Picking up the trench tab

The absence of trench critics was one weird highlight Tuesday as the Reno City Council tried to absorb a glut of financial data on trench construction.

The Citizens for a Public Train Trench Vote were nowhere to be seen as Reno Public Works Director Steve Varela went over the fine points of what the trench will cost.

The critics, who gathered 15,000 signatures to put a trench question on the September ballot only to have a judge shoot down their plans, must’ve been over at the Washoe County Commission meeting, where commissioners unanimously voted Tuesday to allow a county-wide advisory vote on the trench in November. It’s not clear what kind of weight such a vote would carry.

But you needed to be at Reno City Hall if you wanted actual information on whether the city can afford to hire Granite Construction—the lowest-priced of three construction firms bidding on the project—to start digging. In fact, that’s what the Reno City Council will vote on in just a few days at its Tuesday meeting.

How much will it cost to build a trench? Well, first decide if you want to talk about present value dollars or actual value dollars. Actual value dollars have reality-based value, I’m told, value that’s not inflated or deflated or otherwise morphed beyond recognition. So let’s talk about actual value.

Now, how much will it cost to build a 2.1-mile depressed railway so that trains can zip through downtown without impeding traffic on busy cross streets?

Bids from three participating contractors were made public (drum roll, please), and the winner was announced Monday. Granite Construction will take the gig for a $170.7 million. Not bad? Maybe.

When the bid first went out, the city of Reno was looking for something in the $145 to $155 million range. But the first group of proposals (not bids, mind you, because it’s illegal to negotiate bids) from contractors in March came in too darn high. So the city staffers concocted a few suggestions for going the lesser mile—keep it to about, maybe, $163 million or so, eh? Then, at long last, the Best and Final Offers were revealed to the city, and Granite won.

Sure, $170.7 million (in actual value) is a bit spendier than $155 million. It’s a bit more than $163 million.

But now it’s time to add in the other project costs, like $10.8 million for support consultants and legal expenses, and $19.2 million for city expenses like staff, property acquisition and a trench art project ($400,000 in sculpture/mural money). Something called “railroad work” costs $17 million in the budget, and then there’s a fat, handy $26.4 million or so in the contingency fund to cover unforeseen expenses. Toss in the money already spent or obligated to be spent ($18.3 million on stuff like the ReTRAC Environmental Impact Statement and ads in the Reno Gazette-Journal), and you’ve got $264 million and change.

Can the city afford this project? City staffers say you betcha. During a presentation of the ReTRAC financing plan and budget to the Reno City Council Tuesday afternoon, Varela and Reno Finance Director Andy Green showed that, in fact, the amount of money Reno could spend on the project was exactly the amount the city would need. That magic number is around $245.7 million, not including money already spent or obligated.

Here’s the breakdown of the money Reno can put toward the trench, according to Green.

· Carry-over resources: $17.9 million. This is money in the bank that’s been collected from sales and room taxes as well as lease payments on land that Union Pacific is turning over to the city. There’s a cool million in 1998 road bonds jammed in here, too.

· Bonds: $98 million. The city got the go-ahead to sell bonds last month, so they’re unleashing $116.9 million on savvy investors. For bond issuance fees and reserve costs, subtract about $18.8 million. Remember when the bond insurance doubled because the insurers were freaking out over the trench controversy and the demand of citizens to vote? The city took that $2 million hit here.

· TIFIA loans: $73 million. The city borrowed $50.5 million from the feds against the sales and room taxes; $17.6 million against the money collected from the special assessment district (downtowners who have to pay more taxes because of the benefit they’ll receive from a trench) and $5 million against the city’s lease revenues on the Union Pacific land. Remember when the council exempted Fitzgerald’s from the special assessment district? The city took that nearly half-million hit right here.

· 1998 debt service fund reserve: $1.4 million. The city borrowed $6 million against sales and room tax in 1998. This reserve fund has $1.4 million available in cash from refunded bond proceeds.

· Pay-as-you-go: $10.2 million. The city doesn’t have to write a check to Granite Construction this year before the first dirt is turned. So this money represents sales and room taxes collected above and beyond debt service (the money needed to pay back bonds and loans) during the time of construction. The city’s plan is to pay the 40-year bonds and TIFIA loans off in a mere 24 years by applying excess revenue toward prepaying the loan. If there’s a “hiccup” in room taxes, the federal government is on the hook first, then the bondholders, council members were told. The financing was set up to offer the lowest possible risk to the city. And no matter what, the city can’t raise property taxes to pay the tab. (Let’s hold them to this, OK?) Of note: Looks like the city’s making $1.9 million or so a year in lease revenue on that Union Pacific contributed land. Only a teensy portion is being used in this budget plan to paying back trench debt. Mayor Jeff Griffin wants folks to know that, indeed, the railroad’s contribution is making a difference. (If present, critics might have noted that their problem is how the land value was arrived at.)

· Federal grants: $18 million.

· Railroad work: $17 million.

· Interest income: $6.6 million. Get a fat check. Put it in the bank or in a safe investment fund and watch it go to work for the city. Interest is good.During public comment time, Dave Howard of the Reno-Sparks Chamber of Commerce, looking tan and attired comfortably in shorts, said he was “pleased to have some real numbers.”

“This community is divided and it’s time to move forward,” Howard said. “Once it’s completed, you’re going to be complimented because you had the courage to do the right thing.”

A lot of folks have been throwing numbers out, scary numbers on how much a trench might cost, Howard said. “Now we know how much it costs to build a trench. $170 million. Not $500 [million], not $480 million. The number is $170 million.”

He’s sort of right.

On Tuesday, the council votes on whether to accept the bid or not. Some lingering concerns include making funds available to help small business owners who may be hurt by the construction project.

The legal quandary here is that if, say, the council wrote a check to help Joe BarOwner pay his rent for a few months while construction is blocking access to his booze and live bands, that would set a costly precedent for the city to follow in other public works projects. Compassion costs.

The absence of trench critics at the meeting felt odd.

“Where are they?” guitar-playing watchdog Sam Dehné demanded. “Where is this horrible outcry [against the trench]? They should be here yelling and screaming!”

Another unrelated but entertaining highlight: Dehné complained that the council members are so obstinate that when Dehné spoke in favor of pay raises for the mayor and city council, the council voted to hold off on the issue.

“I speak in favor of pay raises, and then you vote it down,” Dehné lamented. “I don’t know which way to go.”

Without missing a beat, Councilman Dave Aiazzi rose his arm and pointed toward the door.

“That way," Aiazzi said.