Posts Tagged ‘Talgo’

Talgo Saying Goodbye to Milwaukee

May 8, 2014

The messy divorce between Talgo and the state of Wisconsin is just about official now that Talgo plans to move two unused trainsets it built for the state out of Milwaukee and terminate its lease at a city-owned manufacturing plant.

Talgo, a Spanish manufacturer, had been using the facility at Century City in Milwaukee to store two trains it built under a contract with the state of Wisconsin.

Those trains are the subject of a state claim and a lawsuit Talgo filed in Dane County Circuit Court to resolve whether it, or the state, owns them.

The Wisconsin Claims Board on Wednesday will consider Talgo’s $65.9 million breach of contrct claim against the state.

Talgo expects to ends its lease with the City of Milwaukee later this month or in June.

“They are wrapping up in the coming weeks,” said Milwaukee Department of City Development spokesman Jeff Fleming. “It also appears imminent that the trains will be leaving.”

Four years ago, the future of Talgo in Milwaukee looked bright. The company and city reached a pact in to locate U.S. manufacturing operations in Milwaukee.

The city renovated a vacant industrial building on North 27th Street and sought to recover those expenses through a long-term lease with Talgo.

Talgo built two trains for Wisconsin and two for Oregon in the facility. But work ended after Wisconsin canceled its order for two trains to run on a never-built high-speed rail service between Milwaukee and Madison.

Talgo Files Claim With Wisconsin for $66 Million

November 9, 2013

Talgo Inc. is suing the state of Wisconsin over its decision to refuse to accept two train sets that it ordered and which were built in Milwaukee.

The $66 million claim was filed on Thursday with the Wisconsin Claims Board and alleges that Republican Gov. Scott Walker acted in bad faith.

The claim is likely to lead to litigation and revive discussion about Walker’s controversial decision shortly after he took office in early 2011 to turn down a $810 million federal grant to pay to upgrade Amtrak’s Chicago-Milwaukee Hiawatha Service corridor to higher speed rail as well as conduct development work for Milwaukee-Madison service. Eventually, the Madison route was expected to be extended to Minneapolis and St. Paul, Minn.

A spokeswoman for the state Department of Justice declined to comment, but Republican Assembly Speaker Robin Vos said the state did nothing wrong in backing out of the deal with Talgo.

“My understanding is we followed all the rules that were required,” Vos said. “There were no bad faith negotiations.”

Vos said that the Talgo contract included a provision voiding the deal if lawmakers didn’t provide money for the trains in the state budget. He said Republicans used that clause and refused to hand over the remaining money for what they saw as a bad deal. “There’s an ‘out’ in the contract,” Vos said.

However, Talgo’s claim asserts that the state improperly invoked that provision. “Wisconsin’s purported funding shortfall was deliberately staged by Gov. Walker and the DOT in an effort to evade the state’s contractual commitments to Talgo,” the claims states.

If the Claims Board agrees with Talgo, the Republican-controlled legislature and Walker would also have to sign off on the decision, which observers say is unlikely to happen. If Talgo’s claim is rejected, the Seattle-based company could sue the state.
Wisconsin signed a deal in 2009 with then-Gov. Jim Doyle, a Democrat, to purchase at least two train sets from Talgo.

The train sets were to be assigned to Amtrak’s Hiawatha service and later used on the Madison route.

The state also agreed to a 20-year maintenance agreement to service the trains. That pact also included a maintenance facility and the option to purchase two additional train sets.
Walker made no effort to hide his disdain for the rail project during his 2010 campaign.
Nonetheless, Talgo continued to build the trains after Walker took office and notified the state in January 2012 the train sets were ready for delivery.

The Wisconsin Department of Transportation refused to accept them. After an unsuccessful attempt at mediation in November 2012, Talgo filed a lawsuit in Dane County Circuit Court, asking Judge Juan Colas to declare that Talgo had the right to terminate the contract and take ownership of the train sets, which have sat in storage since their completion.

Talgo’s latest claim is in addition to the lawsuit that it filed in November 2012.

If it prevails in its 2012 lawsuit, Talgo would keep the train sets and the $42 million the state has paid for them. Talgo says it is owed another $10 million on top of what it has already been paid. If Talgo is able to keep the train sets, it will sell them to another state, the company’s attorney said.

In its $65.9 million claim filing with the Claims Board, Talgo also argues that Wisconsin owes bond holders an additional $70 million because it borrowed that much for the two mothballed train sets but never took possession of them.

“If the Talgo’s reasoning is correct, taxpayers would have to pay Talgo $65.9 million and immediately refund $70 million to bond holders rather than paying that sum off over the coming years,” wrote Patrick Marley in the Milwaukee Journal Sentinel.

“The state, acting through the DOT, bears the responsibility for its lack of any attempt to negotiate prior to termination,” the claim says.

The transportation department has not had a chance to review the complaint, says agency spokeswoman Peg Schmitt, adding that it has worked to honor terms of the original contract.

Talgo’s $65.9 million claim includes $18.6 million in unpaid invoices and interest, $23.5 million in lost business, $10.5 million in damage caused by state officials “continually defaming” Talgo’s reputation, and $9.8 million in lost maintenance work. The remainder covers an array of other costs, such as for insurance and legal work.

Part of the dispute revolves around whether the state or Talgo is responsible for the cost to test the trains. Talgo maintains the state invented the disagreement over testing as a ruse to claim a breach in the contract.

Its filing includes an email from Transportation Secretary Mark Gottlieb to Walker’s office in February 2011 discussing attempts to sell the trains to other states.

Talgo’s claim contends the Wisconsin DOT recognized that it needed to pay for testing—and tried to come up with a way to pay for it without seeking more money from the legislature. WisDOT proposed advancing money to Talgo under its maintenance agreement so the firm could use the funds to pay for testing. That way it appeared Talgo, rather than the state, was paying for testing.

WisDOT spokeswoman Peg Schmitt said in a statement the state incurred $52 million in costs—most of which has gone to Talgo—for the trains. The trains have not been turned over to the state, do not meet specifications, and are not compliant with the federal Americans with Disabilities Act, Schmitt said. ‘We’re waiting for delivery of completed trains that will provide the state with ownership of an asset for which public dollars were used,” Schmitt said in her statement.