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Tuesday, April 4, 2006

OHSU files default notice on tram

This just in from Pill Hill honcho Steve Stadum:

To the OHSU community:

The Portland Aerial Tram will be in the news a lot
this week, so I wanted to give you another update on
the project.

We remain optimistic that the new funding proposal
developed by the Portland Development Commission
under Mayor Tom Potter's leadership will win
approval by the City Council.

The current proposal includes contributions from
OHSU, our private development partners and the city.
It provides for all of the South Waterfront District
needs * affordable housing, greenway, parks * while
also taking care of the tram.

Because of recent statements by city commissioners,
we feel that we must pursue some legal steps as
well. We filed a notice of default with the city
this morning, to preserve our ability to go to
court, if necessary, to compel the city to continue
construction on the tram. We recently sought an
outside legal opinion which confirms that the city
has an obligation to finish the tram.

We hope it won't be necessary to go into litigation
over the tram, but we must and will take the steps
necessary to safeguard OHSU's interests as events
move forward in the next few weeks.

Please click here to read our media release:

The Portland Department of Transportation's Web site
keeps up-to-date information and photos of tram
construction. Here's the link:


Steve Stadum
Chief Administrative Officer

To the courtroom we go!

Comments (52)

The current proposal contains contributions from the city? Well, we already have three commissioners on record as saying there will be no new contributions from the city. So the proposal is already over and the vote is a formality. The tram can’t wait for a long court battle to play out, so OHSU would be better off spending the courtroom money on some new shuttle buses; it looks like they’re going to need them.

The Right of Way is Cursed:
An earlier transportation venture on the identical route.

In 1889, one Frank Prantl tried to build a cable railroad between Marquam Hill and Southwest Second Avenue along Southwest Gibbs Street. At a half-mile long, Prantl's Portland City Homestead Railway was only a few hundred feet shorter than the tram route. Alas, Prantl couldn't make the steam-powered car negotiate its way along a cable anchored between the tracks. It never went into service. "The failure caused the promoter to go insane," wrote John T Labbe, in "Fares, Please," a history of Portland's street railways published in 1980.

Bill -

Careful how you count there. From the Oregonian story:

"On the council vote, Leonard plans to vote no. Adams said his position depends on the ongoing negotiations. Commissioner Erik Sten said he isn't sure how he'll vote. Commissioner Dan Saltzman couldn't be reached for comment."

Potter's a yes, so you have 1 yes and 1 no. Saltzman's probably a no. Adams is a probable yes. That leaves............STEN!!!!!!!!!!!!!!!!!!

The question is - does he (Sten) have the guts to vote no and push this thing to court. If the city loses in court, which is possible no matter what the attorney says, the city will have to pay for the tram anyway and damages. And even stopping the tram is $36 million (according to the paper). So really, what is the least costly solution? Sten will have to ask himself that - both for himself and the city.

Should be fun to watch!

He'll vote yes. Look at Stadum's e-mail. The old "affordable housing" line. This is Erik's out on everything. The tie between the tram and the poor is ludicrous to the extreme, but that never stops Opie. "I'm handing your money over to Homer Williams to help the homeless."

I was referring to the March 3rd article in the Oregonian entitled, "Sten rules out more city cash for tram." And I'm not the one who has to be careful here. I'm not facing a primary in May.
If Erik Sten goes back on his position, even if it's with some convoluted scheme designed to hide the additional costs to the city, I believe the voters will take note. If, on the other hand, he honors his previous statements, the voters should count that, too.
The tram should not be built. It is a loser, and could cost us untold millions in potential lawsuits in the decades to come.

I've been keeping up with this for the most part, but I admit to being confused. What's a "notice of default"? I hear "default" and I think "loan", but as far as I know the city wasn't loaning money to OHSU (in fact, as I understand it, the city is getting loans to pay for the construction until such a time when the tram is complete, at which point OHSU will pay the city back).

Is my understanding correct, and if so, what is this "notice of default"?


