If Cincinnati mayor derails streetcar project, feds want money back

Cincinnati Mayor John Cranley wants to kill a voter-approved streetcar project already underway, which he says will save money. If that happens, Uncle Sam wants a $44.9 million refund.

Even though it won voter approval twice, track has been laid, and the city has received millions of dollars in federal grants, a streetcar project in Cincinnati could be derailed because the city’s new mayor says it will inevitably waste taxpayer money.

While advocates say such investments in infrastructure are needed to insure long-term economical stability, many state and local officials have turned away federal dollars for projects they say are too expensive and will become too burdensome to maintain.

In Cincinnati, Mayor John Cranley, a former city councilman, spearheaded the drive to cancel the project after taking office this fall. He has characterized the project as fiscally irresponsible, complaining that cost estimates were far below what contractors ended up bidding, which he says is the result of a lack of transparency by the previous administration.

Mr. Cranley says the city will save an estimated $100 million if the project does not move forward. An audit commissioned by the city and released Wednesday finds those savings are much lower.

The Federal Transit Administration has set a midnight Thursday deadline for the city to decide to proceed with the project or not. If the city council decides to permanently curb the streetcars, which were designed to span 3.6 miles, the FTA will terminate all federal grants and the city must return the $44.9 million the US Department of Transportation invested in the project to date.

In a recent letter, FTA administrator Peter Rogoff called a possible suspension of the project “a material breach” of the city’s original agreement and said that the agency has the power to withhold non-transportation funds the city is receiving in other areas until the debt is repaid. The city council is expected to make a final vote Thursday.

To date, the city has spent $34 million and obligated an additional $94 million in contracts. The city is also potentially on the hook for the $15 million Duke Energy spent to relocate underground utility lines along the route, according to the Cincinnati Enquirer. A lawsuit between the utility company and the city is pending.

The project broke ground in August, with rails already in place, but work stopped two weeks ago.

Paul Allen Beck, a political scientist at Ohio State University in Columbus, says that across the country, public officials, particularly state governors, have turned away federal aid on projects like high speed rail and bridges because the public is worried about government spending, partly because of tight budgets, but also due to heightened cynicism of government associated with the tea party movement.

“We’re in an era of widespread distrust of government” and the public is “striking back by wanting to say ‘no’ to a lot of things,” he says.

There is a disparity in data between Mayor Cranley and global auditing firm KPMG, which the city hired to determine cost savings of canceling the project versus keeping it moving ahead. The report says it will cost between $50 million to $80 million to terminate the project; completing the project will cost between $105 million and $106 million.

Cranley says it will cost about $31 million to stop the project. He promises to veto any attempt by the city council Thursday to restart the project.

“I’ve made up my mind,” he told the Cincinnati Enquirer. “If the private sector comes up with a bunch of money, that’s a different story.”

Julie Heath, chair of the Economics Center at the University of Cincinnati, says it is common for municipalities to compare the long-term benefits of complicated infrastructure projects against immediate costs. In Cincinnati, the previous administration was vague about upfront costs, which set the opposition in motion.

“Any kind of hint that they are not sure about the costs and benefit is going to make people nervous,” Professor Heath says. “Not having a firm, clear, guiding hand from the get-go has hurt things here.”

The shift to streetcars is taking place in several cities across the US, many of which replaced them decades ago with buses or heavy transit. In recent years, cities have returned to streetcars as relatively affordable ways to break gridlock, rejuvenate deadened commercial corridors, and enliven economically struggling neighborhoods.

Most of these projects were jump-started by Transportation Investment Generating Economic Recovery (TIGER) grants from the US Department of Transportation that are meant for long-term road, rail, transit, and port projects.

In 2013, inaugural streetcar lines or extensions of previous lines were launched in New Orleans; Tucson, Ariz.; Denver; Dallas; Atlanta; Washington; and Salt Lake City. Other cities, including Sacramento, Calif.; Kansas City, Mo.; Minneapolis; El Paso, Texas; Milwaukee; and Honolulu are in different phases of getting future streetcar lines up and running.

Seth Maney, a founder of OTR Matters, a website that promotes the revitalization of Over-the-Rhine, a historic downtown neighborhood in Cincinnati, says that two city referendums have proven the public wants the streetcars to run. He says the opposition comes from worry that gentrification will displace low-income people from the city’s center to outlying areas.

“They don’t like the idea of a diverse city succeeding,” Mr. Maney says.

Of greatest concern among streetcar supporters is that if the streetcar project fails, so too will the city’s reputation as a desirable destination. The new rail lines will foster redevelopment, which will boost city pride and attract and retain a skilled workforce and burgeoning entrepreneurs, he says.

“If we kill the streetcar, with rails already in the ground, what kind of message are we sending?” he asks. “It’s really our reputation that’s at stake.”