streetcar cancellation and close-out costs

8/13/2019 Streetcar Cancellation and Close-Out Costs

1/39

Goodafternoon.Thankyouforhavingmeheretoday.

ImJohnDeatrick,ProjectExecutivefortheCincinnatiStreetcar.

Asanoverview,weregoingtotouchbrieflyontheProjectsStatusasoftoday.

WellgiveyoualittlebitofbackgroundoftheDesignandConstructionWork,andwho

, .

Thenwellgetintothenumbers:TheFinancingofhowwerepayingfortheproject,andthe

Budget(orwherethemoneyisgoing).

Andlastly,welltouchonwhatCancellationoftheProjectlookslike,andwhattheCostsof

thatwouldbe.


2/39

Thecurrentstatusoftheprojectisthatworkisproceedingonscheduleandwithinbudget.

Recently,trackwork reachedasfarnorthonElmasFindlayMarket.

Theprojecthasanexcellentsafetyrecordtodate,withzerolosttimeaccidents.

Messer/Prus/Deltahas

contracted

for

the

Federal

DBE

goal,

of

18%.

That

is

the

portion

of

moneyfromtheConstructionContractthatwillgotofederallydesignatedDisadvantaged

.

Alongtheroute,thereare200constructionworkersonthejob,includingtrackwork and

utilitywork,andworkattheMaintenanceFacilitysite.Thatdoesntincludethemanymore

workinginprofessionalservicesandatoursuppliers.


3/39

AsbackgroundtoourlaterdiscussionofBudgetingandCancellationCosts,itisgoodto

knowwhatsbeendonesofar,whatsongoing,andwhosdoingwhat.


4/39

Sothisistheworkthatsalreadybeendone,andwhodidit.

Beforewegotintothis,therewasaFeasibilityStudythatlookedatthecostsandbenefits.

Engineeringanddesignwork,aswellasthefederallymandatedenvironmentalstudy,were

doneby

Parsons

Brinckerhoff.

This

environmental

study

is

only

valid

for

the

project

since

wewereabletostartconstruction.Ifwestoppedandbeganagainsomeothertime,wed

life.

Andathirdparty,MEConsulting,helpedwiththecostestimating.


5/39

Theongoingworkincludesrelocationofutilities somethisisbeingdonebytheutility

companies,andsomebyMesser/Prus/Delta.

Constructionofthetrack,maintenancefacilityandstationswillbedonebyMPD.

Vehicleshave

been

speced out

and

are

under

construction

by

CAF.


6/39

UtilityreplacementandrelocationincludesthingslikeTimeWarnerCable,WaterWorks,

CincinnatiBell,DukegasandDukeelectric,MSDandothers.

Theutilitiesareusingthisasanopportunitytorenewolderundergroundinfrastructure

alongtheroute.Sothatisabenefittotheurbancenter.

Forexample,whenwewereworkingalongElmnexttoMusicHall,wefoundaleaking

.


7/39

MPDisourprimaryConstructionContractor.Sotheyreworking,alongwiththeir

subcontractors,tobuildthetrackfortheStreetcar.Thisiswheretheyhavereachedthe

18%DBEgoal.

AsIsaidearlier,theyreheadingnorthonElmandhavereachedfromMusicHalltoFindlay

Market.So

far,

we

have

laid

1800

feet

of

track

from

12th to

Liberty.

Rail

has

been

installed

andhadtheconcretetrackslabpouredaroundit.


8/39

Theresanother1200feetinvariousstagesofinstallationheadingnorth.

Todate,we have purchased35,000feetofstraightrailfromthemanufacturerinIndiana.


9/39

MPDwillalsobuildthestationsfortheStreetcar.Insomeplaces,toensurelevelboarding

whichmakestheStreetcarhighlyaccessibletopersonsofallabilities therewillbecurb

bumpoutsbuilt. Infact,thiswillbethemostADAaccessibleStreetcarsystemintheUS.


10/39

MPDisalsoresponsibleforconstructingtheoverheadsystemthatwillpowerthe

CincinnatiStreetcar.


11/39

MovingontotheMaintenanceandOperationsFacility,orMOF,worksunderwayonthat

atHenryandRacestreets.Wevealreadydemolishedthetwobuildingsthereandare

workingtoprepthesiteforconstruction.Asofthisweek,foundationworkhasbegun.

Wevebeenplanningaheadforneighborhoodtoneighborhoodconnections,sothefacility

isdesigned

to

accommodate

growth

in

the

system.

