By Dana Rubinstein, March 31, 2015
Michael Horodniceanu leads a tour of the ongoing Second Avenue construction.
That’s what happened in March, when an advocate suggested the Port Authority of New York and New Jersey had conspired to inflate the projected cost of a new midtown bus terminal in order to kill it.
More frequently, the agencies are criticized, with justification, for low-balling the costs and timelines of major projects, which almost invariably come in late and overbudget. In New York, this problem is chronic—and almost comically severe.
One example that is topical, and will remain so for years to come, is the Metropolitan Transportation Authority’s estimate, back in 2000, that a new Long Island Rail Road station beneath Grand Central Terminal would cost $4.3 billion, rather than the more than $10 billion it is expected to cost by the time it’s complete, sometime in the 2020s.
When, seven years late, the M.T.A. finally got around to completing the Fulton Center transit hub in lower Manhattan, it cost almost 100 percent more than anticipated, kind of like the Port Authority’s transit hub at the World Trade Center.
And just this year, Governor Andrew Cuomo—who had made a great issue of the cost overruns at the World Trade Center site—announced a plan to build a new, $450 million train to LaGuardia Airport. Skeptics of the price tag were quickly vindicated when, less than two weeks later, the Cuomo-appointed head of the M.T.A. put the cost at up to $1 billion.
The M.T.A. chairman, Tom Prendergast, hastily walked back his politically inconvenient estimate. But if anything, his estimate was an overoptimistic one, too: A Bloomberg-commissioned study, based on a longer (or perhaps more accurate) measurement of the same route put the cost of a similar proposal at $1.5 to $1.9 billion.
Cuomo spokeswoman Beth DeFalco said, “Gov. Cuomo has made the holistic redesign of both airports a priority and is committed to finding the most cost-effective way of constructing an Air Train.”
Nicole Gelinas, a transportation-finance expert at the Manhattan Institute, said, “We really have no idea how much this is going to cost.”
The same could be said of nearly any major project in this part of the country. All that is certain is that New York’s transportation agencies—and the political leaders who control them—have a problem with estimates, and that New York’s projects appear to be more expensive than comparable ones elsewhere in the modern world.
All of which makes it that much harder for the M.T.A. to raise money for the infrastructure that planners believe the region needs.
“We’ve got to be able to say with a straight face that ‘Hey, we want to build more subway lines,’” said Richard Barone, director of transportation programs for the Regional Plan Association. “And people say, ‘Yeah, OK, for more than $1 billion a mile—good luck with that.’”
This is not a new problem, even if it has seemed particularly acute in the past decade or two as the M.T.A. has resumed building what are known, in the infrastructure world, as megaprojects. And it is not unique to New York, though the tradition is particularly strong here.
That tradition was cemented, if not invented, by master builder (and chronic underestimator) Robert Moses.
“Year after year, the Board [of Estimate] would allocate new funds—and then would learn that still more were needed,” wrote Robert Caro in The Power Broker. “Marine Park in Brooklyn could be completed for $6,000,000, he assured the Board. When $6,000,000 had been spent on the park, Moses informed the Board that an additional $6,000,000 would be necessary. And when that was spent, the park would still be far from completed. He deceived the Board constantly.”
That legacy appears to be alive and well.
“When are they going to open the first phase of the Second Avenue Subway?” said City College civil engineering professor Robert Paaswell. “The date’s put off. East Side Access, the date’s put off. The opening of the 11th Avenue subway on the 7 line? That’s put off.”
A widely cited Danish study from 2002 found that, worldwide, “[u]nderestimation of costs at the time of decision to build is the rule rather than the exception for transportation infrastructure projects.”
That’s at least in part because “the targets for budget and time are politically motivated,” said Juliette Michaelson, vice president for strategy at the Regional Plan Association. “They’re not really based on what things cost for real.”
Transit historian Peter Derrick, who is working on a book on the M.T.A.’s contemporary rebuilding efforts, said, “It’s the normal thing for transit people to low-ball the cost of things to get them approved in the first place.”
One major motivation for this habit, the world over, is simple enough. That 2002 Danish study, by Bent Flyvbjerg, Mette Skamris Holm and Soren Buhl, put it this way: “[D]eliberate cost underestimation is lying, and we arrive at one of the most basic explanations of lying, and of cost underestimation, that exists: Lying pays off, or at least economic agents believe it does.”
When it comes to megaprojects in New York, lowballing is only half the problem.
At $1.4 billion, Fulton Center “avoided becoming the most expensive subway station on earth only because the World Trade Center PATH station next door took that crown,” wrote Stephen Smith on the urbanism-focused website Next City. “The 7 train extension won’t become the world’s most expensive subway on a per-mile basis only because that honor belongs to the Second Avenue subway.”
It is a sign of how ordinary cost overruns have become in New York that such boondoggles receive relatively little attention.
