1031-00002 · Metropolitan Transit Development Corp · Correspondence

client-advisory-letter-grant-rescission.docx DOCUMENT M&A / Corporate

2 / 12 ← → ✕

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP Attorneys at Law

70 West Madison Street, Suite 5000 Chicago, Illinois 60602 Telephone: (312) 555-7800 Facsimile: (312) 555-7801 www.calderwoodharkness.com

June 15, 2023

Constance M. Adler, Esq. General Counsel Metropolitan Transit Development Corporation 200 West Adams Street, Suite 2400 Chicago, Illinois 60606

Re: FTA Grant Rescission — Grant No. IL-2023-0067-00; ICC Docket No. 23-0214; Recommended Withdrawal of Verified Petition C&H Matter No. 1031-00002

Dear Constance:

I. Purpose of Letter

We write to advise the Metropolitan Transit Development Corporation ("MTDC") regarding the legal and practical consequences of the Federal Transit Administration's ("FTA") rescission of Grant No. IL-2023-0067-00, in the amount of Seventy-Eight Million Five Hundred Thousand Dollars ($78,500,000), as communicated to MTDC by formal Notice of Grant Rescission dated June 12, 2023. As you are aware, Calderwood & Harkness LLP ("C&H" or the "Firm") serves as outside regulatory counsel to MTDC in connection with the proceeding before the Illinois Commerce Commission ("ICC") docketed as ICC Docket No. 23-0214. This letter sets forth our analysis of the current circumstances and our recommendation that MTDC authorize the filing of a Motion to Withdraw the Verified Petition for Approval of Electrification Infrastructure and Interconnection (the "Verified Petition") without prejudice.

This letter has been prepared following, and reflects the outcome of, the MTDC Board of Directors' emergency session held on June 14, 2023, at which the Board voted seven to two (7-2) to authorize the withdrawal of the ICC application. We understand that you participated in that session in your capacity as General Counsel and are therefore familiar with the Board's deliberation and its directive. The purpose of this letter is to memorialize the basis for our recommendation, to describe the procedural steps required to effectuate the withdrawal, and to address certain ancillary matters relating to the preservation of MTDC's rights, work product, and relationships with advisors and counterparties.

II. Background and Procedural History

To place our recommendation in its proper context, we summarize below the relevant background concerning the FTA grant, the scope of the electrification project, and the ICC regulatory proceeding.

A. The FTA Grant and Project Scope

On January 9, 2023, the FTA issued a Notice of Award under the Low- and No-Emission Vehicle Program, authorized pursuant to 49 U.S.C. § 5339(c), awarding MTDC the sum of $78,500,000 under Grant No. IL-2023-0067-00 (the "Grant"). The Grant constituted eighty percent (80%) of the total estimated project cost of $98,125,000, with MTDC's required local match set at $19,625,000, representing the remaining twenty percent (20%) of total project cost, consistent with the standard federal-local cost-sharing ratio applicable to awards under the Low- and No-Emission Vehicle Program.

The scope of the project funded by the Grant (the "Phase 1 Project" or the "Project") encompassed two principal components:

(a) Bus Procurement. The procurement of two hundred twenty-five (225) battery-electric transit buses at an estimated cost of $71,800,000; and

(b) Depot Charging Infrastructure. The design, engineering, procurement, and installation of high-capacity depot charging infrastructure at three MTDC bus garages at an estimated cost of $26,325,000.

The three depot locations, together with their respective planned electrical capacity additions, are as follows:

The combined new electrical load of 45 megawatts represents a substantial addition to the regional distribution grid and necessitated the ICC regulatory filing discussed below.

The Phase 1 Project served as the primary funding mechanism and operational backbone for Phase 1 of MTDC's 2021 Strategic Sustainability Plan, which established the goal of converting forty percent (40%) of the transit authority's 1,840-bus revenue fleet to battery-electric propulsion by 2030. The loss of the Grant therefore affects not only the immediate Project but also MTDC's broader strategic electrification timeline.

B. The ICC Regulatory Proceeding

Calderwood & Harkness's engagement on behalf of MTDC was formalized on February 20, 2023, under C&H Matter No. 1031-00002. The engagement was established for the purpose of preparing and prosecuting the requisite regulatory filing before the ICC in connection with the Phase 1 Project's electrical interconnection and power-purchase requirements.

On March 1, 2023, C&H filed the Verified Petition on behalf of MTDC with the ICC, initiating the proceeding now docketed as ICC Docket No. 23-0214. The Verified Petition was verified by MTDC's Executive Director, Harold J. Greenway, and sought ICC approval for two principal components:

(i) authorization for MTDC to interconnect the new high-capacity charging infrastructure at the three depot locations to the regional electric grid operated by Prairie Shore Electric Company ("Prairie Shore"); and

(ii) approval for MTDC to enter into a long-term power-purchase arrangement with Prairie Shore under a proposed rate schedule designated as Schedule EV-T, which provided for a blended rate of $0.062 per kilowatt-hour.

The Schedule EV-T tariff was specifically designed to address the unique load characteristics associated with overnight depot charging of a large battery-electric bus fleet, including the predictable and largely off-peak demand profile, the significant aggregate load, and the long-term commitment period that would justify Prairie Shore's distribution infrastructure investments.

Following the filing, the proceeding attracted the participation of two intervenors:

Prairie Shore Electric Company. Prairie Shore, as the incumbent electric distribution utility serving the territories in which the three depot locations are situated, filed a Petition to Intervene on March 15, 2023. That petition was granted by Administrative Law Judge Hon. Marcus P. Lindquist on March 22, 2023. Prairie Shore is represented in the proceeding by the law firm of Hargrove, Peck & Tillotson LLP, with Andrew S. Peck, Esq. serving as lead attorney.

Clean Air Transit Alliance. The Clean Air Transit Alliance ("CATA"), a nonprofit advocacy organization, filed its Petition to Intervene on March 20, 2023, in the capacity of a supportive intervenor. CATA's petition was granted on March 27, 2023. CATA is represented by the law firm of Rosenberg & Dietrich LLP, with Diane L. Rosenberg, Esq. serving as lead attorney.

The proceeding has been presided over by Administrative Law Judge Hon. Marcus P. Lindquist. ICC Staff Counsel for the proceeding is Ellen R. Dempsey, Esq.

Since the filing of the Verified Petition, the proceeding has progressed through several procedural milestones:

• Status conferences were held on April 5, 2023 and May 10, 2023, at which the parties established a procedural schedule and addressed preliminary matters relating to discovery and the scope of testimony.

• On May 15, 2023, the ICC Staff filed its Staff Report, which addressed the engineering, financial, and rate-design aspects of the proposed interconnection and power-purchase arrangement.

• MTDC submitted the pre-filed direct testimony of Raymond K. Mosley, Director of Capital Programs, which detailed the technical specifications of the charging infrastructure, the projected energy consumption, the deployment timeline, and the financial underpinnings of the Phase 1 Project.