As

we

expand

to

the

Uptown

and

beyond,thereiscapacitytomaintainthatgrowingfleet.


12/39

WevealsofinalizedthedesignreviewoftheStreetcarvehiclesthemselves.

Again,thisisatruelightrailvehicle infact,CAFconsidersthemlightrailvehicles.Therehasbeensomequestionsaboutwhetherlightrailcouldrunonthesetracks theanswerisyes.

Andwork

is

underway

on

building

those.

.streetcartobe100% lowfloor,meaningtheentirevehicleisaccessibletopersonsinwheelchairs,babystrollersorbicycles.

BecausethisisCAFsentranceintotheUSstreetcar market, we receivedfantasticpricing,wellbelowwhatmanyothercitiesarepaying.Werepayingabout2530% lesspervehiclethanmostmajorstreetcarsystems.

AndweregettingavehiclethatistechnologicallysuperiorandcanclimbVineStreet so

we

did

plan

for

the

future

expansion

quite

a

bit.

SobecauseCAFwantsthistobeashowcasemarket,werereceivingtremendouspricingandvaluefortheCity.

KansasCityhaspurchasedoffofourcontract, andtheywillpaysubstantiallymorepervehicle.


13/39

Nextwellgetintothenumbers,ofwhatthisprojectcostsandhowitsbeingfunded.


14/39

Thetotalfinancingfromallsourcesis$147.8million,andthatsalsothetotalbudget.

Butitsimportanttonotethatthebudgetincludesa$7.4millionreserveforcontingencies

anythingunexpectedwemightencounter.Anditalsoincludesthe$15millionthatwas

putinescrowwhileweengageDukeEnergythroughthecourtsystemoverwhoshouldpay

fortheir

utility

work

in

the

publics

right

of

way.


15/39

Theprojectispaidinpartwithfederalgrantdollars,atotalof$44.9million.

Overseveralyears,theCityhasdevelopedaverystrongrelationshipwiththefederal

government,whichhasresultedintheUSDepartmentofTransportationcommittingscarce

andhighlycompetitivediscretionarytransitfundingonthreeseparateoccasions.


16/39

TheCityscommittedportionoftheprojecttotals$87.9millionfromavarietyofsources.


17/39

AsIsaidearlier,thereisalso$15millioninescrow.BecausetheCityandDukecouldnt

cometoanagreement,thatmoneywassetasidetoallowtheprojecttoproceedwhilethe

matterissettledthroughlitigation.


18/39

Andthisslidegivesyouawrapupofthosethreeareaswejustdiscussed.


19/39

NowwellgetintotheProjectBudget,byitem. Illgooverthebudgetitems,thengiveyou

anaccountingofeachareasspendsofar.

PreDevelopmentandDesignarelargelydone,atacombinedcostofroughly$15.9million.

Thisistheworkthatbeganin2008todesignthetrackandlayitoutthestreets.

Utilityrelocationisbudgetedat$6.1million,whichcoversthirdpartyutilitieslikeTime

, , , .

Ofcourse,wealsohave$15millioninescrowpendingtheoutcomeoflitigationwithDuke

fortheirutilitywork.

OtherutilityrelocationthatisbeingmanagedbyMPDisincludedintheirConstruction

contract,sothatsrolledupintotheConstructioncost(andwasincludedintheir

ConstructionBidprice).

WepurchasedtheMOFsiteandHenryandRacefor$2million.

Andconstruction oftheMOFbuildingisbudgetedat$11.9million.


20/39

ContinuingwiththeProjectBudgetbyitem

Vehiclesareexpectedtocost$23.1million.

FareVendingis$500,000.Thesewillbekioskslocatedatthestationswhereyoupurchase

farebefore

boarding,

so

it

makes

the

whole

boarding

process

alot

quicker.

That

means

the

Streetcarisntdelayedalongthesideoftheroadforverylongwaitingforpeopletoget

, .

The Citysadministrativecostsarebudgetedat$4.3million,andSORTAsadministrative

costsare$2million.Thisiscoveredtheworkofvariousengineers,inspectors,managers

andotherswhoareworkingontheproject.Asyoullseelater,thesearereimbursableto

thefeds.

Startupcosts thatstrainingforpeoplewhoaregoingtotestthevehiclesandstafffor

operations arebudgetedat$250,000.

Andagain,wevegot$7.4millionbuiltintoaconstructionreserveforcontingencies.


21/39

Therehavebeensomequestionsaboutthe FederalGrantsandhowallthatworks.

Soitsactuallyareimbursementprocess.

