HRT chief: Norfolk light-rail 'soft costs' are way out of line

NORFOLK

Nearly half of the budget to build Norfolk's light-rail starter line is "soft costs" such as consulting, legal and administrative fees, which is almost twice the norm for this kind of project, Hampton Roads Transit's new leader, Philip Shucet, told the City Council on Tuesday.

"They just don't make any sense to me," said Shucet, who took the helm of HRT last week. "If I divide them by two, they don't make any sense to me."

Shucet said he's still crunching numbers to grasp what went wrong. As former Virginia Department of Transportation commissioner, he's accustomed to soft costs - expenses other than construction - of 15 percent to 18 percent of a project.

Former HRT president and CEO Michael Townes told the council in December that soft costs were 30 percent of the total project cost, which at the time was estimated at $328 million. Townes was pressured to resign last month amid spiraling cost overruns on the project.

"This is absolutely astounding," Councilman W. Randy Wright, who serves on HRT's board, said Tuesday. "It shows how poorly things had been managed."

Vice Mayor Anthony Burfoot called the soft costs "outrageous."

"I like the fact that (Shucet) is going to pull this thing apart like an onion to understand where it is and how we got there, then extract from that to get us on the right track," he said.

The true cost of Norfolk's 7.4-mile light-rail line is still not clear, Shucet said. HRT staff, with input from consultant AECOM, are working to develop a final cost-to-completion number and present it to the HRT board at a special meeting Feb. 18.

"It will be a number that everyone at HRT will own," he said.

The previous HRT administration over the past several months estimated that the cost had risen 47 percent - from the original $232 million budget to $288 million, then to $328 million and again to $340 million.

"None of those numbers are reliable," Shucet said. "We will determine a reliable number.... Our goal will be to stop the continued upper trend of this cost."

The financial and construction challenges have pushed the opening date of The Tide, as the rail line is known, to late spring or, more likely, summer of 2011, Shucet said.

He said HRT is still searching for funds to complete the project. At $288 million, the federal share was $167.2 million, the state was contributing $67.1 million and the city, $53.7 million. The state has committed an additional $20 million, and federal authorities are expected to add $7 million. Norfolk could be responsible for the balance unless other funding is secured.

"The hope and intention is to hold the city harmless or absolutely as harmless as we can possibly do," Shucet said.

A number of steps have been taken to contain costs. Shucet said they include consolidating the two biggest construction contracts, saving $7.5 million; ending the practice of open-ended task orders with no defined costs; implementing double work shifts downtown; and adding incentives and penalties in construction contracts.

Under Townes' leadership, HRT's lack of communication about light rail's problems was seen as eroding the agency's credibility.

"We are committed to a culture of communication and transparency," Shucet said.

Mayor Paul Fraim told Shucet he was counting on openness: "Tell us the truth every time you come in here."

Debbie Messina, (757) 446-2588, debbie.messina@pilotonline.com