• MTDC and Prairie Shore engaged in arms-length negotiations toward a draft Infrastructure Cost-Sharing Agreement (the "Cost-Sharing Agreement"), which was intended to allocate between the parties the costs of necessary distribution system upgrades to accommodate the 45 MW of new load. The total estimated distribution upgrade cost was $12,300,000, with the proposed allocation being sixty percent (60%) to MTDC ($7,380,000) and forty percent (40%) to Prairie Shore ($4,920,000). That agreement was not executed prior to the FTA's rescission action and remained in draft form.

An evidentiary hearing before ALJ Lindquist was scheduled for June 28, 2023, at which the pre-filed testimony of Mr. Mosley and other witnesses would have been subject to cross-examination, and the parties would have had the opportunity to present additional evidence in support of their respective positions.

III. FTA Grant Rescission — Events and Legal Effect

A. Congressional Funding Lapse

On June 8, 2023, the congressional continuing resolution that had provided interim authority for certain categories of federal discretionary spending, including transit capital funding under the FTA's competitive grant programs, expired without the enactment of a successor appropriations measure or a further continuing resolution. The lapse of the continuing resolution rendered the prior appropriation unavailable for new obligations and, pursuant to established FTA policy, triggered a review of outstanding grant awards that had not yet reached the point of irrevocable obligation.

On June 12, 2023, the FTA issued a formal Notice of Grant Rescission to MTDC for Grant No. IL-2023-0067-00, citing the lapse of appropriated funds as the basis for the rescission. The Notice was transmitted by Karen L. Osterman, Regional Administrator, FTA Region V. The rescission eliminates the entirety of the $78,500,000 in federal funding awarded to MTDC under the Grant, which, as noted above, constituted eighty percent (80%) of the total $98,125,000 Phase 1 Project cost.

We note that the rescission was not the result of any deficiency in MTDC's grant application, any failure of MTDC to comply with FTA requirements, or any performance-related issue. Rather, the rescission was a consequence of the broader congressional funding lapse and affects numerous FTA grantees nationwide. This is relevant both as a matter of public record and because it underscores that MTDC's eligibility for future funding under the Low- and No-Emission Vehicle Program or similar programs should not be impaired by the rescission.

B. Impact on the ICC Proceeding

The rescission of the Grant has direct and material consequences for the ICC proceeding in Docket No. 23-0214, which we summarize as follows:

Financial Predicate. The Verified Petition was predicated in its entirety on the availability of the FTA Grant to fund the Phase 1 Project. The financial representations, projections, and supporting documentation submitted to the ICC were all prepared on the assumption that $78,500,000 in federal funding would be available. Without the Grant, MTDC lacks the financial capacity to proceed with the $98,125,000 Project as currently structured. MTDC's required local match of $19,625,000 was calibrated to complement the Grant, and MTDC does not have access to alternative funding in the amount of $78,500,000 to replace the rescinded federal contribution.

Cost-Sharing Agreement. The draft Infrastructure Cost-Sharing Agreement between MTDC and Prairie Shore contained a condition precedent requiring the continued availability of the FTA Grant. With the Grant rescinded, that condition cannot be satisfied, and the Cost-Sharing Agreement—even had it been executed—would not have become effective. Since the agreement was never executed, no contractual obligations arise from its terms.

Schedule EV-T Tariff. The proposed Schedule EV-T tariff was designed around the specific load profile, deployment timeline, and energy consumption projections contemplated by the Grant-funded Phase 1 Project. The estimated annual energy consumption of 39,420 megawatt-hours per year (MWh/yr) and the estimated annual energy cost of $2,444,040 per year were predicated on the full deployment of 225 battery-electric buses and the 45 MW charging infrastructure. In the absence of the Project, these projections are no longer operative, and the Schedule EV-T tariff as proposed has no factual basis.

Substantive and Procedural Supportability. Proceeding with the ICC application absent the underlying project funding would be procedurally and substantively unsupportable. The Commission's review of the Verified Petition necessarily requires a demonstration of project feasibility, including financial feasibility. A petition premised on a $78,500,000 federal grant that no longer exists cannot satisfy that standard. Continuing the proceeding under such circumstances would expose MTDC to unnecessary costs, could result in adverse credibility findings, and could potentially prejudice future filings.

C. MTDC Board Action

On June 14, 2023, the MTDC Board of Directors convened an emergency session to address the consequences of the FTA's grant rescission. Board Chair Alderman Vivian Ochoa-Brennan presided over the session. Following a presentation by MTDC staff and a discussion of the options available to the transit authority, the Board voted seven to two (7-2) to authorize the withdrawal of the ICC application in Docket No. 23-0214.

This vote constitutes the requisite corporate authority under MTDC's governing instruments for MTDC to direct its outside regulatory counsel to file a Motion to Withdraw the Verified Petition. The Board's action is the predicate for the authorization that we request in Section IX of this letter.

IV. Analysis of Available Options

We have considered three potential courses of action available to MTDC in light of the Grant rescission. We analyze each below and set forth our recommendation.

A. Option 1: Withdraw Verified Petition Without Prejudice (Recommended)

Under this option, C&H would file a Motion to Withdraw the Verified Petition in ICC Docket No. 23-0214 without prejudice, and would request that ALJ Lindquist vacate the June 28, 2023 evidentiary hearing date and close the docket.

We recommend this course of action for the following reasons:

(i) Preservation of Rights. A withdrawal without prejudice preserves MTDC's right to refile a petition concerning the same or substantially similar subject matter in the event that federal funding is restored through a new congressional appropriation, or in the event that MTDC identifies alternative financing sufficient to support the Phase 1 Project or a revised version thereof. This is a critical advantage, as it leaves the door open for MTDC to resume its electrification initiative without having to overcome any prior adverse determination.

(ii) Avoidance of Unnecessary Costs. Withdrawal at this juncture avoids the continued incurrence of legal fees, consulting fees, and internal staff time on a regulatory proceeding that cannot, under present circumstances, proceed to a favorable outcome. The evidentiary hearing scheduled for June 28, 2023 would require substantial preparation by C&H, MTDC's witnesses, and MTDC's engineering and financial consultants—preparation that would be entirely wasted if the Petition must ultimately be withdrawn in any event.

(iii) Avoidance of Adverse Determination. Continuing with the proceeding in the absence of a viable financial plan could expose MTDC to an adverse determination or dismissal on the merits. An adverse finding regarding financial feasibility could, depending on its scope and reasoning, create complications for any future filing.

(iv) No Prejudice to Intervenors. Neither Prairie Shore nor CATA would be prejudiced by a voluntary withdrawal without prejudice at this stage. Prairie Shore has not yet made significant irreversible investments based on the proceeding, and CATA, as a supportive intervenor, would be expected to understand and support MTDC's position.

(v) Orderly Conclusion. A voluntary withdrawal is consistent with ICC procedural rules and represents an orderly conclusion to the proceeding that respects the time and resources of the Commission, the ALJ, ICC Staff, and all parties of record.