TheCityhasaStreetcarProjectAccountthatincludeslocalfunds.

Thataccountpaysforexpensesrelatedtotheproject.

Someofthoseexpensesarenoteligibleforfederalreimbursement.Thedesignandpre

developmentcostswetalkedaboutearlier$15.9million arenteligible.

Butthingslikeconstruction,thevehicles,andCityandSORTAadministration are.

Soasbillscomeinforthat,wesubmitthemtotheFTAforreimbursement.Theypay80

centsonthedollarforthoseeligibleexpenses,uptoatotalof$44.9million.

Technically,becauseSORTAistheFTAgrantee,theFTApaysbackSORTA,whichinturniscontractuallyobligatedtosendthatmoneytotheCity.

Aspartofthisprocess,SORTAprovidesfederalcomplianceassistanceparticularlywith

rocurement safet and securit rants administration DBE com liance and other areas.

ThecityandSORTAhaveanexcellentworkingrelationship.


22/39

ThisslideshowsyoutheexpensesincurredontheprojectthroughMondayofthisweek.

Thesearethingsthathavebeenbilledandpaid.


23/39

Andtheseareexpensesthatwewillhaveincurredthroughthe endofthismonthbutweve

notyetpaid.Weareobligatedthosebillswithin30days.

Theseareinadditiontotheexpensesonthepreviousslide.

Soif

you

compare

the

CONSTRUCTION

item,

you

see

asubstantial

jump

from

about

$3

millionto$8million.

ThatsbecausewehadnotyetpaidtheOctoberinvoicefromMPDasofNov.18.Sothis

slideincludesMPDsOctoberinvoice,theirexpectedNovemberinvoice,plusalotofstored

materialsthattheypurchasedaspartoftheConstructionContractbutwehaventyetbeen

billedforthose.

Again,thefiguresyouseehereareinadditiontothepriorslide.Addedalltogether,the

grandtotalthroughtheendofthismonthisexpectedtobe$32.8million.


24/39

Andthisslideshowsthebudget forthoselineitemscomparedwithexpensesthroughNov.

30th.


25/39

Finally, Ill outline Cancellation of the project, what that looks like, and Close-Out Costs associated with it.

It is a very complex process and one that will take time. Thats why what youll see on the following slides are

best-guess estimates based on what we know today. Were presenting our best professional estimates.

So for most City contracts, and as required by FTA procurement rules, the City has the right to terminate forconvenience. The process for doing so varies by contract. Generally, close-out plans for the major contracts

would be re uired to determine sco e, schedule, and bud et for termination.

Because many of the contractors and sub-contractors will question whether this termination is in good faith, this

will be a very tricky process. Many are using Cincinnati as their entry to compete in the American streetcar

market, including our local companies Messer and Prus.

Project close out would likely require several months to develop, and potentially, several more months to

. .

Construction & vehicle contracts require payment of materials, work-to-date and profit. The Duke litigation ($15

million in escrow) still outstanding.


26/39

So,inadditiontothe$32.8Millionthathasbeenpaidorinprocessofbeingpaid,Idliketota eyout roug w att eteam ascomeupw t t atcou ec oseoutcosts.

Again,Idliketostress thatthesearethebestcalculationswecangiveforawhatifscenario,asthecontractsdontspelloutthedollars,butmerelytheprocessforcalculatingthedollars.

Iwillgothrougheachofthemainareas,butfirstIwanttotalkabouttimeline. Wewill.

WhileIamsittinginfrontofyoutoday,therearemanypeoplefromtheCity,SORTA,andeachofthecontractorsandsubcontractorsthatwillhavetobeinvolvedinplanningthewinddownofwork,andactuallyclosingouttheproject.

Thosepeoplewillstillneedtobepaid.ThatiswhyyouseeAdmincosts.Theseareositions that t icall char e their time to ca ital ro ects rather than the o eratin

budget.Rightnow,wecangetsomeofthatbackfromthefeds ifwestop,wewont.

Youllnotethatlitigationcosts whichdoseemtobeacertaintyarentincludedinourcostestimateshere.Wedidntfeellikewecouldreallyputagoodfigureonthat,andsowedidntfeelcomfortablebringingthatheretoday.

IdliketoreiteratethatthisslideonlyshowstheanticipatedCloseOutCosts.Again,itdoesnotincludefundingalreadyexpended.


27/39

Andthisslideshowstheexpenses andcloseoutcostsversustheBudgetforeachlineitem.


