Light rail's new promised price tag: $338.3 million

HAMPTON

Hampton Roads Transit vowed Thursday to complete construction of Norfolk's beleaguered light-rail project for $338.3 million, slightly less than anticipated but still 46 percent more than original estimates.

Most of the increase is for expenses related to schedule delays that have caused bills for expanded overhead costs and idle equipment to pile up, according to a report by consultant AECOM.

The delays were caused mainly by challenges with utility relocations downtown and by last-minute changes and additions to the project.

For months it's been clear that light rail was running way over budget, but the numbers had not been pinpointed. Estimates ranged from $325 million to, most recently, $340 million. When construction began in the fall of 2007, the price tag was $232.1 million. That number rose to $288 million about a year ago.

On his first day on the job, Feb. 1, HRT's new leader, Philip Shucet, started working with staff to develop a final "cost-to-complete" that the agency could "own." They were aided by work already conducted by HRT and AECOM, hired by former President and CEO Michael Townes, who was forced to step down last month as costs and communication problems grew.

Asked by HRT board members how confident he is in the new figure, Shucet responded, "We're not going to add a penny to that."

He added that passengers will board in May 2011.

"I'm gratified we have, at last, a number that we can have a high degree of confidence in," said Jim Wood, HRT chairman and Virginia Beach councilman.

Vice chairman W. Randy Wright, a Norfolk councilman, said, "For the first time, we know where we are, when we're going to finish and how we're going to finish."

Shucet could not answer on Thursday how he planned to cover the extra costs beyond the previous $288 million budget. Already, the state has contributed an extra $20 million, leaving a $30 million gap.

He said he's looking at other federal, state and even HRT sources for funding. Federal authorities may kick in additional money for safety upgrades.

If no other money is found, Norfolk is ultimately responsible, but Shucet said he's trying to avoid asking the city for more.

HRT's financial review shows that "soft costs," such as design work, consultant fees and real estate, are coming in at more than double the original estimates and that they account for 45 percent of the new project price tag.

Going forward, Shucet has eliminated a layer of consultants that were managing the project, saving $7 million and reducing the soft costs to 10 percent of the project budget for the remainder of the construction period.

Hard costs, or actual building costs, have risen 37 percent since construction began.

Shucet told the board that HRT missed an early warning that something was amiss when the bid for constructing the downtown segment of track came in nearly 75 percent higher than budgeted.

"That was the time to take a deliberate look at the entire budget," Shucet said in a letter to the board Thursday. "The message in that bid is palpable: There is more risk here than you know.... Projects that start right usually end right. We faltered early."

HRT board member Rick West, a Chesapeake councilman, said he feels some guilt for not asking the right questions or pushing management hard enough.

"There's a valuable lesson in here for us: dig, dig, dig, ask, ask, ask," West said.

AECOM's report, dated Jan. 27, reveals that schedule delays are to blame for most of the cost increases. The report offers some specific examples:

The electrical contractor has been delayed 280 days - at an estimated cost of $3.3 million - because of additional work and because track installation was slowed.

Another contract is behind 360 days, at a cost of $1.6 million, waiting for changes requested by Norfolk State University in the design of the maintenance and storage facility. That delay has created another unexpected expense - building a temporary shelter for light-rail vehicles.

And because the opening date has been pushed back from October 2010 until mid-2011, expenses are building for the idle light-rail vehicles on the track next to NSU. A warranty extension for the cars is estimated to cost about $138,000.

HRT's written summary of its financial review states that because construction is 62 percent complete, the unexpected costs are "becoming increasingly smaller as the project rises out of the ground."

Even with the latest overruns, the project remains the cheapest among recent rail projects in the country, at around $45.7 million per mile. The next cheapest is Charlotte, N.C., at $48 million per mile.

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