Based on our experience with the ICC and our informal assessment of the circumstances, C&H does not anticipate opposition from either Prairie Shore or CATA to a motion to withdraw without prejudice, given the well-documented basis for the withdrawal. Similarly, ICC Staff is unlikely to object to a voluntary withdrawal under these facts, particularly where the withdrawal is supported by a clear factual basis (the loss of the federal funding that was the predicate for the entire proceeding) and the explicit authorization of MTDC's governing board.

B. Option 2: Seek a Stay of Proceedings

Under this option, MTDC would request that ALJ Lindquist stay the proceedings in Docket No. 23-0214 pending potential congressional reauthorization of the FTA funding that was the subject of the rescission.

We do not recommend this option for the following reasons:

(i) Uncertain Timeline. There is no concrete indication of when, or whether, Congress will act to restore the lapsed funding. Congressional appropriations timelines are inherently unpredictable, and tying MTDC's regulatory strategy to an uncertain congressional calendar creates an open-ended commitment of uncertain duration.

(ii) Likelihood of Denial. The ICC may not grant an indefinite stay, particularly where the basis for the stay is speculative. ALJ Lindquist would be within his discretion to deny a motion for stay or to grant only a limited stay with conditions, after which MTDC would face the same choice between withdrawal and proceeding on an unsupported petition.

(iii) Continued Costs. Keeping the docket open, even on a stayed basis, would require periodic status reports, attendance at status conferences, continued engagement of counsel and consultants, and ongoing attention by MTDC's internal legal and capital programs staff. These costs, while lower than the costs of full-scale litigation, are nonetheless significant and would be incurred without any assurance of a productive outcome.

(iv) Ultimate Outcome. If funding is not restored within a timeframe acceptable to the ICC, MTDC would ultimately need to withdraw the Petition or face dismissal—arriving at the same destination as Option 1 but having incurred additional costs and delay in the interim.

For these reasons, we do not recommend seeking a stay of proceedings at this time.

C. Option 3: Proceed with the Application on Alternative Funding

Under this option, MTDC would continue the ICC proceeding and seek alternative funding sources to replace the rescinded FTA Grant.

We do not recommend this option for the following reasons:

(i) No Identified Alternative Funding. As of the date of this letter, no alternative funding source has been identified that could replace the $78,500,000 in rescinded federal funding. While MTDC's FY 2023 operating budget is approximately $1,420,000,000, the transit authority's capital budget does not have unallocated capacity sufficient to absorb a project of this magnitude without displacing other critical capital needs.

(ii) Credibility Risk. Proceeding with the ICC application absent a credible financial plan would expose MTDC to adverse credibility findings before the Commission. The ICC expects petitioners to demonstrate the financial feasibility of proposed projects, and advancing a petition supported by a $78,500,000 grant that no longer exists—without a replacement funding plan—would undermine MTDC's credibility not only in the current proceeding but potentially in future filings as well.

(iii) Substantial Amendment Required. Proceeding on an alternative funding basis would require substantial amendment of the Verified Petition, the pre-filed testimony, the financial exhibits, the draft Cost-Sharing Agreement, and the proposed Schedule EV-T tariff, all of which were prepared on the assumption of FTA Grant funding. The scope of the required amendments would be so extensive as to constitute, in practical effect, a new filing. It would be more efficient and procedurally sound to withdraw the current Petition and prepare a new filing if and when alternative funding is identified.

For these reasons, we do not recommend proceeding with the application on the basis of alternative funding at this time. Should MTDC identify a viable alternative funding source in the future, C&H stands ready to assist with the preparation and filing of a new petition.

V. Procedural Mechanics of Withdrawal

Assuming MTDC authorizes the recommended course of action, C&H will proceed as follows:

1. Preparation of Motion. C&H will prepare and file a Motion to Withdraw Verified Petition Without Prejudice in ICC Docket No. 23-0214 (the "Motion to Withdraw"). Draft versions of the Motion and the accompanying proposed order are enclosed with this letter for your review. We welcome any comments or revisions you may wish to suggest prior to the filing.

2. Proposed Order. The Motion to Withdraw will be accompanied by a Proposed Order Granting Withdrawal Without Prejudice for ALJ Lindquist's consideration. The Proposed Order will provide for the withdrawal of the Verified Petition without prejudice to MTDC's right to refile, the vacation of the June 28, 2023 evidentiary hearing date, and the closure of ICC Docket No. 23-0214.

3. Grounds for Withdrawal. The Motion will set forth the grounds for withdrawal, including the FTA's rescission of Grant No. IL-2023-0067-00, the resulting lapse of project funding, and the MTDC Board of Directors' June 14, 2023 vote authorizing the withdrawal.

4. Service on Parties. Service of the Motion and Proposed Order will be made on all parties of record in accordance with ICC procedural rules, including: (a) ICC Staff Counsel Ellen R. Dempsey, Esq.; (b) Hargrove, Peck & Tillotson LLP, as counsel for Prairie Shore Electric Company (Attn: Andrew S. Peck, Esq.); and (c) Rosenberg & Dietrich LLP, as counsel for the Clean Air Transit Alliance (Attn: Diane L. Rosenberg, Esq.).

5. Filing Date. Our target filing date for the Motion to Withdraw is June 19, 2023. This target is intended to allow sufficient time before the currently scheduled June 28, 2023 evidentiary hearing date for ALJ Lindquist to act on the Motion and, if the Motion is granted, to vacate the hearing date in an orderly fashion. To achieve this target, we will need to receive MTDC's formal written authorization no later than June 17, 2023, as discussed in Section IX below.

6. Anticipated Ruling. We anticipate that ALJ Lindquist will rule promptly on the Motion given the approaching evidentiary hearing date and the clear factual basis for the withdrawal. As noted above, we do not anticipate opposition from any party of record.

VI. Preservation of MTDC's Rights and Work Product

A critical advantage of the recommended withdrawal without prejudice is the preservation of MTDC's right to refile a petition concerning the same or substantially similar subject matter at a future date, should federal funding be restored through a new congressional appropriation or should alternative financing be identified. This right is preserved by operation of the "without prejudice" designation in the withdrawal order, which ensures that the ICC's closure of the docket carries no preclusive effect.

All work product developed in connection with the ICC filing will be preserved by both MTDC and C&H and can be adapted for use in a future filing. This work product includes, but is not limited to:

• The Verified Petition for Approval of Electrification Infrastructure and Interconnection, as filed;

• The pre-filed direct testimony of Raymond K. Mosley, Director of Capital Programs;

• The interconnection study prepared by Creston Engineering Group, Inc.;

• The rate-impact analysis prepared by Dralvecen Reade & Co.;

• The draft Infrastructure Cost-Sharing Agreement between MTDC and Prairie Shore;

• The draft Schedule EV-T Term Sheet;

• All discovery materials exchanged in the proceeding; and

• Internal memoranda, research, and legal analysis prepared by C&H in connection with the matter.

C&H will maintain all matter files in accordance with the Firm's document retention policies, which provide for the retention of closed-matter files for a minimum of ten (10) years from the date of matter closure. MTDC should likewise ensure that its internal files relating to the Project and the ICC proceeding are preserved in accordance with MTDC's own record retention policies.