28/39

WehavealreadypurchasedthepropertyforthatatHenryandRacestreets,atthenorthern

endoftheline.

Wepaid $2millionforthe site.

MPDis

contracted to

build

the

$12

million

maintenance facility

there.

, ,

sitesafeforresale.

Aconsideration wouldbeevaluatingoptionsatthepointofstoppagetoensuresiteisnota

hazard thatitsuptocode.


29/39

We estimate closing out the Construction contract would cost between $14 million and. .

TheprocessforterminationoftheMPDcontractisgovernedbytheOhioDepartmentofTransportation(ODOT)ConstructionMaterialsSpecifications(CMS).

TheCitywouldissuenoticeofterminationtoMPD.TheCitywouldneedtodevelopaCloseOutPlantodeterminethelevelofworkrequiredtorestorestreets,determinethestatusofmaterialsandsubcontractedpurchase

orders,

and

maintain

safety

and

bring

the

project

site

into

apermanent

state

of

code

compliance.

CityandSORTAstafftimeandconsultantstafftimewouldbeneededtoresolvecontractualissuesand .

BecausecertainwaterandsewerworkisunderwayaspartoftheConstructioncontract,thiswouldalsorequireanassessmentoflogicalstoppingpointsforworkthatmayneedtobecompleted.

Afterterminationofthecontract,theCitywouldberesponsibleforcostsforworkinplacebutnotpaidfor,andcostsassociatedwithworkrequiredtoimplementthecloseoutplan. ThingsthatwouldneedtobenegotiatedbetweentheCityandMPDinclude:remainingconstructionworknecessarytorestoretheprojectsite;profitonactualworkperformed;restockingand/ordeliveryofpurchasedmaterialsandassociatedprofit;andODOTrequiredcompensationforalteredquantitiesand/oreliminationofitems.

Itisimportanttonotethatoncethecontractisbroken,thebidpricestheCityhasbeenreceivingontimeandmaterialswould nolongerbevalid. Soallfeesincludingforrestocking,laboretc. wouldneededtoberenegotiated.

They

would

not

be

the

same

as

those

outlined

in

the

bid

contract.

BasedonODOTsConstructionMaterialsSpecifications,therearecertainincreasesMPDcouldbeentitledto,likea38%increaseinlaborcostanda15%increaseinmaterialscosts.Thatswhyyouseearangeof$14millionto$20million.Wegenerallyfeelitwouldbecloserto$14million,butthatdependsonhowamicablywecanendthecontract.


30/39

Thecloseoutcostsforutilitiesareestimatedat$2millionto$3.5million.

TheCityhasthirdpartyrelocationagreementswithDukeEnergy,CincinnatiBellTelephone,

TimeWarnerCable,Level3Communications,WaterWorks,andMSD.

Underthese

agreements,

the

City

and

each

respective

utility

would

need

to

negotiate

a

localstoppingpointforthisworkandthecosttotheCity.

Theotherconsiderationisthattheutilitiesmayhavetokeepworkingtogettoalogical

pointofstopping,suchastyingintomain.

StoppingcouldalsoaffectourabilitytorecovercostsincurredbyDuketodateandthe

ultimateuseofthemoneyin escrow.


31/39

Asforthevehicles,wereestimatingbetween$8millionand$12milliontocloseoutthatpieceoftheProject.

Contractsweresigned9monthsago.AstheCityManagerexplainedinhisAprilpresentationtothiscommittee,youdothatbecausegetting aStreetcarvehicleisntlikegoingtoyourlocalForddealershipanddrivingoffthelotwithanewcar.

Beforeyoucandothat,youhavetotellthestreetcarcompanyhowyou'dlikeitbuilt.SowevebeencoordinatingwithCAFonthingslikesafetysystems,materials,mechanicalsystems,electricalsystems,testingprocedures.

lots

of

technical

decisions

had

to

be

made

that

have

impacts

on

production

time.

And

all

that

coordinationandbuildingoftheactualvehicleshastomarryupwithwhenyouhaverailinthegroundandpoweroverhead.

SoifwedwaitedtoorderstreetcarsuntilMPDsconstructionwasfurtheralong,wedrisknothavingvehiclesintime.Sincethen,CAFhasbeensouringmaterialstogetusthebestprice.

95%oftheCincinnativehicledesignworkiscompleted, and90%ofthevehiclereviewiscompleted.

