life Cycle estimate is disturbing and further demonstrates the [PDC?] city agency's willingness to use inappropriate, misleading and unreliable methods.

Sam Adams: PDC did not complete this life cycle cost analysis.

________________________________________________

June 13, 2006

We posted the lifecycle cost analysis of the tram last week and have gotten some good questions from bloggers. So good, in fact, that we needed to do some research. After talking with the Portland Development Commission, the Office of Management and Finance, Debt Management, and Rob Barnard - our exceptional project manager from the Office of Transportation - we have compiled a list of answers to all of the questions people posted below.

Thanks for the chance to answer all these questions.

- Sam Adams

______________________________________________________

June 14, 2006

Question: Steve Schopp: Where is the debt service and the rest of the documentation?

Answer, as provided by Eric Johansen from the city's Debt Management department:

Eric Johansen:

Roland,

You have received questions as to why debt service costs are not separately identified in the life cycle cost analysis for the tram project. The answer lies in the conversion of debt service costs over the life of the bonds (nominal dollars) into present day dollars (present value).

In calculating the present value of a stream of debt service payments, the common financial practice is to discount the annual debt service at the interest rate on the bonds. Therefore, if one calculates the present value of a stream of debt service payments over 20 years (or 50 years), the answer comes back to the original capital cost, in this case $8.5 million (tax increment funded component). Therefore, it appears that the analysis prepared by Rob Barnard is handling the capital cost component of the analysis appropriately. There is no need to separately identify debt service costs as the present value of those costs would yield the same $8.5 million shown in the analysis. In fact, to add debt service costs to the capital costs already shown in the analysis would result in a double count, resulting in a substantial overstatement of project costs.

-Eric

(ejohansen@ci.portland.or.us)

_____________________________________________________

June 13, 2006

Bob R: Can you also provide the latest ridership projections?

Rob Barnard: The June 2002 Connector Study estimated the ridership on the tram at approximately 1,540 per day during the first five years of operation and 5,510 by 2030.

Bob R: What service hours and service frequency does the operating contract provide?

Rob Barnard: The contract provides for service form 6:00am to 10:00pm Monday through Friday; 8:00am to 5:00pm Saturdays; No service defined for Sundays and holidays. At peak hours of operation, the tram is capable of 13 trips per hour, or about one trip every 4 ½ minutes; During non-peak hours the frequency may be less.

Alice: Only $46k/year for alternative service? How many days of "tram down time" does that cover?

Rob Barnard: The alternative service is budgeted at $15,000 per year. This provides approximately two weeks of shuttle service during normal tram operation hours. The $46K noted in your posting I believe was generated by taking the total cost of alternative services for the entire life of the facility of $2,290,006 and dividing it by 50. To equate the results into today’s dollars it needs to be discounted.

Steve Schopp: Where is the debt service and the rest of the documentation?

Rob Barnard: Cost for debt service is not borne by the tram operating costs city. The debt service costs are carried by the private funders of the Local Improvement District, the Tax Increment Financing and Oregon Health Sciences University.

Information on financing costs for each type of debt revenue resource is available from the Portland Development Commission and OHSU.

Steve Schopp: [Cost of] the design competition, land dedicated to the Tram, etc???

Rob Barnard: The $57 million capital amount shown in the life cycle analysis includes all the costs for the design competition, engineering, city staff, OHSU staff, permits, owner furnished furniture, ticket machines etc. All costs that have been expended from July 2002 to now plus all planned expenditures to open a fully operational facility are included in the $57 million amount except for debt service. The $57 million also includes $2.4 million in contingency. The entire tram is within the public right-of-way; the project did not have to pay for right of way costs.

Steve Schopp: How did you get to the 50 life span?

Rob Barnard: The 50-year life span was selected in consultation with Doppelmayr who is constructing the tram; Many trams in operation are over 50 years old.

Mr. Magoo: 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"?

Rob Barnard: Interest is paid for by OHSU, private property owners or as part if Tax Increment Expenses; again, no charge for land; city staff time is billed to the $57 million project costs.

Mr. Magoo: Why not get an independent analysis? Wouldn’t it make the anser more credible?

Rob Barnard: I am a member of the Office of Transportation committee that developed standards for how to generate and use Life Cycle Costs analysis for the Bureau. We will have an outside consultant review my work.