We note that any future refiling would likely require updated financial data, revised engineering assessments reflecting any changes in technology or costs, updated load projections, and potentially a new FTA grant award number and terms (if refiling is predicated on a new federal grant). Nevertheless, the substantial body of analytical, engineering, and legal work that has been completed to date will provide a significant head start in any future proceeding, reducing both the time and cost required to bring a new petition to the filing stage.

VII. Impact on Related Agreements and Advisors

The Grant rescission and the recommended withdrawal of the ICC Petition have implications for several of MTDC's contractual relationships and advisory engagements in connection with the Phase 1 Project. We address these below.

Draft Infrastructure Cost-Sharing Agreement — Prairie Shore Electric Company. As noted in Section II.B above, the draft Cost-Sharing Agreement between MTDC and Prairie Shore was never executed. Accordingly, no contractual obligations arise from that draft, and neither party has any enforceable rights or obligations thereunder. No formal notification to Prairie Shore regarding the Cost-Sharing Agreement is required, although Prairie Shore will, of course, be served with the Motion to Withdraw and will thereby be informed of the withdrawal and its basis.

Creston Engineering Group, Inc. Creston Engineering Group, Inc. (EIN 36-7892104), the engineering consultant retained by MTDC to prepare the interconnection study, should be notified of the Project suspension. The engagement was led by Martin J. Sadowski, P.E. MTDC's in-house team should review the engagement agreement with Creston Engineering for applicable termination provisions, including any termination-for-convenience clauses, notice periods, and obligations regarding payment for work performed to date. Any outstanding invoices from Creston Engineering should be identified and processed in accordance with the terms of the engagement.

Dralvecen Reade & Co. Dralvecen Reade & Co. (EIN 36-6543298), the financial advisory firm retained by MTDC to prepare the rate-impact analysis, should similarly be notified of the Project suspension. The engagement was led by Lisa M. Quayle, CFA. As with Creston Engineering, MTDC should review the engagement agreement with Dralvecen Reade for termination provisions and address any outstanding invoices.

Fielding & Calloway CPAs, LLC. Fielding & Calloway CPAs, LLC, MTDC's independent auditors (engagement partner Douglas H. Fielding, CPA), require no immediate action in connection with the withdrawal. However, any Grant-related audit work that has been performed or commenced should be documented and preserved, both for MTDC's internal records and in the event that any future FTA audit or close-out requirements arise in connection with the rescinded Grant.

We recommend that MTDC's General Counsel coordinate with the Chief Financial Officer regarding the consultant and advisor notifications and any associated contractual matters.

VIII. Engagement and Billing Status

For your reference, we provide the following summary of the engagement and billing status for C&H Matter No. 1031-00002.

The C&H engagement was subject to a capped fee of $385,000 for the regulatory proceeding through final order. This fee cap was established at the outset of the engagement and was intended to cover all professional services rendered by C&H through the conclusion of the ICC proceeding, including preparation and filing of the Verified Petition, prosecution of the proceeding through evidentiary hearing, preparation of post-hearing briefs, and attendance at oral argument, if required.

Upon the filing and granting of the Motion to Withdraw, C&H will render a final invoice for the matter. We are pleased to report that fees billed to date are substantially below the fee cap, reflecting the early-stage termination of the proceeding relative to the originally anticipated scope of work.

C&H will provide a final statement of fees and disbursements upon formal matter closure. For your reference, the hourly rates for the members of the C&H engagement team are as follows:

We anticipate that the work required to prepare and file the Motion to Withdraw, attend to the procedural formalities of the withdrawal, and close the matter will be modest and will be reflected in the final invoice.

IX. Request for Authorization

In light of the foregoing analysis and our recommendation that MTDC proceed with the withdrawal of the Verified Petition without prejudice, C&H respectfully requests that MTDC, through its General Counsel, provide formal written authorization directing C&H to file the Motion to Withdraw Verified Petition Without Prejudice in ICC Docket No. 23-0214.

We request that such authorization be provided no later than Saturday, June 17, 2023, in order to permit C&H to finalize and file the Motion by the target filing date of June 19, 2023. As discussed above, filing by that date is important to allow sufficient time for ALJ Lindquist to act on the Motion before the currently scheduled June 28, 2023 evidentiary hearing date.

Authorization may be transmitted via email to the undersigned at pdunmore@calderwoodharkness.com, with a copy to David Stanton at dstanton@calderwoodharkness.com. A brief email from you confirming MTDC's direction to proceed will be sufficient; no particular form is required.

We note that the MTDC Board of Directors' June 14, 2023 vote (7-2) provides the necessary corporate authority for the withdrawal. This letter requests the formal directive from MTDC's General Counsel, as the designated point of contact between MTDC and its outside counsel, to act on that authority and proceed with the filing.

X. Conclusion

We sincerely regret the circumstances that have necessitated the interruption of the Phase 1 electrification project, which represents a critical component of MTDC's sustainability mission and service to the public. The loss of the FTA Grant is a consequence of factors entirely outside MTDC's control, and MTDC's diligent efforts to advance this project through the regulatory process are well documented in the ICC record.

We remain firmly of the view that withdrawal of the Verified Petition without prejudice is the most prudent course of action available to MTDC under the present circumstances. This approach protects MTDC's interests, preserves its rights, minimizes unnecessary expenditure, and positions the transit authority to move promptly if and when federal funding is restored or alternative financing is secured.

Calderwood & Harkness remains available to assist MTDC with any future refiling before the ICC should the opportunity to resume the Phase 1 Project arise. We would welcome the chance to work with MTDC's team once again to bring this important initiative to fruition.

Please do not hesitate to contact me or David Stanton if you wish to discuss the contents of this letter or any related matter. I can be reached directly at (312) 555-7814 or pdunmore@calderwoodharkness.com. David can be reached at (312) 555-7832 or dstanton@calderwoodharkness.com.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Patricia Dunmore Partner

70 West Madison Street, Suite 5000 Chicago, Illinois 60602 Tel: (312) 555-7814

Email: pdunmore@calderwoodharkness.com

cc: Harold J. Greenway, Executive Director, Metropolitan Transit Development Corporation Sandra R. Pellegrino, Chief Financial Officer, Metropolitan Transit Development Corporation Raymond K. Mosley, Director of Capital Programs, Metropolitan Transit Development Corporation George Trujillo, Billing Partner, Calderwood & Harkness LLP David Stanton, Lead Associate, Calderwood & Harkness LLP

Enclosures:

1. Draft Motion to Withdraw Verified Petition Without Prejudice

2. Draft Proposed Order Granting Withdrawal Without Prejudice

Depot Location	Address	Planned New Load Capacity
North Garage	4501 West Lawrence Avenue, Chicago, IL 60630	18 MW
West Garage	1200 South Cicero Avenue, Chicago, IL 60804	15 MW
South Garage	7800 South Vincennes Avenue, Chicago, IL 60620	12 MW
Combined New Load	45 MW
Attorney	Role	Hourly Rate
Patricia Dunmore	Engagement Partner	$1,050/hr
George Trujillo	Billing Partner	$985/hr
David Stanton	Lead Associate	$625/hr
Michelle Tsao	Junior Associate	$495/hr