Folks, that sound you just heard was not a train crash nor a low-flying sonic boom. That was the sound of Commissioner Leonard's veins exploding out of the side of his neck.

Meanwhile we're closing schools to save a couple million bucks per year.

But, hey, as long as we can slap a few 800 sq. foot luxury condos in among the towers of 2,000 sq. foot luxury condos and tell ourselves we're doing a lot for "affordable housing."


I've been saying it all along. The City has been set up as the fall guy. Left holding the bag by OHSU. I still fully expect there to be a lawsuit.

From what I've seen, the City has a decent countersuit. But then, I'm no legal beagle.

You saw it first, folks.

I'm a little late to the Tram show, and I must say I have never understood our host's vehement objections, but after reading the Sunday Oregonian piece I must say Jack and many of you are right.

How on earth could OHSU move the tram location and still believe that it would cost exactly the same? That's insane.

Sorry, OHSU. You moved the goalposts, literally, now it's time to pay the full freight minus what Portland promised you originally when you lied to us.

As a lawyer friend of mine might say to OHSU, "Is it raining outside? Because you have a better chance of being hit by lightning than you do winning this case."

I suspect that OHSU is jockying for an intimidating position. Of course they have an independent counsel who is suggesting they have a case. I would bet that Mr. Markowitz would be more than happy to defend deep-pockets OHSU, win or lose...It's good money either way.

No One -

From the PDF Stadum links to:

"OHSU delivered the notice of default as a result of statements of city officers and employees declaring the city’s refusal to complete construction of the tram. The notice does not mean that OHSU is suing the city, but under the DA, it is a step that OHSU must take now in order to preserve its option to do so. Having given notice, if the city does not cure the default, OHSU can then go to court to compel the city to keep tram construction moving forward."

So, bottom line, if the City votes no in April, OHSU will sue. Careful, everyone who thinks OHSU has no case. That's pretty high stakes "word that rhymes with smoker but which is prohibited by Jack's spam filter."

Think about what the possible options are now for the city:

* Cobble together 3 yes votes, put in another several million and build the tram (while extracting "affordable housing" promises as Jack suggests)
* Back out of the agreement, go to court, lose the case, pay legal penalties and have to build the tram anyway
* Back out of the agreement, go to court, win the case, and still have to spend at least $36 million to tear down the tram

Which of these is the best option?

Refuse to pay, stop work on the tram, let Kohler think about it some more, then be gracious when he folds his hand and pays the overruns.

What about OHSU suing? You don't think they'll at least try to win their case in court? What if the city loses?

Can two government agencies sue each other?

The OHSU/Portland Tram will go down in history as one of the great wonders of the world. Capable of bending space and time it will move tens of thousands of people in it's 1500 round trips per day, it will turn lead poisoned wasteland in to real estate gold. You're just like all those naysayers back in the 80's who stopped Reagan from building his Star Wars missle shield, and the super duper super conducting super collider. You just get your kicks stomping on a dream.

Can we get some numbers to go along with that "affordable housing" we keep hearing about?
How much does it rent for?

OHSU's notice of default, and whining about it in a press release, is just a way to generate leverage in negotiating how much of the overruns it will cover. It isn't anything to get alarmed about. On the contrary, it suggests that OHSU is ready to swallow a bitter pill.

Y'all seem very confident in the city's case. All I'm saying is, OHSU seems confident in theirs too. If they didn't think they could win, I don't think they would sue.

We'll know soon enough either way.

I believe ending the tram would be a financial bargain compared to the unknowns ahead. We should also be looking at this for it's effect on future projects. Rather than reward this sort of "guesstimate" jive that went on here, where I believe we were deliberately snookered, future planners would think long and hard before presenting numbers that aren't real.
On the other hand, if we give into this pressure and roll over for these people, we might as well bring Goldschmidt back and let his machine run Portland for another 30 years.

Those are real pretty pictures of the Tram (rimshot). Kinda space age lookin'.

