This story was originally published in the Nebraska Examiner.
LINCOLN — A compromise was reached Tuesday on a kerfuffle over how two Nebraska public entities should share the cost of water and gas infrastructure work related to Omaha’s planned streetcar project.
Officials said the agreement won’t require a utility rate increase, a possibility that was cited earlier.
The previous impasse between the City of Omaha and the Metropolitan Utilities District centered on who should foot the bill for an estimated $20.5 million of utility line relocation and reinforcement needed to create a safe downtown-to-midtown route for the streetcar.
MUD earlier had resisted paying any more than $4.2 million of work — saying a larger financial obligation would risk either a rate hike across its four-county customer base or a delay in utility work for neighborhoods in greater need of replacements or repairs.
Timing of announcement
Conflict had grown to the point that a Nebraska lawmaker introduced a pair of bills that would have had the city or its Omaha Streetcar Authority cover all costs in question. Tuesday’s agreement was announced just an hour before legislative hearings were to take place on those bills, however, prompting them to be pulled from debate.
Tanya Cook, chair of the MUD Board, said Tuesday that officials at the public utility are pleased the compromise avoids a rate increase and won’t push the public utility to stray from its policies.
“We feel good about it,” she said. “We don’t have to entertain a rate increase or be perceived as a barrier to the work that is planned for that project.”
Under the compromise, MUD is to “reprioritize work within the streetcar project area and contribute $7.6 million towards utility replacement and relocation costs,” according to a joint statement by MUD and the city.
The city will fund the remaining expense, with that cost becoming part of the streetcar construction budget managed by the Omaha Streetcar Authority.
Months of wrangling
Mayor Jean Stothert, in a statement Tuesday, called the compromise the “right solution for everyone.”
“This agreement is the result of months of negotiation to develop a cost-sharing plan for the utility work along the streetcar route and protect MUD’s customers from a rate increase,” she said.
MUD’s contribution is to be paid through its Water Infrastructure Replacement rate component. The statement said the utility used a tool, its linear asset management plan and risk model, to evaluate additional segments of piping within the project area.
With deeper analysis and more review, the utility found a higher percentage, 35%, of the water and gas infrastructure along the first phase of the streetcar route that justified replacement or repair, MUD officials said.
That justified spending more dollars in the area while still being within MUD philosophy and policies, said MUD attorney Mark Mendenhall. He said that no other projects outside the streetcar project area are to be delayed as a result.
Streetcar tied to Mutual skyscraper
“Through diligence and cooperation, we have found infrastructure that appropriately meets the guidelines of our risk assessment process,” MUD president Mark Doyle said in the statement.
Cook said the goal between MUD and the city always was cooperation, though she noted the two are separate public entities governed by separate elected officials.
“To have another level of advocacy for the people is good,” she said.
The Omaha streetcar plan is driven by more than the economic and real estate development projects supporters expect will be sparked along its proposed route: Farnam and Harney Streets, from 10th to 42nd Streets, and a couple of north-south stretches along 10th and Eighth Streets. The streetcar also was pivotal to Mutual of Omaha’s contract with the city to build a $600 million office high-rise downtown at the former W. Dale Clark Library site.
Legislature gets involved
State Sen. Lou Ann Linehan, who introduced the bills pertaining to the MUD-Omaha conflict, said her radar went up as the streetcar debate intensified.
“When I see two governing bodies in a battle like that, I’m like, ‘OK, what is going on?’ ” Linehan had said in introducing Legislative Bills 691 and 693.
She made a quick appearance Tuesday afternoon before the Legislature’s Urban Affairs Committee, informing lawmakers of the agreement that had been announced an hour earlier. Because of that turn of events, she said, she asked that the two bills be dropped from further discussion.
State Sen. Terrell McKinney of Omaha, chair of the committee, asked for an explanation of how the streetcar project meshed with state law that puts the city’s public transit under the Omaha Metro transit authority.
Linehan said that she had many questions about the streetcar plan, and that the public utilities issue was one that just Tuesday had been resolved.
Lawmaker still has questions
“I have a lot of questions about what is going on (with) the streetcar,” she said, adding that she did not understand how Omaha could shift power to a recently formed Omaha Streetcar Authority that includes no elected officials.
Linehan said Omaha officials have told her more recently that they would brief state lawmakers more. “I look forward to that,” she said.
Linehan has introduced a third streetcar-related bill, LB 389, which is still before the Legislature and was the topic of a recent legislative hearing. That proposal involves Omaha’s broader use of TIF, which is the vehicle for paying the streetcar expense.
We don’t have to entertain a rate increase or be perceived as a barrier to the work that is planned for that project.
Tanya Cook, chair of Metropolitan Utilities District and former state senator
All three bills were introduced after Omaha officials were well into their plan to construct the $306 million streetcar, but Linehan said she was concerned that there were too many questions about the project, and she wanted more oversight from another layer of government, the Legislature.TIF is key to streetcar
The Omaha City Council last year approved the plan to issue bonds to pay upfront costs of the streetcar, including construction of the permanent rail system and purchase of vehicles.
The city plans to pay for the bond debt with tax-increment financing proceeds it anticipates in a specially created TIF district that encompasses three blocks miles on either side of the three-mile-long streetcar corridor.
Those proceeds, according to an analysis by MuniCap, could reach $608 million over about three decades.
Generally with TIF projects, which require city approval, property tax revenue generated on new development is used for up to 20 years to cover eligible redevelopment costs instead of going to traditional recipients such as school districts.
After the TIF loan schedule, the tax revenues on that more valuable property start flowing to the traditional recipients.