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP Attorneys at Law
70 West Madison Street, Suite 5000 Chicago, Illinois 60602 Telephone: (312) 555-7800 Facsimile: (312) 555-7801 www.calderwoodharkness.com
June 15, 2023
Constance M. Adler, Esq. General Counsel Metropolitan Transit Development Corporation 200 West Adams Street, Suite 2400 Chicago, Illinois 60606
Re: FTA Grant Rescission — Grant No. IL-2023-0067-00; ICC Docket No. 23-0214; Recommended Withdrawal of Verified Petition C&H Matter No. 1031-00002
Dear Constance:
I. Purpose of Letter
We write to advise the Metropolitan Transit Development Corporation ("MTDC") regarding the legal and practical consequences of the Federal Transit Administration's ("FTA") rescission of Grant No. IL-2023-0067-00, in the amount of Seventy-Eight Million Five Hundred Thousand Dollars ($78,500,000), as communicated to MTDC by formal Notice of Grant Rescission dated June 12, 2023. As you are aware, Calderwood & Harkness LLP ("C&H" or the "Firm") serves as outside regulatory counsel to MTDC in connection with the proceeding before the Illinois Commerce Commission ("ICC") docketed as ICC Docket No. 23-0214. This letter sets forth our analysis of the current circumstances and our recommendation that MTDC authorize the filing of a Motion to Withdraw the Verified Petition for Approval of Electrification Infrastructure and Interconnection (the "Verified Petition") without prejudice.
This letter has been prepared following, and reflects the outcome of, the MTDC Board of Directors' emergency session held on June 14, 2023, at which the Board voted seven to two (7-2) to authorize the withdrawal of the ICC application. We understand that you participated in that session in your capacity as General Counsel and are therefore familiar with the Board's deliberation and its directive. The purpose of this letter is to memorialize the basis for our recommendation, to describe the procedural steps required to effectuate the withdrawal, and to address certain ancillary matters relating to the preservation of MTDC's rights, work product, and relationships with advisors and counterparties.
II. Background and Procedural History
To place our recommendation in its proper context, we summarize below the relevant background concerning the FTA grant, the scope of the electrification project, and the ICC regulatory proceeding.
A. The FTA Grant and Project Scope
On January 9, 2023, the FTA issued a Notice of Award under the Low- and No-Emission Vehicle Program, authorized pursuant to 49 U.S.C. § 5339(c), awarding MTDC the sum of $78,500,000 under Grant No. IL-2023-0067-00 (the "Grant"). The Grant constituted eighty percent (80%) of the total estimated project cost of $98,125,000, with MTDC's required local match set at $19,625,000, representing the remaining twenty percent (20%) of total project cost, consistent with the standard federal-local cost-sharing ratio applicable to awards under the Low- and No-Emission Vehicle Program.
The scope of the project funded by the Grant (the "Phase 1 Project" or the "Project") encompassed two principal components:
(a) Bus Procurement. The procurement of two hundred twenty-five (225) battery-electric transit buses at an estimated cost of $71,800,000; and
(b) Depot Charging Infrastructure. The design, engineering, procurement, and installation of high-capacity depot charging infrastructure at three MTDC bus garages at an estimated cost of $26,325,000.
The three depot locations, together with their respective planned electrical capacity additions, are as follows:
The combined new electrical load of 45 megawatts represents a substantial addition to the regional distribution grid and necessitated the ICC regulatory filing discussed below.
The Phase 1 Project served as the primary funding mechanism and operational backbone for Phase 1 of MTDC's 2021 Strategic Sustainability Plan, which established the goal of converting forty percent (40%) of the transit authority's 1,840-bus revenue fleet to battery-electric propulsion by 2030. The loss of the Grant therefore affects not only the immediate Project but also MTDC's broader strategic electrification timeline.
B. The ICC Regulatory Proceeding
Calderwood & Harkness's engagement on behalf of MTDC was formalized on February 20, 2023, under C&H Matter No. 1031-00002. The engagement was established for the purpose of preparing and prosecuting the requisite regulatory filing before the ICC in connection with the Phase 1 Project's electrical interconnection and power-purchase requirements.
On March 1, 2023, C&H filed the Verified Petition on behalf of MTDC with the ICC, initiating the proceeding now docketed as ICC Docket No. 23-0214. The Verified Petition was verified by MTDC's Executive Director, Harold J. Greenway, and sought ICC approval for two principal components:
(i) authorization for MTDC to interconnect the new high-capacity charging infrastructure at the three depot locations to the regional electric grid operated by Prairie Shore Electric Company ("Prairie Shore"); and
(ii) approval for MTDC to enter into a long-term power-purchase arrangement with Prairie Shore under a proposed rate schedule designated as Schedule EV-T, which provided for a blended rate of $0.062 per kilowatt-hour.
The Schedule EV-T tariff was specifically designed to address the unique load characteristics associated with overnight depot charging of a large battery-electric bus fleet, including the predictable and largely off-peak demand profile, the significant aggregate load, and the long-term commitment period that would justify Prairie Shore's distribution infrastructure investments.
Following the filing, the proceeding attracted the participation of two intervenors:
Prairie Shore Electric Company. Prairie Shore, as the incumbent electric distribution utility serving the territories in which the three depot locations are situated, filed a Petition to Intervene on March 15, 2023. That petition was granted by Administrative Law Judge Hon. Marcus P. Lindquist on March 22, 2023. Prairie Shore is represented in the proceeding by the law firm of Hargrove, Peck & Tillotson LLP, with Andrew S. Peck, Esq. serving as lead attorney.
Clean Air Transit Alliance. The Clean Air Transit Alliance ("CATA"), a nonprofit advocacy organization, filed its Petition to Intervene on March 20, 2023, in the capacity of a supportive intervenor. CATA's petition was granted on March 27, 2023. CATA is represented by the law firm of Rosenberg & Dietrich LLP, with Diane L. Rosenberg, Esq. serving as lead attorney.
The proceeding has been presided over by Administrative Law Judge Hon. Marcus P. Lindquist. ICC Staff Counsel for the proceeding is Ellen R. Dempsey, Esq.
Since the filing of the Verified Petition, the proceeding has progressed through several procedural milestones:
• Status conferences were held on April 5, 2023 and May 10, 2023, at which the parties established a procedural schedule and addressed preliminary matters relating to discovery and the scope of testimony.
• On May 15, 2023, the ICC Staff filed its Staff Report, which addressed the engineering, financial, and rate-design aspects of the proposed interconnection and power-purchase arrangement.
• MTDC submitted the pre-filed direct testimony of Raymond K. Mosley, Director of Capital Programs, which detailed the technical specifications of the charging infrastructure, the projected energy consumption, the deployment timeline, and the financial underpinnings of the Phase 1 Project.
• MTDC and Prairie Shore engaged in arms-length negotiations toward a draft Infrastructure Cost-Sharing Agreement (the "Cost-Sharing Agreement"), which was intended to allocate between the parties the costs of necessary distribution system upgrades to accommodate the 45 MW of new load. The total estimated distribution upgrade cost was $12,300,000, with the proposed allocation being sixty percent (60%) to MTDC ($7,380,000) and forty percent (40%) to Prairie Shore ($4,920,000). That agreement was not executed prior to the FTA's rescission action and remained in draft form.
