Denver Light Rail’s Costs Are Not Sustainable – A Message For Austin?

COST Comments: The article below depicts a continuing trend of major cost overruns for urban passenger rail systems. Denver’s first FasTracks light rail segment is under construction as discussed below and its estimated costs have already grown to more than $58 million per mile or $707.6 million for the 12.1 mile segment. Austin’s recent light rail proposal by ROMA Design Group is a 15.3 mile system with a ‘high-end’ cost estimate of $614 million which is only $40 million per mile. In Phoenix, a recent 20 mile, starter light rail cost about $70 million per mile. Seattle is well into construction of a light rail which is about 20 miles and is estimated to cost more than $175 million per mile. ROMA’s estimates for Austin streetcar construction are very low and do not seem crediable based on real experience. In addition, ROMA estimates operating costs to be $21-$23 million per year. Capital Metro told voters in 2004 that the operating costs for the Austin-Leander commuter would be $2 million per year. Current estimates are some 5 times this commitment.

Based on actual and recent experiences, the proposed Austin streetcar could easily cost Austin area citizens more than $1 billion to construct and more than $30 million in annual operating cost

With substantially increasing city costs and rapidly rising taxes, it does not seem responsible and is wasteful to be spending city funds to plan an inefficient streetcar which will require heavy funding subsidies by citizens for the life of the system.

FasTracks budget off rails
RTD admits it can’t deliver the plan it promised voters

By Kevin Flynn, Rocky Mountain News
Friday, July 18, 2008

RTD conceded Friday that it cannot deliver the FasTracks program as promised to voters four years ago.

The program, originally budgeted at $4.7 billion when voters approved a sales tax to support it, rose to $6.1 billion last year and is poised for a substantial increase next month during budget talks with the elected board.

The agency is holding off on a recommended strategy, but the options include some politically difficult choices in tough economic times:

* Stretch the program beyond the original 2017 completion date to ease a cash flow slowdown.

* Reduce the length of some of the corridors to cut costs but maintain the schedule.

* Go to voters for an additional tax increase to get the original plan done on the same schedule.

The program has been clobbered from two sides, with huge increases in the cost of construction materials and fuel, and a slowdown in the economy that has cut into the revenue RTD expected from the sales tax that underpins the financing.

“We’re dealing with that reality, and I am going to have to adapt the program to fiscal reality,” said Cal Marsella, RTD general manager. “Our material costs are up and our revenues are down from projections. Reality is reality, and we’re going to have to adapt to that.”

Rights of way, privatization

Marsella said the transit agency is still crunching the new numbers for the annual FasTracks budget update and has no new bottom line, but it will be determined before a mid-August meeting with the 15-member board.

“How much, we can’t really say because some big things are still outstanding,” Marsella said.

Two major elements of the program will remain unresolved for up to two years, and they have the potential to help keep the program costs down or damage its financial footing even more.

One is negotiations with two major railroads, Burlington Northern-Santa Fe and Union Pacific, over purchase or lease of portions of their rights of way for the four heavy-rail commuter lines in FasTracks.

Earlier this year, talks with Union Pacific failed to produce an agreement on a total package of property because the railroad’s price, $700 million, was substantially more than RTD had set aside.

The two sides remain in talks for smaller portions of Union Pacific property.

The second unresolved element is the potential savings from RTD privatizing three or more of the new corridors.

RTD turned to so-called Public-Private Partnerships, PPP, last year as a strategy to close a $548 million deficit between what the original financing plan could handle and the new $6.1 billion budget.

If costs climb much higher, it is unknown if more savings could come from additional privatization.

Mayor critical of estimates

Aurora Mayor Ed Tauer is anxiously awaiting word on the fate of the I-225 light-rail corridor – an extension of the T-REX line from Parker Road to connect with the train to the airport at Fitzsimons on Peoria Street. Tauer said he keeps hearing that RTD’s costs are rising faster than construction costs, indicating there’s more to the problem than rising material prices. He cast doubt on RTD’s original estimates.

“Our concerns are what are we going to get and when are we going to get it,” Tauer said. “Our concern is not how they execute it. But when do we stop having these increases and have a final price?

“Some of our corridors are still three or four years away from starting and they’ve already had huge increases in costs before we’ve laid our first track. When do we stop this and get the final number?”

Marsella defended the original estimates.

“Why would we lowball it and not be able to deliver?”

No good options

Noel Busck, an RTD board member, was mayor of Thornton when FasTracks passed in 2004. He was part of the unanimous front of metro mayors who backed the measure, a 0.4-cent hike in the regional sales tax.

Now sitting on the other side of the table, he expects a hard series of talks with cities and counties over how to handle the future of the FasTracks program.

“To go back on our word and renegotiate things will be quite difficult,” Busck said. “I am sure there will have to be some changes. We don’t have an easy few years ahead of us, but we’ll get it done. There’s always a way.”

Marsella won’t rate the options for now but said all are difficult.

“Is lengthening the time an option? Yes, but no decision has been made,” he said. “Would we consider going to voters for more money? Yes. Are we considering that right now? No. What about shortening the lines? Is that a possibility? Yeah, but is it one we want to pursue? No.

“I heard pretty loud and clear from the public that they wanted it done as quickly as possible.”

FasTracks is one of the nation’s largest public transit expansions, with seven new corridors and additions to three existing ones.

One of the new projects, the 12.1-mile West Corridor connecting Denver, Lakewood and Golden, is under early construction.

Inflation costs accelerate

Last month, its budget was bumped up 11.5 percent, to $707.6 million, a portent of what awaits the other projects in the program.

Those other corridors are in various stages of environmental studies and early design – a stage at which it’s hard to nail down final costs.

The original FasTracks budget was assembled from thousands of pieces of data reflecting the scope of what RTD planned to build, with each piece assigned a price tag down to the last railroad tie, then inflated through the life of the project using a projection for the local Consumer Price Index and priced according to what year each piece was planned to be built.

But that quickly went awry because inflation in the construction industry didn’t track the consumer price index. Even as voters marched to the polls to say yes in 2004, the Colorado Construction Cost Index was going up 9 percent that year. In 2005, it spiked an unprecedented 52 percent. It has continued to outpace inflation, hitting 6.1 percent last year.

The national Producer Price Index for construction material has gone up 30.7 percent since the end of 2003, while the Consumer Price Index has gone up 17.5 percent. or 303-954-5247

FasTracks timeline * Fall 2003: RTD assembles cost projections for the entire program at $4.7 billion.

* April 2004: Denver Regional Council of Governments approves the program after having consultants review the projections.

* November 2004: Metro Denver voters approve a 0.4-cent hike in RTD’s sales tax to support the financing of FasTracks.

* May 2007: RTD’s first overall re-evaluation of costs and financing boosts price tag to $6.1 billion, with a $548 million deficit in the financing plan that is to be plugged by turning to privatization on some corridors.

* September 2007: RTD hires consultant team to lead privatization effort, predicting the gap can be met.

* June 2008: RTD boosts West Corridor light rail project 11.5 percent, to $707.1 million, foreshadowing an overall increase in the program cost to come in August.

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