TerminationforConvenienceoftheCAFcontractrequires30dayswrittenNotice.Then,wewoulddevelopaProjectCloseoutPlan(PCP)with scope,schedule,andbudgetforthetermination. Thiswouldlikelytakeseveralmonths.

n er e con rac , sen e o epa scos s, nc u ngc oseou cos s,an pro onwor performeduptothetimeoftermination. AsCAFhasexecutedcontractsandpurchaseorderswithallofitssubsuppliersandhasbegunfabricationofcarbodies,thesecostscouldbeintherangeof$812million.

VehiclespurchasedbyCincinnaticannotbesoldtoanothercity,astheyaredesignedspecificallyfortheCincinnatistreetcarsystem.Again,whilemanyofthecostsforthevehiclesarereimbursabletothefederalsourcesoncethesystemisbuilt,thecloseoutcostswouldnotbeifwecanceltheproject.


32/39

Whenyouputthatalltogether,itbringsustoanestimatedtotalcosttotheCityof

between$63and$80milliontocanceltheproject.

Wedalsohavetoreturnthefederalgrantsofabout$44.9million.

Andso,

the

grand

total

price

to

cancel

the

project

lies

somewhere

between

$108

million

andabout$125million.


33/39

Andnow,Budget DirectorLeaEriksenwilltalkaboutwherethatmoneymightcomefrom.


34/39


35/39

Sowhilethosearethenumbers,wealsofelt obligedtobringtoyourattentiontheintangiblesthat

wecannotputanumberon.

Theseincludethedisplacedworkers bothconstructionworkers,professionalservicepersonnel

andsupplier.

TherewouldcertainlybedamagetotheCitysrelationshipwiththefeds.

An t atwou a soimpactSORTA sre ations ipwit t eFTA.

Whenwecommittosomethinglikethis,andthenbackout,itwouldcausesometoquestionour

credibilityandgoodfaithwhenweresigningcontracts.

Thereisalsotheunrealizedincreaseweexpectedintermsofpropertytaxrevenue.


36/39

WhileIexplainedearlierthatterminating thefederalgrantshasfinancialcosts,itwouldalsohavea

majornegativeimpactontheCitysabilitytocompetefordiscretionaryfederalfundinginthe

future.

Overseveralyears,theCityhasdevelopedaverystrongrelationshipwiththefeds.Thathas

resulted

in

the

US

Department

of

Transportation

committing

scare

and

highly

competitive

discretionarygrantfundingtotheproject.

AsCongresscontinuestoru eoutearmar s,an astransportation egis ationsta s, iscretionary

grantprogramsarebecominganimportantprimarysourceoffederalfundingformajorprojects.

StaffattheUSDepartmentofTransportationhaveexpressedconcernsthatterminatingaprojectso

heavilysupportedbythefederalgovernmentandreturninggrantfundsthataresohighly

competitive andinsuchshortsupply couldharmfutureeffortsbytheCityandotherregional

jurisdictions,includingSORTA,towindiscretionarytransportationfunding.

ItreallyunderminestheCitysabilitytoshowthatwecanmanageanddeliverfederallyfunded

transportationprojects.

That

could

include

the

Eastern

Corridor

Project,

for

example.


37/39

TheresalsothedamagetoSORTAsrelationshipwiththeFTA.

Upon initiation of termination actions by the City, the FTA would find the City andSORTA in default of their obligations under the three grant agreements.

As outlined in the FTA Administrators letter last week, this finding would trigger atermination of the grant agreements, restrict any further draws on the federal grants,

days.

Through November 19, that total is roughly $4 million.

If the grants werent paid back within 30 days, there would financial consequencesfor SORTA, including NOT being able to draw down their grants for bus operations.

As noted in the FTA Administrators letter, Federal grant funds obligated to the

project cannot be reprogrammed for other projects.

Subsequent discussions with FTA have confirmed that any temporary slowdown ormoratorium to the work will be considered a lack of reasonable progress and willtrigger a default finding by the FTA.


38/39

AndMs.Eriksenwilltalkbrieflyhereaboutwhattheimplicationswouldbeforourability

togrowpropertytaxrevenue.

Hereistheestimatedpropertytax/TIFrevenuebasedonthe2007HDRstudy.Wehave

adjustedtheyearsforthetimingoftheStreetcarProject,butIhadnoimmediatewayto

adjustthe

base

property

values

for

items

that

have

occurred

since

2007.

,

potentialpropertytaxrevenueandTIFdollarstotheCityandtoSchools.

Amorecurrenteconomicimpactstudyshouldstillbeconducted.


39/39

Sothatwrapsupmyformal presentation.Anyquestions?

streetcar cancellation and close-out costs

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