An evidentiary hearing before ALJ Lindquist was scheduled for June 28, 2023, at which the pre-filed testimony of Mr. Mosley and other witnesses would have been subject to cross-examination, and the parties would have had the opportunity to present additional evidence in support of their respective positions.
III. FTA Grant Rescission — Events and Legal Effect
A. Congressional Funding Lapse
On June 8, 2023, the congressional continuing resolution that had provided interim authority for certain categories of federal discretionary spending, including transit capital funding under the FTA's competitive grant programs, expired without the enactment of a successor appropriations measure or a further continuing resolution. The lapse of the continuing resolution rendered the prior appropriation unavailable for new obligations and, pursuant to established FTA policy, triggered a review of outstanding grant awards that had not yet reached the point of irrevocable obligation.
On June 12, 2023, the FTA issued a formal Notice of Grant Rescission to MTDC for Grant No. IL-2023-0067-00, citing the lapse of appropriated funds as the basis for the rescission. The Notice was transmitted by Karen L. Osterman, Regional Administrator, FTA Region V. The rescission eliminates the entirety of the $78,500,000 in federal funding awarded to MTDC under the Grant, which, as noted above, constituted eighty percent (80%) of the total $98,125,000 Phase 1 Project cost.
We note that the rescission was not the result of any deficiency in MTDC's grant application, any failure of MTDC to comply with FTA requirements, or any performance-related issue. Rather, the rescission was a consequence of the broader congressional funding lapse and affects numerous FTA grantees nationwide. This is relevant both as a matter of public record and because it underscores that MTDC's eligibility for future funding under the Low- and No-Emission Vehicle Program or similar programs should not be impaired by the rescission.
B. Impact on the ICC Proceeding
The rescission of the Grant has direct and material consequences for the ICC proceeding in Docket No. 23-0214, which we summarize as follows:
Financial Predicate. The Verified Petition was predicated in its entirety on the availability of the FTA Grant to fund the Phase 1 Project. The financial representations, projections, and supporting documentation submitted to the ICC were all prepared on the assumption that $78,500,000 in federal funding would be available. Without the Grant, MTDC lacks the financial capacity to proceed with the $98,125,000 Project as currently structured. MTDC's required local match of $19,625,000 was calibrated to complement the Grant, and MTDC does not have access to alternative funding in the amount of $78,500,000 to replace the rescinded federal contribution.
Cost-Sharing Agreement. The draft Infrastructure Cost-Sharing Agreement between MTDC and Prairie Shore contained a condition precedent requiring the continued availability of the FTA Grant. With the Grant rescinded, that condition cannot be satisfied, and the Cost-Sharing Agreement—even had it been executed—would not have become effective. Since the agreement was never executed, no contractual obligations arise from its terms.
Schedule EV-T Tariff. The proposed Schedule EV-T tariff was designed around the specific load profile, deployment timeline, and energy consumption projections contemplated by the Grant-funded Phase 1 Project. The estimated annual energy consumption of 39,420 megawatt-hours per year (MWh/yr) and the estimated annual energy cost of $2,444,040 per year were predicated on the full deployment of 225 battery-electric buses and the 45 MW charging infrastructure. In the absence of the Project, these projections are no longer operative, and the Schedule EV-T tariff as proposed has no factual basis.
Substantive and Procedural Supportability. Proceeding with the ICC application absent the underlying project funding would be procedurally and substantively unsupportable. The Commission's review of the Verified Petition necessarily requires a demonstration of project feasibility, including financial feasibility. A petition premised on a $78,500,000 federal grant that no longer exists cannot satisfy that standard. Continuing the proceeding under such circumstances would expose MTDC to unnecessary costs, could result in adverse credibility findings, and could potentially prejudice future filings.
C. MTDC Board Action
On June 14, 2023, the MTDC Board of Directors convened an emergency session to address the consequences of the FTA's grant rescission. Board Chair Alderman Vivian Ochoa-Brennan presided over the session. Following a presentation by MTDC staff and a discussion of the options available to the transit authority, the Board voted seven to two (7-2) to authorize the withdrawal of the ICC application in Docket No. 23-0214.
This vote constitutes the requisite corporate authority under MTDC's governing instruments for MTDC to direct its outside regulatory counsel to file a Motion to Withdraw the Verified Petition. The Board's action is the predicate for the authorization that we request in Section IX of this letter.
IV. Analysis of Available Options
We have considered three potential courses of action available to MTDC in light of the Grant rescission. We analyze each below and set forth our recommendation.
A. Option 1: Withdraw Verified Petition Without Prejudice (Recommended)
Under this option, C&H would file a Motion to Withdraw the Verified Petition in ICC Docket No. 23-0214 without prejudice, and would request that ALJ Lindquist vacate the June 28, 2023 evidentiary hearing date and close the docket.
We recommend this course of action for the following reasons:
(i) Preservation of Rights. A withdrawal without prejudice preserves MTDC's right to refile a petition concerning the same or substantially similar subject matter in the event that federal funding is restored through a new congressional appropriation, or in the event that MTDC identifies alternative financing sufficient to support the Phase 1 Project or a revised version thereof. This is a critical advantage, as it leaves the door open for MTDC to resume its electrification initiative without having to overcome any prior adverse determination.
(ii) Avoidance of Unnecessary Costs. Withdrawal at this juncture avoids the continued incurrence of legal fees, consulting fees, and internal staff time on a regulatory proceeding that cannot, under present circumstances, proceed to a favorable outcome. The evidentiary hearing scheduled for June 28, 2023 would require substantial preparation by C&H, MTDC's witnesses, and MTDC's engineering and financial consultants—preparation that would be entirely wasted if the Petition must ultimately be withdrawn in any event.
(iii) Avoidance of Adverse Determination. Continuing with the proceeding in the absence of a viable financial plan could expose MTDC to an adverse determination or dismissal on the merits. An adverse finding regarding financial feasibility could, depending on its scope and reasoning, create complications for any future filing.
(iv) No Prejudice to Intervenors. Neither Prairie Shore nor CATA would be prejudiced by a voluntary withdrawal without prejudice at this stage. Prairie Shore has not yet made significant irreversible investments based on the proceeding, and CATA, as a supportive intervenor, would be expected to understand and support MTDC's position.
(v) Orderly Conclusion. A voluntary withdrawal is consistent with ICC procedural rules and represents an orderly conclusion to the proceeding that respects the time and resources of the Commission, the ALJ, ICC Staff, and all parties of record.
Based on our experience with the ICC and our informal assessment of the circumstances, C&H does not anticipate opposition from either Prairie Shore or CATA to a motion to withdraw without prejudice, given the well-documented basis for the withdrawal. Similarly, ICC Staff is unlikely to object to a voluntary withdrawal under these facts, particularly where the withdrawal is supported by a clear factual basis (the loss of the federal funding that was the predicate for the entire proceeding) and the explicit authorization of MTDC's governing board.
