Resolved conflict over who pays for utilities needed to build streetcars in Omaha

This story was originally published in the Nebraska Examiner.

LINCOLN. A compromise was reached on Tuesday in a dispute over how two Nebraska state-owned enterprises should share the cost of water and gas infrastructure work related to a planned streetcar project in Omaha.

Officials said the agreement would not require the increase in utility rates mentioned earlier.

The previous stalemate between the city of Omaha and the Metropolitan Utility District centered on who should pay the roughly $20.5 million utility relocation bill and the reinforcement needed to create a safe downtown-to-city streetcar route.

Tanya Cook, Chairman of the Capital Municipal District (Courtesy of MUD)

MUD has previously refused to pay more than $4.2 million for work, saying the larger financial commitment could either raise rates for its four-county customer base or delay utilities in areas more in need of replacement or repair.

Announcement time

The conflict escalated to the point that a Nebraska legislator introduced a couple of bills that would require the city or its Omaha streetcar authority to cover all of the costs in question. Tuesday’s agreement was announced just an hour before legislative hearings on the bills were due, prompting them to be withdrawn from discussion.

Tanya Cook, chairman of the board of MUD, said Tuesday that utility officials are pleased that the compromise avoids a rate increase and will not force the utility to deviate from its policy.

“We feel good,” she said. “We must not allow a rate hike or be seen as an impediment to the work planned for this project.”

Under the compromise, MUD is to “reprioritize work in the streetcar project area and contribute $7.6 million in utility replacement and relocation costs,” MUD and the city said in a joint statement.

The City will fund the remaining costs, and these costs will become part of the streetcar construction budget administered by the Omaha Streetcar Authority.

Months of controversy

Mayor Gene Stother, in a statement on Tuesday, called the compromise “the right thing to do for everyone.”

Omaha Mayor Jean Stothert is featured in the official portrait. (City of Omaha/City Hall)

“This agreement is the result of months of negotiations to develop a plan to share utility costs along the tram route and protect MUD customers from fare increases,” she said.

The MUD contribution is to be paid through the component of the water infrastructure replacement rate. The statement said the utility used the tool, a linear asset management plan, and a risk model to evaluate additional pipeline segments within the project area.

After a deeper analysis and additional verification, the utility found a higher percentage, 35%, of water and gas supplies on the first phase of the tram route that justified a replacement or repair, MUD said.

According to MUD attorney Mark Mendenhall, this justified spending more dollars in the area while staying within MUD’s philosophy and policy. He said that as a result, no other projects outside the tram construction area should be delayed.

Tram tied to the Mutual skyscraper

“Through diligence and collaboration, we have found an infrastructure that properly meets the recommendations of our risk assessment process,” MUD President Mark Doyle said in a statement.

Cooke said the goal between MUD and the city has always been cooperation, although she noted that they are separate state entities run by separate elected officials.

“It’s good to have another layer of protection for people’s interests,” she said.

The Omaha streetcar plan is not just driven by the fact that supporters of economic and real estate development projects expect it to run along a proposed route: Farnam and Harney Streets, from 10th to 42nd Streets, as well as several north-south sections. along 10th and 8th streets. . The streetcar also played a key role in Mutual of Omaha’s contract with the city to construct a $600 million office high-rise building downtown on the site of the former W. Dale Clark Library.

The legislature is involved

State Senator Lou Ann Linehan, who introduced bills regarding the MUD-Omaha conflict, said her radar had gone up as the streetcar debate escalated.

“When I see two governing bodies in a fight like this, I think, ‘OK, what’s going on?’ Linehan said, introducing bills 691 and 693.

State Senator Lou Ann Linehan of Omaha withdrew the two bills after a compromise. (Paul Hammel/Nebraska Examiner)

On Tuesday afternoon, she quickly appeared before the Legislative Assembly’s committee on urban affairs, briefing lawmakers on the agreement, which had been announced an hour earlier. According to her, because of this turn of events, she asked to exclude these two bills from further discussion.

Omaha Senator Terrell McKinney, chairman of the committee, asked for an explanation of how the streetcar project is consistent with state law that places the city’s public transportation under the Omaha Metro Transit Authority.

Linehan said she had a lot of questions about the tram plan and that the utility issue was only resolved on Tuesday.

MP has questions

“I have a lot of questions about what’s going on (with) the streetcar,” she said, adding that she didn’t understand how Omaha could hand over power to the newly formed Omaha Streetcar Authority, which does not include elected officials.

Linehan said Omaha officials most recently told her they would keep state lawmakers informed. “I’m looking forward to it,” she said.

Linehan has introduced a third streetcar bill, LB 389, which is still before the Legislature and has been the subject of recent hearings in the legislature. This proposal involves greater use in Omaha of TIF, which is a means of paying for streetcar costs.

We must not accept a rate increase or be seen as an obstacle to the work planned for this project.

Tanya Cook, Metropolitan Utility District Chair and former state senator

All three bills were introduced after Omaha officials got a good handle on their $306 million streetcar plan, but Linehan said she was worried about too many questions about the project and wanted more oversight from another level of government, the Legislative Assembly. . TIF – the key to the tram

The Omaha City Council last year approved a bond issuance plan to pay for the initial costs of the streetcar, including building a permanent rail system and purchasing vehicles.

The city plans to pay off the bond debt with tax revenue it expects to generate in a purpose-built TIF area that spans three blocks of miles on either side of a three-mile streetcar corridor.

These revenues, according to MuniCap’s analysis, could reach $608 million over the course of about three decades.

Typically, for TIF projects that require city approval, property tax revenues generated from new development are 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, tax revenues from this higher value property begin to flow to the traditional beneficiaries.

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