Adron: …aerial trams don't cost fifty million plus to build. They just don't. Someone has screwed the design and financing.

Rob Barnard: This particular tram is a custom one-of-a-kind facility. The tram’s cabins are hand built: Each piece of their metal is hand formed by Swiss craftsmen who came out of retirement to build this cabin. The intermediate tower is designed as a sculptural icon. The upper station cantilevers twenty stories out of the ground and is resisting 160 million foot-pounds of force. A simpler, off the shelf tram would have been less costly.

Nick: What business would pick-up the % that OHSU has put in for a public transportation system???

Rob Barnard: The transportation study estimated that 85% of the ridership would be OHSU employees, patients and students. Their share of the financing and yearly operational costs are based on this percentage. This percentage of which jurisdiction is responsible for operation costs will be reviewed based upon a census of riders in year three and beyond.

Steve Schopp: Did Commissioner Sam instruct Roland to post this reason why a professional life cycle cost was not prepared?

Rob Barnard: No, Commissioner Adams has always let his staff offer their own point of view. Commissioner Adams has asked for an outside consultant to review my life cycle cost analysis.

Steve Schopp: Has Mr. Barnard ever prepared a project life cycle cost before?

Rob Barnard: Yes. I am a member of the Office of Transportation committee that developed standards for how to generate and use Life Cycle Costs analysis for the Bureau.

Steve Schopp: Was there an earlier draft or two? Who Ok'd the final draft?

Rob Barnard: The final draft was reviewed by the Director of the Bureau of Transportation Engineering and Development and now the public.

Steve Schopp: Did Mr. Barnard use professional Life Cycle cost estimating software or any other helpful means?

Rob Barnard: Custom software was not used.

Steve Schopp: Is Mr. Barnard free to openly discuss his estimate?

Rob Barnard: Yes, I am willing to discuss this estimate.

Steve Schopp: Can Mr. Barnard be interviewed by a local journalist?

Rob Barnard: Yes.

Steve Schopp: Can Commissioner Adams office obtain the full life cycle debt service costs?

Rob Barnard: The debt service on the LID is shown as $691,035 on Ordinance 179297; PDC should have estimates for debt service on the TIFF bonds.

Steve Schopp: 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?

Rob Barnard: The will be built into the cost of the project. Again, Commissioner Adams asked that an outside firm review my analysis.

Steve Schopp: Will it take months to get any more basic information?

Rob Barnard: The time it took to develop the life cycle cost analysis included waiting for negotiations for the final contract amounts with the tram operator to be completed and discussion with OHSU security forces, etc.

Steve Schopp: Who keeps track of money spent on SoWa?

Rob Barnard: Portland Development Commission.

Steve Schopp: Where can one get a list of all SoWa payments to date with names or recipients and what the payment was for?

Rob Barnard: Portland Development Commission.

Steve Schopp: 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?

Rob Barnard: Portland Development Commission.

Steve Schopp: What is the current TIF interest rate the city is paying? What rate was used in the original 1999 SoWa plan estimates?

Rob Barnard: Portland Development Commissioner would be the agency to ask.

Steve Schopp: Should the city answer these questions?

Rob Barnard: Of course, that is why Commissioner Adams asked me to post this information on his blog and answer these questions.

G Laubaugh: 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?

Rob Barnard: The tram has an electrical main drive system that is connected to the utility power grid. If the power were to go down or if the main drive went off-line there are two backups.

The primary backup is the diesel hydrostatic standby drive. It can operate the tram at half speed. It has a day tank and has sufficient fuel to operate for one day. If the main drive and the standby drives are off line there is a diesel hydrostatic rescue drive that operates at 1.2 meters per second. This rescue drive is designed to bring the cabins back to the station.

The upper and lower stations are also connected to OHSU’s emergency power grid. OHSU is a level one trauma center and generates their own power in an emergency. This emergency power is used to run all the lights, computers, fire alarm panels and the like.

