From our pen pals
Two little birds up on Pill Hill send along the latest e-mail message from the chief administrator of OHSU to all his employees concerning the $55 million aerial tram (pictured above) [rim shot]:
To the OHSU community:O.k., I'll take the bait. Here's Dr. Kohler's pitch to the local businesses whose property taxes he's sucking up:
This continues to be an important time for the Portland Aerial Tram, so I would like to take a few minutes to update you on recent developments.
The Portland Development Commission presented a plan last week to the City Council designed to resolve the funding question for the tram.
The plan calls for each of the project partners - OHSU, the city and North Macadam Investors - to participate in the solution. OHSU is supportive of this plan, which was negotiated by the PDC at Mayor Tom Potter's request. Here is a link to PDC's City Council presentation:
http://www.pdc.us/newsroom/breaking-news.asp (then click on "Presentation").
You should know that we are doing all we can to ensure that any further contributions by OHSU do not impact our current cash or long-term financial position. No money will be taken away from other OHSU needs to fund our latest proposed contribution. The proposed additional OHSU contribution will consist mainly of a cancellation of PDC's financial obligation to OHSU for securing federal funding for the South Waterfront district at our expense. Also, we have offered to continue to pay the city's usual interest rate on our local improvement district debt, as we have budgeted all along, which is slightly higher than the rate we might have otherwise paid. The interest differential will help close the tram funding gap.
The City Council will review the PDC proposal and make a decision in the next few weeks. Here's a link to a recent editorial on the proposal:
Also last week, City Commissioner Sam Adams and Mayor Tom Potter held a town hall discussion of the tram project. About 200 people attended, representing a wide assortment of people who support or oppose the tram. City staff presented informative recaps of the history of the project and its current status. Audience questions ranged from wondering about the cost and operating hours of the tram, how far along the project is, whether it should be mothballed until financing questions are answered, how many jobs it has created, and its long-term benefits/challenges.
The Portland Department of Transportation has created a Web site with up-to-date information and photos of tram construction. Here's the link:
Or you can check out our OHSU update site: http://www.ohsu.edu/tramupdate/
You'll also find on that site links to our tram Q&A and a recent letter that OHSU President Peter Kohler sent to more than 1,000 Portland-area business owners.
Chief Administrative Officer
March 14, 2006
I am writing to you today because Portland's aerial tram faces a crucial turning point in the days ahead. Some city commissioners have been suggesting that the city walk away from its obligations on this project, endangering the city's ability to develop the jobs, private investment and public services Portland needs in the future.
I would like to share a little history with you before I outline the challenges we now face.
As the city's largest employer, Oregon Health & Science University has almost outgrown its home on Marquam Hill. We need space to expand either in Portland or on our own West Campus in Hillsboro.
Recognizing this, the city encouraged OHSU to invest in the South Waterfront district because it would keep thousands of new family-wage jobs OHSU will create in the decades ahead within Portland's central city, which has seen its employment base erode. OHSU's presence also would spur additional economic activity and investment in this underused riverside district.
The key for OHSU to buy land and invest in South Waterfront was the development of a fast, reliable transportation connection between that new area and our existing Marquam Hill facilities. After studying a variety of options, the aerial tram emerged as the best way to link our Marquam Hill campus with new research, clinical and campus facilities at South Waterfront. The tram will provide efficient connections between our faculty, researchers, clinical and support staff and students. (It has the capacity to move 980 people an hour in each direction, with trips that take three minutes at five-minute intervals.)
For Portlanders, the tram has spurred $2 billion of current and future investment in South Waterfront, providing jobs and long-term economic vitality. It also is helping to bring a variety of new, needed neighborhood transportation links.
The city council approved the tram after dozens of hearings and a long public process. OHSU offered to act as the manager of this challenging undertaking, turning the tram over for city ownership when construction was complete. The city, instead, chose to manage the construction itself. That means that although OHSU is paying most of the cost of building the tram, we have not been in charge of managing the construction contracts, schedules, material acquisitions or other expenses.
The process used by the city has failed to identify and control costs. The pricetag for the tram has skyrocketed -- and no one is more frustrated by those increases than OHSU, because we have a history of bringing complex construction projects in on time and on budget. The estimates rose over time from $15.5 million to $40 million because of the tram's design (chosen by the city and not by OHSU), big steel price increases, the dollar's weakened ability to buy foreign-made tram equipment, the construction inflation caused by Hurricane Katrina and a flawed city contracting process.
There are two key facts many people don't know:
* While the public's share of the tram costs has increased only from $2 million to $3.5 million, OHSU's costs have risen from $9 million to $30 million. That has been frustrating to us, because OHSU brings projects in on time and on budget.
* Not a dime of the tramďż˝s cost is coming from the city's General Fund -- that means not a dime from schools, police, fire or other public services. We have found that some members of the public do not understand how the tram is financed.
In June 2005, when the city informed us that the project estimate had reached $40 million, OHSU stepped up and paid for the additional costs, even though management of the project wasn't under our control. In return, the city agreed that finishing the tram was its obligation, that it would be responsible for costs over $40 million and that the project would be finished by July 2006.I love the "not a dime from the General Fund" bit (caps and all). It's only "urban renewal" money, folks. You know, that line of your property tax bill that constitutes around 20 percent of the taxes that you pay to the city. That's not real money, so what's the fuss?
Now, yet again, the project is over budget. Completion has been set back to December. This is inexcusable. Yet some city commissioners - again - want OHSU to pay for the city's process mistakes.
A different solution is needed. At Mayor Tom Potter's request, OHSU has been negotiating with the Portland Development Commission to find ways to address the gap. There are clear and obvious alternatives that won't impact taxpayers' pocketbooks.
A logical solution is to employ the funding process that other cities in Oregon and across the country use to pay for urban renewal projects. The city should use revenues generated by the development of this district that would not be available except for that development and which, by law, cannot be used outside of the district. This long-term funding does not take city General Fund money away from schools, police, fire or other public services.
Rather than exploring this or other reasonable alternatives, some city commissioners are talking about walking away from the city's contractual obligations. They are endangering investments the city already has made in South Waterfront and jeopardizing the city's future ability to join in public-private partnerships.
The tram already is 45 percent complete and is delivering on its promise. Many Portlanders are proud of the new neighborhood that is rising before their eyes, with its focus on green, sustainable buildings, an exciting mix of residential and business uses and a new campus for OHSU, Oregon's leading research university and only academic health and science center.
We hope you agree with us that the city council should live up to its obligations. The council should fund its fair share of the tram using the taxes generated by the tram and its accompanying development, or some other appropriate option. The city council must rebuild this partnership that is crucial to bringing jobs and economic opportunities to Portland's future.
President, Oregon Health & Science University
3181 SW Sam Jackson Park Rd.
Portland, OR 97239
I've got to admire Dr. Kohler for his restraint. He's laying it on thick, but at least he left out this:
I'm just like you, colleague. I know you're struggling to make your firm successful in an unfavorable business climate. I was almost the chair of a privately owned public utility myself at one point. In fact, I think about you often as I cash my $600,000 annual paycheck and return home to the mansion in which I live at public expense -- a mansion that's owned by OHSU, which of course pays no property taxes. I'm doing it all for you.