March 14, 2006
Dear Colleague,
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 tram’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.
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.
Sincerely,
Peter Kohler
President, Oregon Health & Science University
3181 SW Sam Jackson Park Rd.
Portland, OR 97239