If all of the above are off line, the cabins are equipped with rescue facilities. The cabin attendance lowers the retrieval rope stored in the cabin floor to the ground. The Fire Bureau attaches two 10,000 psi tensile strength rescue ropes to the retrieval rope. The attendant raises the two rescue ropes into the cabins. The attendant attaches them to safety eyebolts with a self-locking karabiner. (A karabiner is a metal loop with a sprung or screwed gate. It is used as a component in safety-critical systems and is a common method use to attach a rope to a fixed anchor.) The Fire Bureau will then use these two ropes to ascend into the cabins and rescue the patrons.

As already mentioned, part of the annual tram operating costs are to operate shuttle buses in the event the tram is non-operational.

Publius: 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.

Rob Barnard: The City’s contribution to pay for the tram’s operating costs will be from South Waterfront parking meter revenue. We have completed an analysis that shows adequate revenue over a 10 year period. This is the same operating funding approach we have used to help pay for the streetcar operations. Diligent care has been given to determine the life cycle costs of the facility. However, these costs may vary based on adjustments to the operating hours or frequency of service.

An Executive Management Committee (EMC) has been established to provide command and control authority over the tram. It includes a Citizen Advisory Committee to ensure input from neighborhoods. They are required to meet quarterly to review costs. The Chief Financial Officers for both the City and OHSU are members of the EMC.

________________________________________________________

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.

_____________________________________________________

06/08/2006

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.

Tram Tower Making Way Up the Willamette River

David Gonzalez — Fri, 09 Jun 2006 17:46:52 -0700

Vancouver Mayor Royce Pollard and Sam joined workers and executives from Thompson Metal Fabricators, Bigge Crane and Rigging and tram staff here today to send off a giant piece of one of the new Portland Aerial Tram towers. The 90 by 30 foot structure is making its way down the Columbia River this afternoon. The structure, locally produced by Thompson, is more that twice the size of the Portlandia statue that was barged into Portland in 1985.

Speaking from the barge on the Columbia River today, Sam said, “Now that the costs and funding of the tram have been finalized, it’s exciting to see the construction finally taking shape.” Sam continued, “In addition to spurring the development of the new South Waterfront, it is becoming clear that the tram will be a landmark for the entire region.”

At 4:00pm today, the barge started down the Columbia River, winding its way up the Willamette River through the evening and overnight. The structure is expected to arrive in the South Waterfront area of Portland on Saturday morning.

Peter O. Kohler Pavilion Opening

Maria Lynn Lim — Mon, 05 Jun 2006 12:32:19 -0700

I had the opportunity to staff Sam to the opening of the new state-of-the-art Peter O. Kohler Pavilion in OHSU yesterday, June 4, 2006.

This building is designed to house The Center for Women’s Health, 86 medical, surgical and intensive care beds, eight new cutting-edge technology operating rooms with room for expansion and a large parking garage that will accommodate 450 cars.

With its design, landscaped courtyards and the beautiful art hanging on the walls, it is indeed a world class facility.

Open attachments to read Sam's and Dr. Peter Kohler's remarks.

Attachment	Size
060406 Kohler Pavilion Remarks Sam.doc	22.5 KB
060406 Kohler Pavilion Remarks Peter.doc	27 KB

BLOG: Fixed Costs on Tram Contracts and More Funding for Affordable Housing, Parks and Transportation Are Reasons Why I Voted t

Sam Adams — Wed, 12 Apr 2006 16:49:59 -0700

My comments today at the Portland City Council meeting today: I am pleased—and yes, a little bit relieved—to support this resolution.

This is not necessarily the easiest resolution to support, as it represents an agreement that is less than perfect. However, at the end of the day, it’s one that has earned my support.

As the stakeholders will attest, I have been a demanding participant on behalf of taxpayers during these negotiations. But I’m convinced this is the right thing to do.

I want to be clear about what I am supporting. Then I want to explain why I support it. This is a big decision and the public deserves to know exactly how I made my decision.

I am voting in favor of a funding package that instigates a comprehensive development of needed public infrastructure in the South Waterfront District.

We’ve all heard a lot about the tram lately, but there’s a lot more here than just the tram.

At my urging, the Mayor and City Council directed PDC in December of last year to negotiate with our private sector partners a new funding package that includes not just the tram, but also street car development, neighborhood park development, initial Greenway development, business recruitment, and a significant increase in affordable housing.

