Months before the L.A. streetcar project's additional expenses became public, City Hall staff members quietly warned the cost estimate was not detailed and could rise, a Times review has found.
Posted on NO 710 Freeway Tunnel Facebok page:
Interesting parallels between this story and the saga of the F-7
alternative. The initial estimates were done based on cost of a similar
project in Oregon. For the F-7x tunnels, the cost estimates are based on
Seattle's Alaskan Way Viaduct Replacement Tunnel. For the Los Angeles
streetcar, the company that underestimated the cost of moving utilities
by a factor of 20(!!!) -- HDR -- recently purchased and absorbed
InfraConsult LLC, the company that is responsible for all the financial
analysis for Metro's PPP program and responsible for the projections of
toll revenues and profitability of the F-7x tunnels. Pay close attention
to this quote: Henry Koffman, a construction management professor at
USC, said public works projects often feel pressure to keep early cost
estimates low. "If you aim high at the start, it's more likely the
project will be torpedoed," he said, adding there is a better chance
that requests for more money will be granted once a project is underway.
By Laura J. Nelson, October 21, 2013
Officials recently announced that cost estimates to bring back the L.A.
streetcar have more than doubled, to as much as $327.8 million. Earlier
budgets had not accurately accounted for inflation or the potentially
high cost of relocating utilities. Above, an artist's rendering of the
(July 20, 2012)
When downtown voters agreed last winter to bring back the Los Angeles
streetcar, the campaign pitch sounded simple: a $125-million trolley
through the heart of the central city, with funding split between
federal grants and a new property tax.
Inside City Hall,
however, staff members had been quietly warning that the project's price
tag was not a detailed estimate and could rise, a Times review of city
memos, emails and meeting notes has found.
Records also show that aides to City Councilman Jose Huizar
were reluctant to incorporate higher estimates into public discussions,
partly because of concerns they could slow the streetcar's progress.
The red flags proved
accurate. Officials recently announced that cost estimates have more
than doubled, to as much as $327.8 million. Earlier budgets had not
accurately accounted for inflation or the potentially high cost of
relocating utilities. The route probably will be shortened, no longer
passing by two high-profile venues, the Walt Disney Concert Hall and the
Dorothy Chandler Pavilion.
With no clear way to close what could be a $200-million funding gap,
the fear now at City Hall is that the streetcar's shot at a crucial
federal grant is in jeopardy, potentially delaying construction by
The bumpy saga of L.A.'s modern-day streetcar may yet end with a
sleek new transit loop. But records and interviews shed a fresh light on
the technical and financial problems that have dogged the project,
largely out of public view, in the months before news of the additional
costs was shared with taxpayers.
"We thought it was too early to go with any kind of number," Huizar's
chief of staff, Paul Habib, said of the reluctance to make public the
higher potential cost. Not enough engineering work had been done, he
said, to move beyond a "guesstimate."
The push for a trolley began in 2006 when L.A.'s then-Community
Redevelopment Agency published a study supporting a partial resurrection
of the streetcar network that once spanned Southern California.
Armed with $10 million in seed money from the CRA, a group of
downtown business leaders in 2009 formed a nonprofit, Los Angeles
Streetcar Inc., to spearhead the project. Many hoped it would accelerate
the area's nascent renaissance.
A price tag — $100 million to $125 million — appeared. But it was a
"back-of-the-envelope" figure, Huizar aide Jessica Wethington McLean
recently acknowledged, based on the cost-per-mile of the Portland, Ore.,
streetcar, with no allowance for inflation. The 7.2-mile Portland
streetcar opened over five phases from 2001 to 2012 and cost a reported
"It's really that simple," Eric Metz, the nonprofit's project
director, explained to city staff in one email. "We didn't hire an
engineer or anything that fancy."
New cost estimates were produced in early 2012 by HDR Inc., a global
engineering consultant. The four-mile route ultimately selected was to
start at 1st Street, run 11 blocks south along Broadway before veering
west to the LA Live entertainment zone and north through the Financial
District. Including $19 million to cover any unexpected costs, the new
construction cost estimate came to roughly $125 million, city staff
Then, during a round of deep budget cuts, Gov. Jerry Brown
dissolved California's redevelopment agencies, killing what nonprofit
officials said had been one of their biggest political champions at City
During the "gray period" after the CRA dissolved, the city's
Transportation Department began preparing to take the lead on the
project, spokesman Jonathan Hui said. Soon, transportation staff members
were voicing concerns about the $125-million estimate, noting it did
not account for inflation or utility relocation — often two of the
biggest costs of Southern California construction projects.
"Do not know what is under the street," James Lefton, the
department's executive officer of transit services, noted on a legal pad
during a July 2012 meeting. "Could add significantly to cost overruns."
The missing costs were not publicized as downtown residents prepared
to vote on whether to create a property tax district to raise about
$62.5 million. In December of that year, the tax measure won with 72.9%
of the vote.
The department did not publicly discuss its concerns, Hui said,
because it did not become the lead agency on the project until after the
election. Pointing out issues would have been difficult, staff members
said, without a better estimate to use as a point of comparison.
Henry Koffman, a construction management professor at USC, said
public works projects often feel pressure to keep early cost estimates
low. "If you aim high at the start, it's more likely the project will be
torpedoed," he said, adding there is a better chance that requests for
more money will be granted once a project is underway.
HDR's new estimate came in at the beginning of this summer. Earlier
budgets had allotted about $10 million for utility costs. The new figure
would need 20 times that.
"Did I add this correctly?" one legislative analyst wrote in an email.
Beneath Broadway lies a tightly packed tangle of power lines and
century-old pipes. Moving or replacing them would be very expensive.
Similar issues have plagued other cities, including Cincinnati, where a
streetcar project's cost overruns have become a key issue in the mayor's
Staff members who spoke on the condition of anonymity said examining
the project budget and revealing the shortfall had been politically
awkward. Huizar's staff wanted to enter the federal funding process
quickly, without disclosing the shortfall, emails indicate.
Huizar's staff said they did not have enough confidence in the new
estimate to discuss it publicly. The estimates are a worst-case
scenario, Wethington McLean said, and she expects them to come down as
engineers find ways to cut costs, such as moving segments of track to
dodge certain utility lines.
A spokesman for City Atty. Mike Feuer
said he could not speculate whether the cost increase would pose
problems for the downtown tax district that voters approved at a lower
The next cost estimate is expected in January. If the price veers
above $250 million, officials say, the streetcar project will be bumped
to a different funding category, pitting the first large-scale project
shepherded by L.A.'s city transportation department — rather than the
county's transit agency — against much more expensive and sophisticated
proposals across the country.
Without a federal grant, the budget shortfall could rise to nearly
$275 million. The money from downtown property taxes cannot be collected
until federal funding is awarded.
In the meantime, Huizar staff members said they would pursue other
grants, or possibly a private partner, to cover the costs. However,
transit systems don't usually make a profit, experts say, which makes
them less appealing to the private sector.
The project has missed the Sept. 30 deadline for consideration in
next year's federal budget. Some in City Hall believe the streetcar will
not be done until mid-2019, five years later than originally promised.