Talgo Trains in Midwestern America? Maybe?

Wisconsin taxpayers could pay $22.2 million more than previously disclosed to build and maintain two trains for Milwaukee-to-Chicago service, state documents show.

Depending on whom you talk to, that’s either another repercussion of Republican Gov. Scott Walker’s decision to cancel a high-speed train project, or a bill that former Democratic Gov. Jim Doyle’s administration left for his successor to pay.

The state has borrowed $47.5 million for its no-bid contract with Spanish train manufacturer Talgo Inc. to build two 14-car train sets to replace aging Amtrak-owned passenger cars on the Hiawatha line.

Cab Car of the Wisconsin Talgo
But now the state Department of Transportation is asking the Legislature’s Joint Finance Committee to authorize borrowing $21.4 million more to cover related costs, including $11.7 million to build and equip a temporary maintenance base at Talgo’s factory on Milwaukee’s north side; $6.9 million for a British consulting company to oversee the manufacturing process; and up to $2.5 million for spare parts.

Together with $800,000 in separately appropriated funds, that brings the total cost of the train car acquisition to $69.7 million, almost 47% more than the original $47.5 million price tag, according to the department’s funding request.

Reggie Newson, executive assistant to state Transportation Secretary Mark Gottlieb, said the state is required to pay many of those costs to fulfill contracts signed by Doyle’s administration. Newson and Gottlieb were named to their positions under Walker.

But former Transportation Secretary Frank Busalacchi, who served under Doyle, said nearly all of the costs would have been covered by an $810 million federal stimulus grant awarded to Wisconsin last year to extend the Hiawatha to Madison, as part of a larger plan for high-speed trains connecting Chicago to the Twin Cities and other Midwestern destinations. Walker, however, campaigned against the 110-mph route, and the federal governmentyanked the funds after his election in November.

“We made a commitment based on having the grant,” Busalacchi said. “When they gave back that money, they threw all that away.”

Gottlieb and Newson agree that at least half the additional costs – $3.2 million for a temporary maintenance base and $8.5 million for equipment – would have been covered by the stimulus grant. But they and other transportation officials say much of the remainder would have been the state’s responsibility.

For example, Gottlieb said in his funding request that the grant would have paid part of the consultant’s fee. But Donna Brown, state passenger rail planning chief, said it wouldn’t have covered anything related to the two state-financed Talgo train sets.

Project manager John Oimoen said the consultant would have been involved in the additional trains and locomotives purchased under the federal grant.

Busalacchi, however, contended the state already had received federal approval to use the grant for those costs. He noted the $810 million total included about $150 million in contingencies.

But no one at this point appears to be claiming these charges are unexpected cost overruns. Nora Friend, a Talgo vice president, said the maintenance base, maintenance equipment and spare parts are required by Talgo’s contract to service the trains that it builds, and state officials knew of those costs all along.

Details of the additional train car costs:

Maintenance base: Talgo’s plant in the Century City complex, formerly the site of Tower Automotive, is to serve as a temporary maintenance base for up to three years after the trains start service, until a permanent base can be built.

The costs of building and equipping both the temporary and permanent maintenance bases would have been covered by the $810 million federal grant. That grant also would have paid for more train cars and locomotives, which would have been serviced at a $52 million permanent base in Madison.

After the original grant was withdrawn, the state unsuccessfully sought $213.3 million in federal money earlier this year for Hiawatha upgrades, including additional trains, retrofitting the Talgo plant as a permanent maintenance base and improving the tracks between the plant and the downtown Amtrak station.

The state now is turning away from building a permanent base at the Talgo plant and is seeking to cut costs by finding a site closer to the downtown station, Newson said. Track and signal upgrades would have added $27.6 million to the $60.1 million cost of retrofitting the Century City site, plus engineering costs, according to this year’s grant application.

Talgo has said it’s likely to move its manufacturing operations out of the state after it fills its Wisconsin and Oregon orders. Friend said the company had hoped the plant could become a permanent maintenance base, but she understood the track issues.

Consulting firm: The Doyle administration hired British-owned Interfleet Technology Inc. to advise state officials and watch over Talgo, which is manufacturing key components in Spain, testing them in Germany and then shipping them to Milwaukee for final assembly.

“Given the department staff’s lack of expertise in train car design, manufacturing and safety compliance and the logistical issues related to design and manufacturing in Spain, structural testing in Germany and final assembly in Wisconsin, it was necessary to retain the services of industry experts,” Gottlieb wrote.

Busalacchi conceded the consulting contract was costly, but said the outside experts were needed to ensure that components being manufactured and tested overseas would meet federal safety standards.

“We had to have people who knew what they were talking about,” Busalacchi said. “We had to make sure that the taxpayers were being represented properly.”

Spare parts: Transportation officials say they expect to pay $500,000 for spare wheels for the trains. Other spare parts could run up to $2 million, although the exact cost remains under discussion with Talgo.

Change orders: State officials and Talgo are discussing a redesign of the cab cars to meet Amtrak specifications, at a possible cost of $500,000. The cab car is at the back of each train and is equipped to allow an engineer to operate the train from that end, rather than from the locomotive, when needed.

Amtrak is concerned about sight lines, and state officials believe Talgo is responsible for building the cars to state and Amtrak requirements, Oimoen says. Friend says the original design meets Federal Railroad Administration standards, and the state has to pay more if it or Amtrak want something else.

Other design changes have had little impact on the bottom line. The largest was $3.4 million for adding a bistro car to each train. That was covered by the savings from buying the trains under a joint purchasing deal with Oregon, which was reached after the state had borrowed the $47.5 million. Similarly, the $621,648 cost of outfitting the trains for wireless Internet service was more than canceled out by an $800,000 saving on 2009-’10 Hiawatha fuel costs.

In a related matter, Newson said state officials are considering a less-expensive redesign for a planned renovation of the downtown station’s train shed, the area where passengers board and disembark from trains.

Much of the renovation is needed to bring the aging structure into compliance with the federal Americans with Disabilities Act. Under the Doyle administration, that was envisioned as a $20.4 million project that would have been covered by the $810 million federal grant.

Now Gottlieb is asking the Joint Finance Committee to authorize $8 million in borrowing and release $2.2 million in money previously set aside for possible Hiawatha needs, matched by $10.2 million in federal aid. But it’s possible a redesign could cut the total cost, Newson said.

In previous budgets, the Legislature provided $122 million in borrowing power for rail projects, subject to Joint Finance Committee approval. The state has used $2 million to buy the downtown station and $47.5 million for the Talgo cars. If the committee approves the $29.4 million that Gottlieb requested, $43.1 million would remain.

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