Thanks to this new funding agreement before us today, South Waterfront will be a neighborhood not only for lawyers and doctors that serve OHSU and elsewhere, but also nurses, support staff, and most anybody who chooses to live there. This will be a real neighborhood, with housing options for a breadth of income levels, parks, a street car line, and a tram for all Portlanders.

TRAM:

• We’ve all heard a lot about the tram and its ever-escalating construction costs. With the passage of this resolution and the supporting ordinances, we’ve worked hard to make increasing tram costs yesterday’s news. We’ve worked with our contractors Kiewit, Doppelmayr, and others to achieve a fixed price for tram construction.

• Let me explain “fixed price.” The total anticipated project cost is $57 million. Of that, $34,799,000 goes to Kiewit Pacific as the general contractor. Dopplemayr, which is providing the support structures, ropes, mechanical equipment, and cabins receives $10,477,387. Here’s the important part: that’s it. Both prices are fixed. Those two companies will receive no more than that.

• In fact, the total project cost can only change if we, City of Portland, make the appropriate design changes. We’re in control of our own destiny on cost.

• Now, there may be design changes. This is an extremely complex project and obviously all of the thousands of parts have to interact with each other. That’s why this package also sets aside $2,436,440 in contingency.

• In summary, 95.7% of total project cost cannot increase. Of the remaining 4.3% we are in control of cost changes, and for those changes we’ve set aside $2.4 million.

NEIGHBORHOOD PARK:

• Neighborhoods aren’t just bricks and mortar. People—residents and non-residents alike—need a place to relax and enjoy themselves. You can go down to Jamison Square in the heart of Portland’s highest density neighborhood, the Pearl, on a sunny summer day and see hundreds of kids and families from the around the city enjoying themselves. South Waterfront needs an equivalent. This package guarantees $4 million for park development and guarantees expedited completion by 2009 and I’m pleased to see this nailed down.

GREENWAY:

• The restorative ribbon of green to be nurtured along the banks of the Willamette River is a cutting-edge development. It’s a sanctuary for wildlife and contemplation, a buffer between the city’s most bustling live/work district and the timeless needs of the natural environment. $4 million is secured in this package to further the Greenway’s development. It’s not nearly enough to complete this important development, but it’s more than we had before and a very good start. I’m pleased to support additional funding for it.

STREETCAR:

• As the city’s transportation commissioner, I take great pride in our ever-advancing ability to provide meaningful transportation options to our citizens. The Office of Transportation and our private sector partners with Portland Streetcar, Inc. continue to expand this invaluable line. One of the secrets of the streetcar line is that while it provides people with a safe, comfortable, and convenient way to travel it’s a proven instigator of development.

• To date, the existing streetcar line has helped foster more than $2 billion in private investment adjacent to the line. We now refer to streetcar as development-oriented transit. It’s a perfect match for Portland’s newest neighborhood, and I support unified efforts brought forth in this deal to seek state dollars to complete the streetcar with 2.4 more miles in line in South Waterfront.

INVESTMENT IN BIO SCIENCE ECONOMIC DEVELOPMENT INITIATIVE:

• Although we as a city receive consistently high marks for our livability, we frequently receive demerits for lacking a top-tier research university. A February 12, 2006 front-page Oregonian article articulated the economic importance of top-tier research universities: University of Washington in Seattle, WA brings in more than one billion dollars annually. Meanwhile, Oregon ranks 44th in higher education support. We need to change this.

• As the city’s liaison to higher education, I know how important higher education is to the current and future economic development of the city and region. When I worked for former Mayor Vera Katz, I pressed for $8 million in investments to help build PSU’s Urban Studies Center, the new School of Engineering, and the streetcar connection.

• $1.5 million for a joint PDC/OHSU bio-science recruitment strategy, and $2 million for tenant improvement within the North Macadam URA to encourage additional private bio-science growth.

• These are the kinds of investments we need to make. Yes, there are costs, and we can’t be sure it will yield jobs. However, there are costs to doing nothing. In fact, doing nothing ensures we see no job growth. These are good investments and I support them.

AFFORDABLE HOUSING:

• In addition the district’s planned 5000 housing units, $18 million in new dollars for affordable housing is available with this package, bringing the total allocation to $25.7 million, which funds 3-5 projects and funds completion of the first 200-unit project by 2009. Outside of the Central District, I will insist that retain our policy that includes housing opportunities for those in the 0-30% of median family income.

