Talgo to keep Wisconsin trains, get $10 million more in settlement

From the Milwaukee Journal Sentinel:

A new Wisconsin train from Talgo sat on the track at the Milwaukee manufacturing facility where trains are assembled in 2012. The Talgo trains left the state last year.
A new Wisconsin train from Talgo sat on the track at the Milwaukee manufacturing facility where trains are assembled in 2012. The Talgo trains left the state last year.

Wisconsin taxpayers will end up paying $9.7 million more for two state of the art train sets — for a total of roughly $50 million — but leave the trains with their Spanish manufacturer, under the settlement of a nearly 3-year-old lawsuit.

The settlement, which still needs to be approved in court, ends a political saga going back half a decade.

The bizarre and expensive outcome for Wisconsin — paying for a product but not keeping it or ever using it — reflects the depth of the political disagreement in which Democratic Gov. Jim Doyle signed, and then GOP presidential candidate and Gov. Scott Walker nixed, a no-bid contract with Talgo Inc. for trains from Madison to Milwaukee and then on to Chicago

The manufacturer ended up suing Walker and Transportation Secretary Mark Gottlieb seeking a clean title to the trains — and also sought an additional $10 million as a final payment on them — and has reached a settlement that largely achieves that, said Lester Pines, an attorney for Talgo. If the manufacturer is able to sell the trains, it will return 30% of the net proceeds of the sale, up to a limit of $9.7 million, to Wisconsin.

Spokespersons for the Walker administration and the state Department of Justice did not respond to requests for comment late Wednesday. But Pines confirmed details of the settlement and provided a copy of a stipulation in the case that was signed Wednesday by both sides and that will be filed in Dane County Circuit Court on Thursday.

“(Talgo) didn’t like this litigation and it’s happy it’s over,” Pines said. “They’re not in the business of suing people.”

Under Doyle and a Democratically held Legislature, the state agreed in 2009 to a no-bid contract to buy two new train sets from Talgo Inc. for Amtrak’s Hiawatha line, which runs from Milwaukee to Chicago, for $47.5 million as well as additional trains for a proposed Madison to Milwaukee line.

Talgo, a Spanish company with U.S. headquarters in Seattle, was paid $42.2 million for the trains before the lawsuit, according to the state Department of Transportation. The state expended millions of dollars more for a temporary maintenance base and planning for a permanent base, spare parts and consulting fees.

The payments were made using bonds, with taxpayers ultimately on the hook for those expenditures.

Wisconsin won an $810 million federal stimulus grant to build a high-speed rail from Milwaukee to Madison, but the federal government revoked the award after Walker won election in 2010 on a promise to stop the train.

The lawsuit, however, centers on the trains for the Milwaukee-Chicago line and is not related to the abandoned Milwaukee-Madison line, since the state canceled its order for those Talgo trains before work on them started. The State of Wisconsin has sovereign immunity, meaning it can only be sued for failing to pay up on a contract in cases in which the agreed item has been delivered or had work started, Pines said.

The problem with the trains for the Hiawatha was exacerbated for two reasons, Pines said.

First, Talgo had priced the train sets lower to account for a 20-year maintenance contract on the trains that the state also broke. Second, the Walker administration and GOP lawmakers waited more than a year to go back on the state’s order with Talgo for the Milwaukee-Chicago train sets, allowing the company’s work on the trains to progress even further, Pines said.

“The state signed contracts with Talgo and then absolutely walked away from that,” Pines said.

In March 2012, Republicans on the Legislature’s Joint Finance Committee ignored the objections of the Walker administration and voted 12-4 on party lines to reject borrowing $2.5 million for additional planning to replace a maintenance base for the Talgo trains. At the time, Walker’s Department of Transportation said that vote meant the state would not be able to put the trains into service. GOP lawmakers rejected the maintenance base anyway, saying they believed the state could save money by sticking with the existing Hiawatha trains.

Assembly Speaker Robin Vos (R-Rochester), a co-chairman of the Joint Finance Committee at the time, said Wednesday that he hadn’t seen the settlement or talked with GOP Attorney General Brad Schimel about it. Vos said that he believed at the time that the state had protections against legal action and that the blame for the outcome ultimately rested on actions by Doyle and the previous Legislature.

“This is just another reminder of the dark days of Jim Doyle,” Vos said.

At the time, however, then state Rep. Jon Richards (D-Milwaukee), an attorney and budget committee member, said the Joint Finance action was inviting a lawsuit for breach of contract and was “completely foolhardy and irresponsible.”

Source: http://www.jsonline.com/news/wisconsin/talgo-to-keep-trains-get-10-million-more-in-settlement-b99560687z1-322348321.html