Economics

The Streetcar: Cincinnati’s Silk Purse

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Some Cincinnatians argue for buses instead of streetcars. Buses have no effect on development.

Why?

Because a bus route can disappear overnight. Buses also seldom attract “riders from choice” with significant disposable incomes, which is what cities need economically. Rail transportation appeals to middle-class and upper-middle-class people, who have money to spend in stores, restaurants, and theatres. Streetcars, with their investments in tracks and wires, represent a commitment from the city to lasting, high-quality transit service, that developers can count on in the years to come.

While buses usually carry only the transit dependent, rail service can appeal to riders from choice – people who have cars and can drive, but who choose to ride transit instead. Most riders from choice represent a car removed from traffic, which benefits everyone, including the person who still drives.

In terms of economic development, streetcars are silk purses and buses are sows’ ears. You can’t make one into the other, not even through an unfunded federal mandate.

We’ll take the silk, thank you.

Research by Paul Weyrich and William Lind, Free Congress Foundation

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Streetcar Construction Awards $12.5M in Contracts to Minority-Owned Businesses

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Messer, Prus, Delta (MPD), constructor of the Cincinnati Streetcar, today reported they have met their inclusion goal of the project, awarding 18% of construction contracts to Disadvantaged Business Enterprises (DBEs). A DBE is defined as a small business owned and operated by minorities or women. recognized as socially and economically disadvantaged individuals.

The contracts total more than $12.5 million to nine companies with DBE certification. MPD is building the 3.6-mile streetcar loop with total construction costs estimated at $70 million.

The streetcar project receives money from the federal government as well as local sources, and therefore, the project must use a DBE goal rather than a Small Business Enterprise (SBE) goal as seen in other locally-funded building projects.

The DBE goal for the civil construction contract for the streetcar project is 18%. The goal was based on an analysis of the highly-specialized scopes of work outlined in the construction contract, and available registered DBEs in the area. Disadvantaged businesses are involved in many areas of the construction, including: preparing streets for rail, building the Maintenance & Operations Facility, installing the street signalization and poles, and the station stops.

“MPD is committed to inclusion and we are pleased to have met the 18% DBE goal for construction contracts,” said Mark Luegering, senior vice president of Messer Construction Co. “We sought-out disadvantaged businesses during the bid period and award of contracts to play a significant role in construction and are pleased with the quality of our subcontractors.”

DBE Firms awarded contracts include:

Construction work is on schedule to be completed fall 2016.

Hispanic, African American Chambers support Cincinnati Streetcar

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This week, Alfonso Cornejo, President of the Hispanic Chamber, and Sean Rugless, President of the African American Chamber, both spoke out in support of the streetcar and the possibilities it brings for minority companies to have a business located along the route. The Chambers hosted a joint discussion about economic development created by the streetcar, featuring a presentation by Project Executive John Deatrick.

In addition to an overview of the project, Deatrick focused on making resources available for people wanting to start businesses along the route, as well as providing support for current businesses that are open during construction.

To date, 18% of the streetcar contracts have been awarded to minority-owned companies, such as Fairfield-based Bansal Construction, who received a $10 million contract for electrical work. Ten disadvantaged business enterprises (DBE) are engaged with the project. Over 100 people are currently employed through streetcar construction.

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Deatrick will be hosting a public outreach session on November 14 at the Main Library to provide minority-owned enterprises with information on creating a sustainable business along the streetcar route. The seminar will be hosted by the City of Cincinnati Economic Development Division, as well as the Small Business Administration, representatives from financial institutions and real estate companies, and partners from the African American and Hispanic Chambers.

“We will have as many seminars as it takes to be economically inclusive,” assured Deatrick.

Both the Hispanic and African American Chambers urge their members to become certified as a DBE, attend informational seminars, and take advantage of the opportunity the streetcar brings to Cincinnati.

Rugless stated, “Whether you are for streetcar, or against streetcar, it doesn’t really matter because the tracks have already been laid. The Cincinnati Streetcar is going to happen. We have to look ahead at how can we use this platform as an economic development engine to build wealth, drive investment, and attract the businesses of our people.”

Earning and Saving with the Streetcar

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The most common misconceptions about the streetcar project involve concerns about return on the city’s $133 million investment. However, feasibility studies conducted by urban planning and risk assessment firms state that both the local economy and families can benefit financially from the streetcar.

SAVING FAMILIES MONEY

Federal Transit Administration (FTA) research explains that households located in transit-oriented communities (within a half-mile to a mile of a fixed rail station) save an average of $250 per month or $3,000 per year per household in auto-related costs as compared to households in auto-oriented areas. These savings are associated with the ability to walk to a wider range of destinations and to transit access itself.

EARNING MONEY FOR CINCINNATI’S 52 NEIGHBORHOODS

Benefits, costs, net present value, and benefit cost ratio were examined to calculate the risk of building a streetcar in Cincinnati. According to the Benefit-Cost Analysis conducted by HDR, a financial risk assessment company:

The value of total benefits for Cincinnati’s streetcar system is expected to be $430.9 million over 35 years between 2008 and 2042. Benefits are expected to exceed the total costs by $315.1 million. This represents a return on investment of 2.7 times, meaning for ever $1 that is invested, the streetcar will generate $2.70 for the City of Cincinnati.

The HDR analysis notes that there is a 90% probability that the Cincinnati streetcar will succeed.  Once operational, it will earn more money to be shared throughout the city’s 52 neighborhoods than the costs needed to build and operate the route. The Benefit-Cost Analysis results recommend that investing in streetcar system is economically worthwhile with minimal risk of economic failure.