But does this thing have a restroom or two onboard for when the winds pick up, or it gets stuck for a couple of hours because of ice? Motion sickness ain't the best thing to be around.

so OHSU would be better off spending the courtroom money on some new shuttle buses

Bill, I think that line item is already covered with the couple of million bucks budgeted --but not yet funded, (it didn't look like it)-- for the South Waterfront Transportation Management Association (aka the Sowhatamess Shuttle).

Michael asks: But does this thing have a restroom or two onboard for when the winds pick up, or it gets stuck for a couple of hours because of ice? Motion sickness ain't the best thing to be around.

No, no restrooms. It's only a 200 second ride.

Besides, there won't be any room if they're going to stack folks on there like cordword.

I suspect they will provide the staffer who has to ride it with a station that includes a plastic bag set up like supermarket checkout clerks.

So "notice of default" == "notice that we intend to sue"??

I suspect it means they don't intend to pay the $10 million plus that the City of Portland, as the construction manager on the tram *rimshot*, has already borrowed from financial institutions to get this far....if they refuse to complete it.

The notice of default is a legal move to preserve their right to sue. I think that they can then sue no more than 60 days hence.

60 days from now is early June. That gives enough time for the hearing, the vote, the May primary and a couple of bonus weeks after the primary for everything to shake out. If OHSU likes where things stand at that 60 day point, they'll back off. If they don't like where things are, they'll sue.

Should be an interesting next couple of months. Your move, council.

Thought I'd go back to the agreement and post the relevant grafs (http://www.pdc.us/pdf/ura/north_macadam/sowa_development_agreement.pdf)

17.2 Default by PDC

PDC shall be in default if it breaches any of the provisions of this Agreement whether by action or inaction, and such breach continues and is not remedied within sixty (60) days after another Party has given notice specifying the breach; provided that if such breach cannot with due diligence be cured within a period of sixty (60) days, PDC shall have a longer and reasonable period of time to cure such breach, and in any such event such breach shall not constitute a default so long as PDC diligently proceeds to effect such cure and such cure is accomplished within such reasonable period. In the event of a cure period of greater than one (1) year, PDC shall provide the other Parties with a written assessment of the cure every month describing: the curative actions taken since the last written report, the estimated date by which the cure will be completed, the remaining impediments to completing the cure, and the planned curative acts for the next month.

17.3 CEO Meeting

In the case of a claimed default pursuant to Section 17, which is not cured or being cured in accordance with Section 17, a non-defaulting Party may not file litigation to exercise its remedy pursuant to Section 18.4 or 18.5 of this Agreement unless the non- defaulting Party gives the defaulting Party a notice requesting a meeting of the chief executive officer of each of the Parties and establishing a weekday date for the meeting within not fewer than seven (7) and not more than fourteen (14) days of the date of the notice. The respective chief executive officers of the Parties shall meet on the day noticed and engage in good faith discussions in an attempt to resolve the claimed event of default. The meeting may be continued until either the non- defaulting Party calling the meeting or the defaulting Party elects not to participate further. If the above process does not resolve the claimed breach, then each Party shall be entitled to pursue its remedies pursuant to Section 18.4 or 18.5 of this Agreement.

18.5 Remedies for PDC Default

(2) Recover from the defaulting Party all monetary damages (except for punitive or exemplary damages) and pursue all other remedies allowed at law or in equity arising out of, or related to, or caused by the uncured default. The Parties agree that equitable remedies may include specific performance or injunctive relief in some circumstances, but no Party has agreed in advance as to the availability of any particular remedy in any particular factual

There's also an interesting section in (19) - "Dispute resolution" - the city and OHSU can also mutually choose someone to solve the dispute. Any takers?

"""How on earth could OHSU move the tram location and still believe that it would cost exactly the same? That's insane.""""""

Everyone involved new early on that building was coming out of the ground. It a pathetic excuse.

Potter, Adams and Sten will vote yes.

There is no money for affordable housing or the other public improvements in SoWa.
They are all lying in hopes of putting Tram behind them before the bigger mess SoWa blows up in their face.

Trouble is it's too late the explosion is underway.