B. Option 2: Seek a Stay of Proceedings
Under this option, MTDC would request that ALJ Lindquist stay the proceedings in Docket No. 23-0214 pending potential congressional reauthorization of the FTA funding that was the subject of the rescission.
We do not recommend this option for the following reasons:
(i) Uncertain Timeline. There is no concrete indication of when, or whether, Congress will act to restore the lapsed funding. Congressional appropriations timelines are inherently unpredictable, and tying MTDC's regulatory strategy to an uncertain congressional calendar creates an open-ended commitment of uncertain duration.
(ii) Likelihood of Denial. The ICC may not grant an indefinite stay, particularly where the basis for the stay is speculative. ALJ Lindquist would be within his discretion to deny a motion for stay or to grant only a limited stay with conditions, after which MTDC would face the same choice between withdrawal and proceeding on an unsupported petition.
(iii) Continued Costs. Keeping the docket open, even on a stayed basis, would require periodic status reports, attendance at status conferences, continued engagement of counsel and consultants, and ongoing attention by MTDC's internal legal and capital programs staff. These costs, while lower than the costs of full-scale litigation, are nonetheless significant and would be incurred without any assurance of a productive outcome.
(iv) Ultimate Outcome. If funding is not restored within a timeframe acceptable to the ICC, MTDC would ultimately need to withdraw the Petition or face dismissal—arriving at the same destination as Option 1 but having incurred additional costs and delay in the interim.
For these reasons, we do not recommend seeking a stay of proceedings at this time.
C. Option 3: Proceed with the Application on Alternative Funding
Under this option, MTDC would continue the ICC proceeding and seek alternative funding sources to replace the rescinded FTA Grant.
We do not recommend this option for the following reasons:
(i) No Identified Alternative Funding. As of the date of this letter, no alternative funding source has been identified that could replace the $78,500,000 in rescinded federal funding. While MTDC's FY 2023 operating budget is approximately $1,420,000,000, the transit authority's capital budget does not have unallocated capacity sufficient to absorb a project of this magnitude without displacing other critical capital needs.
(ii) Credibility Risk. Proceeding with the ICC application absent a credible financial plan would expose MTDC to adverse credibility findings before the Commission. The ICC expects petitioners to demonstrate the financial feasibility of proposed projects, and advancing a petition supported by a $78,500,000 grant that no longer exists—without a replacement funding plan—would undermine MTDC's credibility not only in the current proceeding but potentially in future filings as well.
(iii) Substantial Amendment Required. Proceeding on an alternative funding basis would require substantial amendment of the Verified Petition, the pre-filed testimony, the financial exhibits, the draft Cost-Sharing Agreement, and the proposed Schedule EV-T tariff, all of which were prepared on the assumption of FTA Grant funding. The scope of the required amendments would be so extensive as to constitute, in practical effect, a new filing. It would be more efficient and procedurally sound to withdraw the current Petition and prepare a new filing if and when alternative funding is identified.
For these reasons, we do not recommend proceeding with the application on the basis of alternative funding at this time. Should MTDC identify a viable alternative funding source in the future, C&H stands ready to assist with the preparation and filing of a new petition.
V. Procedural Mechanics of Withdrawal
Assuming MTDC authorizes the recommended course of action, C&H will proceed as follows:
1. Preparation of Motion. C&H will prepare and file a Motion to Withdraw Verified Petition Without Prejudice in ICC Docket No. 23-0214 (the "Motion to Withdraw"). Draft versions of the Motion and the accompanying proposed order are enclosed with this letter for your review. We welcome any comments or revisions you may wish to suggest prior to the filing.
2. Proposed Order. The Motion to Withdraw will be accompanied by a Proposed Order Granting Withdrawal Without Prejudice for ALJ Lindquist's consideration. The Proposed Order will provide for the withdrawal of the Verified Petition without prejudice to MTDC's right to refile, the vacation of the June 28, 2023 evidentiary hearing date, and the closure of ICC Docket No. 23-0214.
3. Grounds for Withdrawal. The Motion will set forth the grounds for withdrawal, including the FTA's rescission of Grant No. IL-2023-0067-00, the resulting lapse of project funding, and the MTDC Board of Directors' June 14, 2023 vote authorizing the withdrawal.
4. Service on Parties. Service of the Motion and Proposed Order will be made on all parties of record in accordance with ICC procedural rules, including: (a) ICC Staff Counsel Ellen R. Dempsey, Esq.; (b) Hargrove, Peck & Tillotson LLP, as counsel for Prairie Shore Electric Company (Attn: Andrew S. Peck, Esq.); and (c) Rosenberg & Dietrich LLP, as counsel for the Clean Air Transit Alliance (Attn: Diane L. Rosenberg, Esq.).
5. Filing Date. Our target filing date for the Motion to Withdraw is June 19, 2023. This target is intended to allow sufficient time before the currently scheduled June 28, 2023 evidentiary hearing date for ALJ Lindquist to act on the Motion and, if the Motion is granted, to vacate the hearing date in an orderly fashion. To achieve this target, we will need to receive MTDC's formal written authorization no later than June 17, 2023, as discussed in Section IX below.
6. Anticipated Ruling. We anticipate that ALJ Lindquist will rule promptly on the Motion given the approaching evidentiary hearing date and the clear factual basis for the withdrawal. As noted above, we do not anticipate opposition from any party of record.
VI. Preservation of MTDC's Rights and Work Product
A critical advantage of the recommended withdrawal without prejudice is the preservation of MTDC's right to refile a petition concerning the same or substantially similar subject matter at a future date, should federal funding be restored through a new congressional appropriation or should alternative financing be identified. This right is preserved by operation of the "without prejudice" designation in the withdrawal order, which ensures that the ICC's closure of the docket carries no preclusive effect.
All work product developed in connection with the ICC filing will be preserved by both MTDC and C&H and can be adapted for use in a future filing. This work product includes, but is not limited to:
• The Verified Petition for Approval of Electrification Infrastructure and Interconnection, as filed;
• The pre-filed direct testimony of Raymond K. Mosley, Director of Capital Programs;
• The interconnection study prepared by Creston Engineering Group, Inc.;
• The rate-impact analysis prepared by Dralvecen Reade & Co.;
• The draft Infrastructure Cost-Sharing Agreement between MTDC and Prairie Shore;
• The draft Schedule EV-T Term Sheet;
• All discovery materials exchanged in the proceeding; and
• Internal memoranda, research, and legal analysis prepared by C&H in connection with the matter.
C&H will maintain all matter files in accordance with the Firm's document retention policies, which provide for the retention of closed-matter files for a minimum of ten (10) years from the date of matter closure. MTDC should likewise ensure that its internal files relating to the Project and the ICC proceeding are preserved in accordance with MTDC's own record retention policies.
We note that any future refiling would likely require updated financial data, revised engineering assessments reflecting any changes in technology or costs, updated load projections, and potentially a new FTA grant award number and terms (if refiling is predicated on a new federal grant). Nevertheless, the substantial body of analytical, engineering, and legal work that has been completed to date will provide a significant head start in any future proceeding, reducing both the time and cost required to bring a new petition to the filing stage.
