This afternoon, the Mayor’s Office released a summary report by KPMG on its analysis of the Center City Streetcar project. While it is still working on an analysis of the impact of buying longer, heavier streetcars, there’s plenty of other bad news, and no timeline for a decision on whether to continue forward with the project.

In a press briefing this morning, Mayor Durkan, City Budget Director Ben Noble, and SDOT Interim Director Goran Sparrman laid out six issues with the project, and what KPMG and their own staff had discovered:

The capital costs for the Center City Streetcar project have ballooned again, from $197.7 million last year up to $252.5 million — around a 25% increase. Of the $55 million, about $19 million is additional design, vehicles, startup administrative and construction costs. Another $7.2 million are newly-identified costs for starting up and integrating the Center City Connector line with the two existing lines. $11 million is for utility work.



As a reminder, the original estimate for the project in 2015 was $143 million.

The new $252 million capital cost estimate doesn’t factor in any costs from the potential issues with the new streetcars. KPMG and the city still don’t fully understand the impacts of the city having contracted for streetcars that are nine feet longer and 20,000 pounds heavier, though the issues are clearer. They are worried about whether they fit in the existing stations and maintenance barn. They are also worried about the turn radius of the streetcars on the existing First Hill and South Lake Union tracks (picture what happens when a metro bus or long truck tries to turn at an intersection) and whether it means that streetcars would be unable to pass each other while turning. And they are worried about whether the older viaducts at 4th and Jackson will be able to support the additional weight from the heavier streetcars. The city now expects to have a draft report at the end of September, and a final report in late October or early November. If the city decides to move forward with the streetcar project, the FTA now wants to conduct a new review before it hands over its $75 million contribution. Sparrman noted that with all the changes and issues associated with the project, the FTA is justified in re-assessing whether the city is capable of successfully executing the project. But that review is expected to take 12-18 months, once the Mayor makes a decision. The ridership numbers on the First Hill and SLU lines continue to disappoint. Neither the First Hill nor the SLU line has come close to meeting their original ridership projections.



Last June, SDOT lowered its projections. The First Hill streetcar exceeded the new prediction by a substantial amount, though the SLU streetcar missed even the lowered number. In today’s briefing, Sparrman suggested that this was at least in part due to other transit options being available now in the SLU neighborhood that compete with the streetcar, including bus service and Uber/Lyft.



The city has once again revised its ridership projection models, which are reflected on the above graphs as red dots for 2019. Combining the two lines, the divergence from the original predictions is large and casts a shadow of skepticism over projections for the Center City Connector line.

With the lower ridership, trying to keep the streetcar lines from being a money-pit for the city is challenging. Durkan emphasized in today’s briefing that nearly all transit programs are subsidized at some level, but that has little reflection on whether they are worth doing. That said, she and Noble emphasized the extent to which the streetcars are dependent on subsidies from Sound Transit, Metro, and the FTA to be even close to break-even.



In fact, the existing streetcar lines continue to lose money, even with the substantial subsidies.



Given that the subsidies are not guaranteed, with ridership missing projections the operational finances for the streetcar look shaky. The city has already been accumulating debt associated with the streetcar lines. Not the usual kind of bond debt associated with this kind of project, but debt from capital cost overruns and operational losses. To date, there is about $18 million in debt.



The city has been covering the debt so far by loaning money to SDOT from other department funds; Durkan said today that she plans to submit a proposed 2019-2020 budget next month that retires that debt and allocated city funds to cover streetcar operational costs so as to prevent further debt from accumulating.

The KPMG report didn’t take a side on the issue that started this controversy: the ongoing dispute between SDOT and Metro on annual operating cost estimates (SDOT said $16 million; Metro said $24 million). However, it did say that SDOT’s estimate was “reasonable.”

All this points to a big decision that Durkan will need to make this fall as to whether to go ahead with the Center City Streetcar project. She refused to put a timeline on the decision, but said that she wanted to put all the information out in public view, then listen to feedback from the community and stakeholders. “Clearly the project is more expensive than the people were ever told,” she said.

She also emphasized that both options — moving forward or stopping the project — have fiscal impacts. There are sunk costs already for the project, including some necessary utility work such as replacing “historic” wooden pipes in Pioneer Square.

She suggested that part of the equation for her would be to look at needs in other regional transit projects that may not be fully funded or that the city might want to pitch in for to help influence the outcome (such as light rail to West Seattle and Ballard).

As part of their analysis, KPMG suggested a slightly lighter-weight plan as a third option. It would still build out the track, but would reduce service in non-peak hours, thus curtailing both capital costs (by requiring fewer trains to be purchased) and operational costs (fewer workers, less maintenance). Ridership estimates are slightly lower than the original plan, but the bottom-line numbers are much improved.

Despite accusations from transit advocates that Durkan is anti-transit, the words she used this morning were remarkably pro-transit. “Transit is crucial to the future of Seattle,” she said, adding that the city needs to “move forward as fast as possible to get people out of cars.” Observing that every form of transit has subsidies and none fully pay for themselves, she said, “But transit is good. Just because it doesn’t run in the black doesn’t mean we shouldn’t do it.” She noted several other efforts her administration has been doing to prepare for the “period of maximum constraint,” including:

extending the transit priority hours on 3rd Avenue;

under the new bike share program contracts, requiring that bikes are placed at transit centers to help people with the last mile of their trips;

adjusting signaling speeds and timing to reduce the time the First Hill and SLU streetcars are stuck in traffic;

distributing ORCA passes to all public school students;

working with Metro to increase West Seattle water taxi service;

adding peak and shoulder bus trips to major routes in the city; and

looking at options to improve transit mobility along First Avenue.

When asked how and why the streetcar project had gone wrong, Durkan said that while she believes the majority of SDOT employees are doing excellent work, she thinks that SDOT was not prepared to manage well some of its largest projects. She noted repeatedly that when she took office, the streetcar was never mentioned to her as having problems, and “there were questions that were never asked along the way.” Durkan said that the people who are now managing the streetcar and other large projects at SDOT are new to her administration, but she wouldn’t comment on whether the former managers had been fired.

Sparrman added a bit more color commentary on how SDOT ended up buying longer, heavier streetcars. He said that the manufacturer they had used for the previous two lines had caused several problems, including schedule delays, so they felt the need to find a new manufacturer. He also added that the “Made in America” requirements for FTA funding limited their options among the already-short list of potential streetcar manufacturers. In the end, the chosen vendor doesn’t make streetcars shorter than the ones the city purchased. That said, Durkan commented, “Bottom line: there’s no excuse that the streetcars don’t fit.”

Durkan was light on details for how she intends to gather public input once the ongoing analysis is complete later this fall; expect to hear more about that in November.

You can read the KPMG summary report here, and the city’s briefing slides (which borrow heavily from the KPMG report) here.

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