Did anyone notice in the Tribune article (4/4/06) on page A3 about campaign financing where Eric Sten said he got "seed money" for his latest campaign from donors including Homer Williams? How can he tell us he still hasn't made up his mind about the tram when he is taking the developer's money? I think he should hear from us, his email is esten@ci.portland.or.us

So, as long as the city seeks to "cure" the default the time limit may be extended. How does one "cure" unbudgeted cost overruns? Municipal bonds perhaps? How long does that reasonably take?
My gut sense is that OHSU completes the tram and then files suit.
Stay tuned.

Someone could get a preliminary injunction to halt the depletion of the fund that the city points to in escaping the duty to stop work immediately.

The DA has a duty to insist on a halt to the depletion of the funds.

I already know the Auditor says go faster faster faster . . . . which is far different that even sitting on the fence.

This as all the very definition of arbitrary and capricious. It is the very purpose of laws to restrict this sort of behavior, thus it is not an "election" issue. Proof: No leader needs laws to facilitate graft, for that is the default position in the absence of laws.

Specific narrow demand:

All money that may be paid to KiwiWit from the fund is amenable to return to the city as it is not now lawfully being expended. They have actual notice too. The city could insist that any funds that might go to KiwiWit go instead into an escrow account such that in the event of Tram-death KiwiWit gets zero from the escrow account, as per negotiated instructions that would be given to the escrow agent. In this game of chicken then KiwiWit would have to make their own call about whether to halt construction, as a judgment call, all on their lonesome. This maneuver could be negotiated by staff so as immunize themselves, sort of, from the set of bad actors that have thrown the rule of law to the wind.

Make KiwiWit talk to OHSU directly?

Who has more to lose in voting to increase the City's subsidy: Sten or Saltzman?

OK, this is really cruel...but Sten is like Fredo. (Maybe this has already been used - but I think its apt and it lets us take a break from Mayberry - come on, what a tired analogy). Sten's about to get in the fishing boat. He probably knows what is going to happen. But he doesn't resist.

Saltzman still has some life in him. I don't know what Godfather character he'd be like. Maybe Moe Greene? (He gets shot, but he gets shot while getting a massage - not a bad way to go out)

Anyone have any better Godfather analogies? Sorry for giving away the ending, but you really should have seen it by now.

They're working overtime under lights right now at the lower Tram landing.

"""""My gut sense is that OHSU completes the tram and then files suit.""""

No way. The LID will be dead, they don't have the money, can't borrow the money and can't sell bonds.

We're witnessing the desperation of a pyramid scheme running out of options.

With SoWa going broke, business as usual may be over in this city.

I think Erik is more like Kay Corleone (the Diane Keaton character) who is SHOCKED, SHOCKED to learn that her husband (OSHU as the new Godfather, Michael Corleone) is affiliated with the mob and he STEALS MONEY from people!

There is rich irony in OHSU painting themselves as the victim in all this.

Some updates on the tram:

No One: The city has borrowed over $22M and growing for the tram construction. OHSU will be paying back their LID portion over a long period of time with a reduced interest rate (subsidy to OHSU) compared to the NM Property Owner's LID interest rates which are higher. So again, the taxpayers are paying the interest on the trams construction budget.

That is why it is crazy for PDC staff claiming in URAC meetings and other public meetings that "there are no financing costs for the tram". And financing isn't a small amount. And PDC isn't even conveying this fact to Potter and Council.

There are over $27M direct attributed costs that the taxpayers have already paid for the tram including the $3.5M in TIF money. This fact has been blogged several times in several ways.

If Eric eats the "housing carrot" he will be a fool. The MN URA Proposed Budget that the URAC is deliberating on states on page 13:

"Funding status-Estimated Phase 1 200-Unit Affordable Housing $18M

Current Funding (includes $850k in federal grants) $7.0M

Funding Gap/New funds needed $11.0M"

And this is only for the next five year budget. Medium income housing ($68T for family of four) as promised in the earlier NM Agreement was over $45M. Now the PDC budget has been reduced to around $25M. It has been robbed for other projects, like the tram. Be careful of Dames and Williams "shell game". They haven't yet invested a dime to the tram, They have so far used your money for the "hype"-the so-called "lynchpin".

