Two lively debates (here and here) are raging on Jack Bog's Blog about the tram that's being built to connect OHSU with the South Waterfront (or, if you're an old-timer, the North Macadam) area that's being turned from an industrial preserve to a developer's paradise. The original construction budget of $15 million or so has gone into hibernation with Santa Claus and the Easter Bunny. The current construction cost estimate is in the range of $45 million and climbing. Some people, including this particular Isaac, have suggested that the City should scrap the project.
Commissioner Leonard has commented that in his view the City of Portland should contribute what it promised and budgeted, and not a penny more -- if the tram is that important to OHSU and the NoMa/SoWa developers, then they should come up with the extra money to build it. I heartily second Commissioner Leonard's view.
The arguments in favor of the City continuing with the tram are three:
1. The City has already paid $X to design and build it so far, and all that money would be wasted if construction stopped. In addition the City would owe the contractor a pile of money for damages.
2. The City has already paid $X to design and build it so far, and not only would the money be wasted, but OHSU would have a large claim against the City for damages, because the City promised -- cross its heart and hope to go broke -- that it would finish the tram by a date certain.
3. Homer Williams and his associates are civic-minded people who would be terribly disappointed if the City didn't finish the tram, and the City owes it to them to reward their work in NoMa with the tram.
I don't put much stock in the third argument.
Commissioner Adams posted links to some of the tram documents on his website, here. Among them are the tram contracts with the contractor. I read them. My conclusion is that if the City terminates the tram contracts, it has to pay the contractor for the work done up to the time of termination, for any materials that the contractor has already bought, and for the cost of demobilization. (I'm oversimplifying slightly, but this is the general idea.) The City doesn't have to pay the contractor for lost profits, consequential damages, or any of those other things that send ordinary citizens out to buy more liability insurance.
The thing that makes termination expensive is the cost shifting. If the City builds the tram then OHSU and the developers pay for most of the cost. But if the City cancels the tram, then (I think) the City pays all of the cost. OHSU and the developers aren't going to pay for half a dead horse. So from the City's point of view, it's cheaper to finish the tram -- even if it's horrendously over budget -- than to cancel it, because other people pick up the cost overruns if the City finishes the project.
I don't know what liability the City has to OHSU if the City cancels the tram. If any reader has the document, or a link to it, I would be delighted to read the OHSU agreement. I think it's unusual for the City to promise to pay penalties if it doesn't perform on time that I would be surprised if the consequences are as dire as advertised. At any rate, it's time for the City to say "no mas" to the North Macadam tram.
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