WHY I’M SUPPORTING THIS DEAL:

• From a direct cost/benefit analysis, it’s pretty straight-forward: If we don’t go forward the City’s general fund, the source of dollars we use to provide basic services like fire and police protection, could be exposed to more than $36 million in claims. That would be $36 million we currently earmark for basic city services that would be lost.

• Additionally, it’s clear that our private sector partners would pursue litigation against the city which would bring untold legal costs, notwithstanding which party prevails on claims.

• Instead of pursuing litigation, the private sector partners have guaranteed the tax-increment finance dollars needed to pay for these investments.

• The bottom line is that we can either spend additional dollars to fund this package of neighborhood improvements, or we can spend additional dollars to fight in court. The choice is clear.

Yes, the City is providing direct and indirect financial assistance to OHSU: $7.8 to $14 million dollars worth depending on how you count it. Is it worth it…? You decide.

ECONOMIC IMPACT OF OHSU AND SOUTH WATERFRONT DEVELOPMENT:

• OHSU is the city’s largest employer with 11,500 jobs.
o These are mostly living-wage jobs, and research shows that every OHSU job yields 2 more.
o Over the last decade, OHSU brought in $274 million in research awards, $258 million of it from out-of-state sources.
o OHSU generates 46,000 jobs in communities throughout Oregon and fuels $2.7 billion in regional economic activity annually.

• Their expansion catalyzes more than $2 billion in planned investment in the district.
o 4,500 new jobs.
o 1,800 jobs with OHSU’s first building construction already.

YES, THERE ARE NEIGHBORHOOD IMPACTS:

I want to touch upon the very real impacts felt primarily in the Corbett/Terwilliger/Lair Hill neighborhood. Some neighbors there are bitterly opposed to the tram, and we need to acknowledge that.

o Some expect a reduced sense of privacy. The tram has been designed specifically to minimize sight lines into homes below.

o For those directly impacted along Gibbs Street, the City, at Commissioner Dan Saltzman’s suggestion, initiated a voluntary buy-out program. We’ve followed through on that, and 2 homeowners have accepted this offer.

o Additionally, this deal retains commitments to building the pedestrian bridge over Interstate 5, the underground of utilities, public art in the neighborhood, and additional amenities.

Yes, there are neighborhood impacts that come with the tram. We need to acknowledge and mitigate those impacts. I believe we’ve done a good job in doing just that, and we’ll continue to do more.

THANK YOU.

Before I confirm my support for this resolution, I want to acknowledge the good work of a number of people who have helped to make this happen.

First, my colleague and Mayor, Tom Potter. His commitment and leadership has been crucial. His staff assistant, Austin Raglione, has done excellent work in helping to bring the deal together.

Bruce Warner, Rochelle Lessner, Cheryl Tweete, Larry Brown, and Bob Alexander of PDC deserve special mention. They’ve negotiated on the city’s behalf.

Within my office, Roland Chlapowski and Tom Miller have worked tirelessly on this. On my PDOT team, Sue Keil, Art Pearce, Greg Jones, and Don Gardner have done great work. In the City Attorney's office, I would like to thank Jim Van Dyke. Thank you all.

And on a particular note, I want to thank our new tram project manager, Rob Barnard, for his dedication, savvy, and stellar attitude.

OHSU’s Dr. Peter Kohler, Steve Stadhum and Mark Williams have helped get their team together on this.

Our private sector partners, Homer Williams and Dike Dame of North Macadam Investors have contributed in important ways as well.

I asked Jim Francesconi, who represents Kiewit on Eastside Big Pipe negotiations, to assist with Kiewit Pacific, the Kiewit arm building the tram. He did great work in a short time helping Kiewit partner with the city and its partners.

Finally, my colleague Commissioner Dan Saltzman deserves credit for making a commitment last week to this deal. Politically, some think it would be easier to say no. Dan’s commitment puts the city’s well-being ahead of the politics of the moment. That’s what leadership is all about.

I vote aye.

To read a copy of the resolution passed by council, you can do so here (pdf format).

To look at a copy of "Exhibit A" - which breaks down the final contract and how the tram costs are allocated amongst all the parties involved, you can do so here (pdf format).