There is over $127M in unfunded items (and probably higher) in this 5 year proposed budget. This budget has been posted in earlier blogs. And to make matters worse, PDC has moved many projects (based on earlier NM Plan) to a later date beyond the 5 year budget so that the 5 year budget is ONLY unfunded by the $127M plus, and not a higher number. For example many of the high cost transportation projects are moved beyond 2010.

There is fiscal failure to come in NM. The tram is contributing to it it, but NM budgeting as a whole is much worse.

As the PATI Citizen Advisory Board (Dames a member) stated in their letter to city council in late 2003:

"We recommend that Council take the following steps to accomplish the needed linkage between Marquam Hill and the South Waterfront District.

1. Suspend development work on the Tram. The estimated cost of the Tram is now far above the costs used to evaluate the desirability of the Tram in relation to other linkage systems...." 3 pages .

We need a Council and staff that understands the "funding gaps" of NM and their relationships to the tram. OHSU has mislead the public and I hope not the Council. I'm glad we have candidates for Council that are talking about these important issues for our city.

Can two government agencies sue each other?

If not, then OHSU will wear its "private" hat, then put on its "public" hat when it gets sued for malpractice.

In other news ... All the tram backers say "the biggest risk is delay." OK, so call OHSU's bluff. I don't see how a lawsuit speeds things along.

In other news, pt. 2 ... Can some of you legal eagles school me in the concept of "optimal breach?"

They have already invoked the prisoners dilemma, fingering the other. "If both defect, both lose"

The optimal breach (of public trust) is to mutually hide behind a judge. The judge needs to tell them both to get their chicken feet out of the courtroom before it permeates the walls for years to come.

Garage Wine - I think you mean the theories of "efficient breach" (unilateral termination) or maybe "efficient termination" (termination by mutual consent).

I read a decent overview of these theories not too long ago - and here it is:


Read all about it here:

Solozzo = Stadum/Kohler (Drug dealer asking for funds and political backing) "What we want, godfather, are those politicians in your pocket...." and "If you consider 3.5 million dollars a small investment, salut" When denied their request they go to war (litigation)

Al Neri = Jack (Fredo's (Opie) final "fishing partner")

Randy has a little bit of Sunny in him, but only when he loses "that famous temper of his"... appears to have fairly good intentions unless you cross him

Homer Williams = Barzini (True mastermind behind the entire thing and the one who tricks Fredo into betraying the family)

The problem with the analogy is what is missing. There is no godfather, no one holding the strings and denying the request to enter into the shameful business of narcotics (tram building).

So is it time for the city to "go to the mattresses"?

Daphne: How on earth could OHSU move the tram location and still believe that it would cost exactly the same? That's insane.

My understanding is that the city made the decision for the design of the tram and the end terminals not OHSU. (Anyhow that is what I have read.)

Does that mean Randy will meet his untimely end at the Bridge of the Gods tollbooth? (nearest tollbooth I could think of)


The hit on Sonny will be on lightrail in the revamped bus mall.

The MAX car will be blocked by a Schumaker Furs van.

Hi Mike.

The Sunday Oregonian story on the front page said OHSU presented plans to the city calling for the top tram platform to be built on land OHSU had already planned to develop for other uses.

That's what the Big O said.

So, Trammies, did OHSU move the goal posts, so to speak? Yes or no?

The reality is that ALL PARTIES to the Tram Fiasco agreed upon a budget before they had even started gathering the inputs for a complex engineering project.

The Tram Fiasco would keep the brightest minds at the Harvard Business School busy for months:

A case study in public/private convolution, the Portland Aerial Tram.

With the various contracts and addendums, and the dispersed decision making authority, this seven headed hydra was designed to be a failure. But why? To insulate the City Council from the inevitable aftermath? To distance OHSU from any cost esclation? To make certain the project was too far along before somebody (the public, perhaps) realized what a massive boondoggle it had become? In all cases, they failed to achieve the desired effect.

