WILL Releases Open Letter on Streetcar

 In Case Updates, Streetcar Challenge

Here is the text of an open letter sent today by the Wisconsin Institute for Law & Liberty to Milwaukee Mayor Tom Barrett and the Members of the Common Council.  The letter asks the Mayor to confirm that the City’s budget for the Streetcar Project will be revised to reflect the recent PSC decision that the City is responsible to pay all of the costs of utility relocations associated with the Streetcar.  The only budget approved to date by the Common Council contains no costs for utility relocation.  Milwaukee taxpayers are entitled to know that they will pay these costs and how much they are likely to be.  In the interest of open and transparent government, the Mayor should propose and the Common Council should now consider a new and more realistic budget for the Streetcar Project.

Dear Mayor Barrett and Members of the Common Council:

The Wisconsin Institute for Law & Liberty is a public policy law firm that seeks to advance the rule of law and the public interest in open and transparent government.  WILL represented the individual petitioners in the Streetcar dispute that was recently decided in their favor by the Public Service Commission.  We are writing this letter to call your attention to several problems that appear to be unresolved with respect to public disclosure of the effect of the PSC decision on the Streetcar Project budget, the sources of funds the City may use to address the inevitable funding shortfall, and the legal authority of the City to proceed with the project at all without further authorization from the Common Council.

As you know, the Public Service Commission has ruled that under Wisconsin law the City of Milwaukee cannot make public utilities pay any of the relocation or other costs that they will incur as a result of the construction of the Streetcar Project.  These costs are likely to be quite substantial.  And it is now clear that the City will have to pay them.

The original budget for the Streetcar Project authorized a total expenditure of $64.6 million.  It was anticipated that most of the funds would come from a $54.9 million grant from the Federal government.  The remaining $9.7 million was to come through a Milwaukee tax incremental district created for that purpose.  There is no Common Council resolution authorizing the expenditure of any other City funds for the project.  In fact, Milwaukee taxpayers were told that none of the project funding would come from the City’s regular budget and, in effect, that they would not be responsible for any substantial part of the Streetcar construction costs.

That is no longer the case in light of the PSC’s decision, and probably for other reasons as well.  First, it is clear that the City will have to find a way to pay the costs of utility relocation.  We do not know at this point how substantial those costs will be.  But the City has said for the last two years that it has been working diligently to complete the design and engineering work for the Streetcar Project and that work must now be close to completion.  The City has said that in connection with its own engineering and design work it has been working with the affected utilities to refine their cost estimates, which have ranged as high as $50 million or more.  Surely the City is now in a position to refine its original budget to take into account the utility relocation costs.  City taxpayers should be told what those additional costs are likely to be, as they will be paying them.

In fact, the Common Council Resolution (No. 110372) that authorized the Commissioner of Public Works to begin work on the Streetcar Project requires the preparation of just such a report.  “[I]f during the process of final design and construction, it becomes apparent that the total project cost will exceed $64.6 million, the Joint Committee on Downtown Streetcar Implementation shall promptly report this conclusion to the Common Council, along with any adjustments to the project plan, including potential route modifications or other cost-saving measures for Council review.”  There is no question that the original project budget did not include any provisions for the payment of utility relocation costs and given the PSC’s decision it surely by now must be clear that the total project costs will exceed the budgeted amount.  The Common Council should be so advised and should be offered an opportunity to determine whether any proposed cost savings can be implemented or whether the project should go forward at a higher cost to the taxpayers.  There is no reason why these matters should not be considered in the normal course of the Council’s public meetings.

Second, the original project budget was developed and presented to the Common Council during 2011, and approved by the Common Council in July of that year.  That was more than three years ago.  We are not experts on construction costs, but it seems certain that budgeted costs are likely to have increased over that period.  Inflation alone has probably increased the projected construction costs by around 5%, or roughly $3.5 million.  Moreover, it seems probable that, regardless of secular factors like inflation, a construction budget developed and approved over three years ago should be updated to reflect more recent developments.  The Common Council should know what the Streetcar Project is now likely to cost and how much of those costs will be borne by City taxpayers.  In fact, according to an affidavit of City Engineer Jeffrey Polenske filed earlier this year with the PSC, the Streetcar Project has reached the 60% design and engineering milestone and an updated capital cost estimate has been prepared.  It is not clear whether or not the updated capital cost estimate includes an estimate of utility costs.  What is clear is that the City could certainly prepare a revised project budget that would reflect those costs as well as any other changes made necessary by the passage of time.  There is no reason why the Common Council should not at this juncture consider, and share with the public, an updated and realistic budget for the Streetcar Project.  Milwaukee taxpayers have a right to know how the City proposes to pay for what are likely to be substantial increases in the capital costs.

And third, the decision of the PSC has created considerable uncertainty about the legal authority of the Superintendent of Public Works to proceed with the project at all absent further action by the Common Council.  The PSC has declared that Milwaukee Resolution No. 110372 is in violation of Wisconsin law and therefore is void under the provisions of Wis. Stats. §§ 182.017(8) and 196.58(4).  This is the one and only resolution that authorized the Superintendent to proceed with design, engineering and construction.  As the resolution has been declared void, there is at present no legal authority for the City to make any expenditure of funds, whether city, state or federal, on the Streetcar Project.  Of course, the Common Council could pass a new resolution authorizing the project to proceed, and in the interest of the rule of law and open and transparent government that is exactly what they should attempt to do.  The debate over passage of a new resolution that would authorize the Streetcar Project to proceed would presumably inform the public as to the increase in the projected construction costs of the project as of 2014 and the share of those costs that the taxpayers will be expected to pay.  But until the Common Council acts, there is no legal authority for the Superintendent of Public Works to continue work on the project.

The PSC decision does not prevent the City from moving forward with the Streetcar Project.  But by invalidating the authorizing Resolution, the PSC’s order means that as of now there is no legal authority for the City to proceed.  If it wants to do so, the Common Council must pass a new resolution that authorizes the Superintendent to proceed.  We do not know what the Common Council will decide to do, but it is our hope that it will act in accordance with the law and by way of a fully-informed and public debate on the likely costs of the Streetcar Project as of today.

We look forward to your response.

Richard M. Esenberg

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