The Costs of Stopping the Tram

Sam Adams — Wed, 29 Mar 2006 15:27:07 -0800

A lot of people have been asking me and my staff about the specific costs of stopping the tram project.

After talking with city staff, our office learned that coming up with a solid cost figure is difficult because it would require speculation on many costs due to legal uncertainties. They did give me an estimated "floor" to such costs (the lower limit of we could owe). Right now, that floor stands at $36 million, though it could increase.

I know that this won't satisfy our most vocal bloggers, but in an effort to be as open as possible, here is the email exchange between my office and city staff below:

-----Original Message-----
From: Chlapowski, Roland
Sent: Tuesday, March 21, 2006 11:35 AM
To: X; Y; Z
Subject: Costs of stopping tram

I've been fielding a lot of inquiries on the costs of stopping the tram construction; can you please let me know what those costs would be, in a quantified form?

Thanks,

Roland

______________________________________

Roland-

It is hard to fully quantify the actual costs for stopping construction of the Tram. We would need to restore the sites. A very very rough guess for this is about $700,000. No back up, just a shot from the hip. The cost to pay Kiewit and all the subcontractors to close up shop may be around $3,000,000. Again, this just a rough guess after talking to the contractor. No back up or supporting data.

Please keep in mind, that by the time that we reach our drop-dead date for stopping the Tram using the Kiewit Contract authorization limit as the bench mark, the potential exposure to the City will have increased from the current $20 million to approximately $36 million.

Kiewit          $22.3 million (currently at $11.3 million)
Doppelmayr $6.7 million    (currently at $4.7 million)
Soft Costs    $7 million    (currently at $5.5 million)

Per the contract, Section 108.07 Suspension of Work, the contractor would be entitled to "reimbursement for its direct costs incurred as a result of the delay and 4% mark-up for both overhead and profit." Providing a reasonably accurate estimate for the actual cost for delay is difficult. There are too many unknowns. Would we delayed them for a week, a month, or a year? Mobilization and demobilization cost alone are typically 10% of the project costs. The potential impact of losing key staff to other projects and then having them gear up new staff has a cost. OHSU has provided us notice that the potential actual monetary damages for delay from their side associated with delay of the Tram opening is $1.5 - $2.5 million per month.

Per the most recent cash flow analysis, we reach the 125% Director's Authorization limit of $22,269,938 on or about mid-June. Given that actual expenditure of funds versus invoice has a 30-45 day lag, we would need to either suspend the work or terminate the Kiewit contract on or about early to mid-May. Doppelmayr is schedule to arrive on-site beginning the first week in May. If we tell them to stop, it is highly unlikely that we can get their crews back until next year. They are fully booked for the remainder of the calendar year.

Sincerely,

PDOT Staff
Office of Transportation

____________________________________

Roland:

It's a reasonable question, but any quantification would be a wild guess, with a capital "W". If this information needs to be quantified beyond what was stated at the Town Hall meeting, my suggestion is to let people know that we are not talking exact figures, but rather guesstimates that could be significantly different than the actual amounts. Given the difficulty of estimating expenses, I don't want citizens to be misled or find newspapers saying "City underestimates costs again."

Having said that, its fair to say that termination of construction means losses in excess of at least $20M. How much higher than that is open to a lot of speculation.

As you recall from the Town Hall Meeting, the City is borrowing money to pay for construction and, if the tram is NOT completed, there will be no LID to pay for the borrowed money, so repayment would come from the General Fund. Last week Rob estimated all construction costs around $20M (give or take a few million).

However, $20M does not include a) the cost of site restoration, b) the cost of terminating the construction contracts (we would owe money under our contracts for wind up costs, which is dependent on what it costs the contractor to stop), c) the cost of dealing with purchased, but unused materials, and e) the cost of staff time to devote to this. Nor does it include the cost of litigation if the City were to be sued over stopping the construction nor does it include damages in the event that a judge were to say that the City improperly terminated (as you know I have suggested we have a contractual obligation to go forward if the tram is fully funded, so if it were and we stopped, we are potentially liable for breach of contract damages in an unknown amount).

Therefore, my suggestion is that we say that $20M is likely the minimum amount it would cost and the upper end could be much more than that. How much more depends on many factors in this fluid situation.

City Attorney Staff