As Erik pointed out, Nobody was minding the store. Perhaps no single individual could have excercised effective oversight of such a complex multi-party process that effectively demaned: must build a $15 million tram, and we don't care how much it actually costs.

In fact, the neighborhood's concerns ("they wanted a cadillac") were irrelevant to the engineering challenge: more than 80% of the cost increases had nothing to do with the Tram Car (or Gondola) itself. Truth be told, we all know that OSHU would not have been satisifed with "stripped down: ski lift version.

Did they complete any site analysis/geology, structural engineering, RFP's, schedule of materials, inflation factors, construction calendar BEFORE arriving at a $15.5 million guesstimate? It appears that most of this technical work only began AFTER the design competition was completed. A competition which emphasized form (it looks pretty) over function(is the design cost effective, will it work on this site). Most engineers and designers believe that form should follow function.

No serious engineering project starts with a low-ball budget, with a nod and a wink that "future cost increases require city council approval" so let's avoid telling them for as long as possible:
we can all see where that gets you.

It's no wonder that Matt Brown decided to depart the public sector before the shit hit the fan.

I have only one proactive solution: vote for anybody but Sten, and anybody but Saltzman.

In the next election cycle, it will be anybody but Potter, Leonard, and Adams.

In other words, "Throw the bums out!"

The heart of the problem lies in the constantly "moving" budget. The City with blessing of the architecture Ayatollah Randy Gregg decided they needed a design competition. They proceeded to hire an architect that had one (yes 1) project in the US that was under construction (not completed) at that time of the selection. But they are Euros with a hometown connection - Sarah. Just what Randy Gregg wanted "world class" [Euro] design - since all of the architects in Oregon are unfit. Would you hire an architect with one [ONE] project to their name to build a one of a kind complex structure? NEVER.
The City is getting what they deserve - THEY hired the architect, and have a contractor that hasn't provided a static budget yet. Scope & schedule haven't changed. The architect is simply unable to deliver a project on budget. Typically, architects' contracts say they must bring in the project on budget or redesign at THEIR cost. Why isn't that being enforced?

Can we blame the architect for being politically astute? Sarah was told by the City's handlers not to make waves, so she quietly noted the $15 millions was inadequate and went on about her work. You have to follow your client's lead on public policy matters, right?

The clients (OHSU, PDC, CoP) had a wish list that couldn't be accomodated by a fixed price budget: only one intermediate tower (when two or three would be more traditional), an atypical upper terminus (absent traditional anchoring protocols, with a no vibration of the hospital proviso), a tight calendar, and neighboring construction sites surrounding both the upper and lower terminuses.

I assume the architects had to subcontract much of the tram specific engineering to a third party consultant. If you've never designed an aerial tram before, how would you possibly conjure one from thin air?

Here's an ugly thought: what if the intermediate tower collapses during the test runs. Or the they have to operate it at 1/4 the original design speed due to the tight tolerances. Can we call it the Hubble Space Tram?

Did Kiewit post a surety bond?

"""Can we blame the architect for being politically astute? Sarah was told by the City's handlers not to make waves,""""

I wonder what sort of astuteness or orders had her failing to get licensed to work as an architect in Oregon.

A lapse which resulting in her, Sara Graham earning a $15,000.00 fine.

Just another Tram/SoWa snafu.

Jason - it's even worse than picking an architect with only 1 project in the States. I recall Tom Potter's interview with the Tribune some months back, where he said that he was amazed that the architect chosen had NEVER designed a tram before, and the contractor had NEVER built a tram before. Call me silly, but I would have released the RFP to businesses who had experience in such things. Especially since we're hearing that this particular application is especially complex and unforgiving. I had an argument with a friend of mine, who stated that Kiewit is way beyond being qualified for this job - should be easy for them. While that might be true - he didn't understand my point. My analogy: I wouldn't go to GM to buy a go-kart. GM has all the resources, capability, and talent necessary to design and build one, but that doesn't mean that they would do it best, or most cost-effectively.



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