VII. Impact on Related Agreements and Advisors
The Grant rescission and the recommended withdrawal of the ICC Petition have implications for several of MTDC's contractual relationships and advisory engagements in connection with the Phase 1 Project. We address these below.
Draft Infrastructure Cost-Sharing Agreement — Prairie Shore Electric Company. As noted in Section II.B above, the draft Cost-Sharing Agreement between MTDC and Prairie Shore was never executed. Accordingly, no contractual obligations arise from that draft, and neither party has any enforceable rights or obligations thereunder. No formal notification to Prairie Shore regarding the Cost-Sharing Agreement is required, although Prairie Shore will, of course, be served with the Motion to Withdraw and will thereby be informed of the withdrawal and its basis.
Creston Engineering Group, Inc. Creston Engineering Group, Inc. (EIN 36-7892104), the engineering consultant retained by MTDC to prepare the interconnection study, should be notified of the Project suspension. The engagement was led by Martin J. Sadowski, P.E. MTDC's in-house team should review the engagement agreement with Creston Engineering for applicable termination provisions, including any termination-for-convenience clauses, notice periods, and obligations regarding payment for work performed to date. Any outstanding invoices from Creston Engineering should be identified and processed in accordance with the terms of the engagement.
Dralvecen Reade & Co. Dralvecen Reade & Co. (EIN 36-6543298), the financial advisory firm retained by MTDC to prepare the rate-impact analysis, should similarly be notified of the Project suspension. The engagement was led by Lisa M. Quayle, CFA. As with Creston Engineering, MTDC should review the engagement agreement with Dralvecen Reade for termination provisions and address any outstanding invoices.
Fielding & Calloway CPAs, LLC. Fielding & Calloway CPAs, LLC, MTDC's independent auditors (engagement partner Douglas H. Fielding, CPA), require no immediate action in connection with the withdrawal. However, any Grant-related audit work that has been performed or commenced should be documented and preserved, both for MTDC's internal records and in the event that any future FTA audit or close-out requirements arise in connection with the rescinded Grant.
We recommend that MTDC's General Counsel coordinate with the Chief Financial Officer regarding the consultant and advisor notifications and any associated contractual matters.
VIII. Engagement and Billing Status
For your reference, we provide the following summary of the engagement and billing status for C&H Matter No. 1031-00002.
The C&H engagement was subject to a capped fee of $385,000 for the regulatory proceeding through final order. This fee cap was established at the outset of the engagement and was intended to cover all professional services rendered by C&H through the conclusion of the ICC proceeding, including preparation and filing of the Verified Petition, prosecution of the proceeding through evidentiary hearing, preparation of post-hearing briefs, and attendance at oral argument, if required.
Upon the filing and granting of the Motion to Withdraw, C&H will render a final invoice for the matter. We are pleased to report that fees billed to date are substantially below the fee cap, reflecting the early-stage termination of the proceeding relative to the originally anticipated scope of work.
C&H will provide a final statement of fees and disbursements upon formal matter closure. For your reference, the hourly rates for the members of the C&H engagement team are as follows:
We anticipate that the work required to prepare and file the Motion to Withdraw, attend to the procedural formalities of the withdrawal, and close the matter will be modest and will be reflected in the final invoice.
IX. Request for Authorization
In light of the foregoing analysis and our recommendation that MTDC proceed with the withdrawal of the Verified Petition without prejudice, C&H respectfully requests that MTDC, through its General Counsel, provide formal written authorization directing C&H to file the Motion to Withdraw Verified Petition Without Prejudice in ICC Docket No. 23-0214.
We request that such authorization be provided no later than Saturday, June 17, 2023, in order to permit C&H to finalize and file the Motion by the target filing date of June 19, 2023. As discussed above, filing by that date is important to allow sufficient time for ALJ Lindquist to act on the Motion before the currently scheduled June 28, 2023 evidentiary hearing date.
Authorization may be transmitted via email to the undersigned at pdunmore@calderwoodharkness.com, with a copy to David Stanton at dstanton@calderwoodharkness.com. A brief email from you confirming MTDC's direction to proceed will be sufficient; no particular form is required.
We note that the MTDC Board of Directors' June 14, 2023 vote (7-2) provides the necessary corporate authority for the withdrawal. This letter requests the formal directive from MTDC's General Counsel, as the designated point of contact between MTDC and its outside counsel, to act on that authority and proceed with the filing.
X. Conclusion
We sincerely regret the circumstances that have necessitated the interruption of the Phase 1 electrification project, which represents a critical component of MTDC's sustainability mission and service to the public. The loss of the FTA Grant is a consequence of factors entirely outside MTDC's control, and MTDC's diligent efforts to advance this project through the regulatory process are well documented in the ICC record.
We remain firmly of the view that withdrawal of the Verified Petition without prejudice is the most prudent course of action available to MTDC under the present circumstances. This approach protects MTDC's interests, preserves its rights, minimizes unnecessary expenditure, and positions the transit authority to move promptly if and when federal funding is restored or alternative financing is secured.
Calderwood & Harkness remains available to assist MTDC with any future refiling before the ICC should the opportunity to resume the Phase 1 Project arise. We would welcome the chance to work with MTDC's team once again to bring this important initiative to fruition.
Please do not hesitate to contact me or David Stanton if you wish to discuss the contents of this letter or any related matter. I can be reached directly at (312) 555-7814 or pdunmore@calderwoodharkness.com. David can be reached at (312) 555-7832 or dstanton@calderwoodharkness.com.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Patricia Dunmore Partner
70 West Madison Street, Suite 5000 Chicago, Illinois 60602 Tel: (312) 555-7814
Email: pdunmore@calderwoodharkness.com
cc: Harold J. Greenway, Executive Director, Metropolitan Transit Development Corporation Sandra R. Pellegrino, Chief Financial Officer, Metropolitan Transit Development Corporation Raymond K. Mosley, Director of Capital Programs, Metropolitan Transit Development Corporation George Trujillo, Billing Partner, Calderwood & Harkness LLP David Stanton, Lead Associate, Calderwood & Harkness LLP
Enclosures:
1. Draft Motion to Withdraw Verified Petition Without Prejudice
2. Draft Proposed Order Granting Withdrawal Without Prejudice
Depot Location | Address | Planned New Load Capacity
North Garage | 4501 West Lawrence Avenue, Chicago, IL 60630 | 18 MW
West Garage | 1200 South Cicero Avenue, Chicago, IL 60804 | 15 MW
South Garage | 7800 South Vincennes Avenue, Chicago, IL 60620 | 12 MW
Combined New Load | 45 MW
Attorney | Role | Hourly Rate
Patricia Dunmore | Engagement Partner | $1,050/hr
George Trujillo | Billing Partner | $985/hr
David Stanton | Lead Associate | $625/hr
Michelle Tsao | Junior Associate | $495/hr

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP

Record

Parties

Dates

Amounts