The only New York politician in recent memory who’s attempted to grapple with the issue is New York City comptroller Scott Stringer, who noted in a speech back in 2011, when he was running for mayor, “The first phase of the Second Avenue subway is costing $2.7 billion per mile of new tunnel.
The extension of the 7 line from Times Square to the Javits Center is costing $2.1 billion per mile.”
He contrasted that with the construction of the Jubilee line extension of the London Underground, which he said cost $700 million per mile.
“We cannot build a 21st-century city and compete globally if we continue to spend five, even seven times as much on construction projects as compared to our competitors,” he said.
How New York City’s megaprojects compare in cost to those in similarly developed countries around the world is a question that is, somehow, very rarely studied.
Stringer’s spokesman said the comptroller relied for his numbers, in part, on a mathematician named Alon Levy, who’s now completing his post-doc at the Royal Institute of Technology, and who notes, in his blog Pedestrian Observations, that, mass transit is a “side interest” for him and “entirely unrelated to my work.”
The experts at the Regional Plan Association, who are looking into the problem of megaproject cost overruns as part of their latest survey of regional infrastructure, directed Capital to a blog post by Levy, too.
The post, from 2011, reported that the Toei Oedo Line in Japan cost $560 million per mile. The Berlin U55 cost $400 million per mile. The Paris Metro Line 14 cost $368 million per mile.
New York’s construction costs blew all of that away, the study found.
The Second Avenue Subway is coming in at $2.7 billion per mile. The 7 train extension to the far West Side? $2.1 billion per mile.
David Schleicher, an associate professor at George Mason University School of Law, has analyzed Levy’s numbers and says that his analysis basically confirms Levy’s.
Barone, of Regional Plan Association, said, “The question is always why, why, why is it so expensive?” said Barone.
The answer always seems to come back to a limited universe of issues, in varying combination: labor costs, work rules, managerial incompetence, the spaghetti of infrastructure tangled beneath Manhattan’s streets, a political firmament without incentive to tackle hard issues.
Maybe, suggested Gelinas, the M.T.A. is just trying to do too much all at once.
“If the choice is doing a lot of things not very well or nothing at all, then what do you pick?” she asked.
There have, in fact, been some in-house efforts to examine the issue, though none that anyone seems to find particularly useful.
In 2008, the M.T.A. released the report from a “blue ribbon” panel on the topic of unwieldy megaprojects. Then it appointed a traffic engineer named Michael Horodniceanu to run those projects and “implement the ideas the panel generated.”
Seven years later, all of the M.T.A’s megaprojects are still late, and nearly all are hundreds of millions over budget.
Cuomo appointed a “reinvention commission” to tackle the problem, too. It came up with recommendations, like creating a “center of excellence” to reform procurement procedures.
Asked which of these recommendations the M.T.A. has implemented, agency spokesman Adam Lisberg said, "We have used design-build processes for billions of dollars’ worth of procurements, we solicit input from the contractor community during the design of complex projects before locking them down, we do formal risk assessments of all large procurements, and we develop mitigation strategies to manage that risk."
“It is time to recognize that the delivery model for big projects is broken and fiddling on the margins will not build the kind of projects the region needs,” said Chris Ward, the former Port Authority executive director and former East Side Access contractor, who Cuomo publicly chastised for cost overruns before replacing him at the head of the authority.
New York City in the early 21st century looks very different from New York City in the early 20th century, when much of its transportation system was built.
More people live in the outer boroughs, and more people work there, too, but the options available for traveling between boroughs other than Manhattan are limited.
New York’s main bus terminal is a tear-down.
In the next 20 years, one or perhaps both of the two tubes connecting Midtown to New Jersey may have to be closed for repairs.
At the same time, the region invests billions of dollars in projects that planners believe were prioritized for political reasons. That Long Island Rail Road terminal beneath Grand Central will serve some 160,000 people a day, while the bus terminal serves more than 230,000. The temporary PATH station at the World Trade Center now serves 44,000 passengers a day, while Penn Station serves 600,000.
When those politicized projects go wildly overbudget it gives that much more license to politicians to be miserly about transportation funding.
Last year, after the M.T.A. approved a $32 billion capital plan with a $15 billion hole, Cuomo—who effectively controls the authority—called it “bloated,” even though the vast majority of it would go toward expenses like new subway cars, new buses, new rail and new signals to replace deteriorating old versions of each.
The governor is uneven at best as a champion of the transit system he oversees, and he had every political motivation in the world to reprise his tough-on-spending routine. Yet no one affiliated with the system was in a particularly good position to complain.
“Success requires bringing these projects in on time and within budget,” said that 2008 Blue Ribbon Panel report. “The public focuses on the transportation community and draws conclusions, deserved or undeserved, about MTA’s competence based on their perception of project success. Public trust and confidence in the transportation sector as a whole often lies in the balance.”