OHSU's Operation

[February 15th, 2006] Two new pieces of information in the byzantine world of tram finance both appear to favor the project's primary beneficiary, Oregon Health & Science University, with additional millions of dollars.

It's well-known that the tram's estimated cost has soared from $15.5 million in 2003 to $55 million today. What's unknown is where the funds beyond the $40 million currently budgeted will come from.

WW has learned that city finance officials have come up with a proposed change that could benefit OHSU by about $2.5 million, money that could go toward filling that $15 million shortfall.

While that's a small concession compared with the tram's overall cost—most of which OHSU is paying—it's likely to tick off already-angry property owners along the waterfront.

Here's how the new money might appear:

The primary sources of tram funding so far—about three-quarters of the $40 million committed to the project—are local improvement districts on Marquam Hill, where OHSU's main campus is located, and down along South Waterfront, where OHSU, ZRZ Properties and various private real-estate developers own land.

Property owners in the local improvement districts (LIDs) at either end of the tram are assessed charges based on the value of their property, with that money going to help pay for the tram.

Currently, the city charges all those property owners the same rate per $1,000 of assessed value.

But under a proposed new city plan developed by Ken Rust, the city's chief financial officer, public-sector parties such as OHSU would be charged a lower rate than their private-sector neighbors. The rationale for that shift: Public-sector property owners are less likely to default than private-sector property owners. OHSU is the only property owner in the tram's LID that would benefit, to the tune of $2.5 million over at least 10 years.

Rust says the proposed change, which he hopes will come before City Council later this year as part of a package, was not designed specifically with OHSU in mind and would affect all LIDs in the city that include public-sector parties.

The possible break for OHSU is likely to further enrage ZRZ Properties, whose affiliate Zidell Marine operates a 33-acre shipyard in South Waterfront within the tram LID. ZRZ has already sued the city and OHSU over its assessment, which it believes is too high. A company representative declined to comment, citing pending litigation.

City Transportation Commissioner Sam Adams, whose portfolio includes the tram, argues that OHSU should contribute the $2.5 million in savings to the project's current $15 million funding gap.

"I would hope they'll apply any savings to the tram," Adams says.

Asked for comment, OHSU would say only that funding for the tram and other South Waterfront infrastructure remains under discussion.

The second piece of good news for OHSU is a mixed blessing for city taxpayers. An amendment to the South Waterfront development agreement signed last spring provided an extra incentive for OHSU: For every federal transportation dollar the university could secure above the city's request, the city-funded Portland Development Commission would kick in an extra 50 cents.

Larry Brown, the PDC official overseeing South Waterfront, says the amendment acknowledged OHSU's prowess in leveraging federal funds. Last year, the city asked for, and received, $4 million in federal transportation dollars to fund various street improvements in South Waterfront.

When OHSU landed another $7 million in federal money, dollars that will be used for a pedestrian bridge over I-5 among other things, that put PDC on the hook to spend an unbudgeted additional $3.5 million on OHSU-designated projects (including, possibly, the tram) over the next three years.

"It's a good news-bad news situation," Brown says, noting that the $7 million replaces money PDC would have had to spend anyway.