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Audit: Tram Costs Shoot Skyward—Again

The Story Behind the Brewing City Hall Civil War




Yesterday afternoon, City Commissioner Sam Adams released the findings of an outside audit of the aerial tram being built to connect OHSU with the emerging development in the south waterfront district.

The audit, the first independent investigation into the costs of the tram, bumps the current estimated cost—$45 million, up from an initial $15.5 million—to $55 million with a $5 million contingency. In other words, the estimate is $50 million plus a $5 million buffer.

Though the cost has gone up, yet again, the news may not be all bad for Adams, the commissioner in charge of the transportation bureau. For one, it "verifies" that the project is still feasible and represents a firm estimate on costs that aren't astronomically higher than the most recent estimate.

Adams' office recently began looking into the possibility of pulling the plug on the tram; that investigation will reportedly still continue, though likely with less fervor. Despite the audit's finding that the project is too far along to be shelved, Adams won't rule that option out.

"If city council knew at the inception of the project that it would cost $55 million, they probably would've voted no," Adams told the Mercury. But now, "it would be very difficult for us not to do this."

Additionally, Adams said, the audit validates the recent "controversial" personnel changes that he's made on the management level—firing, very publicly, tram boss Vic Rhodes.

Still, in order for the project to hold to the $55 million estimate, it will have to be completed without delay, according to auditors Pinnell/Busch, Inc. The audit lists "further delay" as the most significant risk to the bottom line, though it stops short of laying out a specific timeline other than a December 1, 2006 completion date. The task of developing a comprehensive timeline is given to Kiewit, the contractor on the tram structure.

The audit also lays out the grim news that the project is too far along to save any money through "value engineering"—a fancy term for cutting or discounting unnecessary elements of the project. This news comes just days after the city released a report claiming that such "value engineering" has shaved $9.6 million off of tram construction.

Two big questions still linger: How did the estimated price tag skyrocket from the initial $15.5 million to $55 million, and how much of that is going to be paid for by the city?

Adams and Rob Barnard, project manager for the Oregon Department of Transportation, answered the first query with a few explanations that have become recently familiar to critics of the tram: The initial estimate wasn't based on any concrete evidence; the project is so very, very unique that there was no way of knowing how much it would cost; rollercoaster-like changes in the value of the Swiss franc have affected the contract with Doppelmayr, the Swiss firm that will build the tram car; and, interestingly, bad weather.

As for the second unanswered question, it appears less and less likely that the city will pony up any more money for the project. City council has only approved $3.5 million for it in incremental tax financing and would have to likewise approve any more funds. City Commissioner Randy Leonard has already gone on record as saying he won't support any more funds, and Adams voiced a similar reluctance to approve more tax dollars.

So, at this point in the development of the project, the question of who will foot the remainder of the bill will largely be answered by those who can make the most use of leverage. The city is likely to use OHSU's necessity to transport people from its main facility to its offices in south waterfront to its advantage—that is, OHSU has far more to lose than the city.

"OHSU, which started this project, should step in and fill most, if not all, of the budget gap," Adams said. Plus, he said, private landowners and developers in south waterfront are now likely to be in a position where they'll have to drop some change.

The next steps are finding an operator for the tram—a Request for Proposals is in the works—and getting a handle on maintenance costs.

The Story Behind the Story

In the next few days, the results of the audit could very well be overshadowed by another tram-related controversy—an internal struggle between Adams and Mayor Tom Potter, essentially over who's in control of fixing the tram's problems.

Two days ago, Potter circulated a memo ordering that the entire city council take over the tram project; up until now, it has been under Adams' office for managerial issues, but all funding decisions still needed to be approved by the full council. Since the tram counts as "infrastructure," Potter said it falls under his new plan to pull it under the council as a whole.

But according to a city hall insider, Potter's move is more about his angst with all of the media attention Adams has been getting than about "infrastructure." Since the beginning of his term, Adams has been tackling high-profile issues—lobbyist reform, percent for arts, the Sellwood Wal-Mart, the Equal Benefits Ordinance, etc., many of which were on his list of campaign promises. (And then there's the tram; in order to turn what has been overwhelmingly negative publicity, Adams will have to spin the audit as showing that he's turned it around.)

Meanwhile, Potter has been peddling big idea projects like "Visioning," which doesn't quite have the media pull of a concrete ordinance.

But even more, says the city hall source, Potter is flexing his muscles in order to build support for a "strong mayor" form of government, which can take many forms but essentially gives the mayor more centralized, executive-type authority. The just-beginning Charter Review Commission, which, incidentally, Potter formed, is considering changes to the form of government, and could emerge with a "strong mayor" recommendation.

Back to the tram audit, Potter apparently wanted to unveil it and take ownership of the seemingly positive changes, as a way of appearing in control. Instead, Adams threw together the news event—timed with the release of the report—giving himself just minutes to hastily scan the full audit.

Where was Potter? He and the other commissioners were still in a meeting in council chambers, and were unaware of the makeshift press conference.


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