Norfolk light-rail overruns leave cash crunch

HAMPTON

Cost overruns on Norfolk's light-rail project have created a potential cash-flow crunch for the $338 million starter line, Hampton Roads Transit's board learned Thursday.

The increasing costs rolled out over the past couple of months prompted the Federal Transit Administration to hold up $26.8 million of federal money already approved for the project, HRT President and CEO Philip Shucet said.

HRT needs the FTA to release those funds by April for the agency to be able to continue to pay the bills.

"FTA is well aware that if you hit the wall on cash flow and stop work, you're going to increase the cost," Shucet said. "No one has an interest in that happening."

Federal regulators have told HRT leaders they need assurances about project spending and financial stability before releasing more money. Specifically, the FTA wants to be sure that federal funds are going to pay only for enhancements to the project and not for tasks that went over budget. And authorities also want to know that HRT can fully fund the rest of construction.

Shucet said he's confident the agency will be able to provide the documentation the FTA needs and that the agency will continue to pay its bills on time and avoid additional delays.

Last week, HRT released what it considers its final budget for light rail:

$338 million.

"Now that we have a new cost-to-complete, we have another month of hard work ahead," Shucet said. "We've got to get a financial plan in place that is credible."

A report prepared by consultant AECOM indicates that the federal money is being held in two separate pots of $13.4 million each.

One pot would be released when the FTA gets proof that no federal money will pay for cost overruns. The money can be spent on what's known as "betterments" to enhance safety, security and livability. The other pot would be available when the FTA is satisfied that there are sufficient resources to finish construction. Light rail is expected to open in May 2011.

Shucet said HRT is working to categorize each new cost as an enhancement or an overrun to present to federal regulators. HRT has financial commitments totaling $288 million, the previous light-rail budget. Of the $50 million in new costs, the state has agreed to cover up to $20 million. The FTA wants a plan for funding the rest.

Shucet said the agency is working hard to identify the money from other federal and state sources. Norfolk, however, is ultimately responsible for any gaps.

AECOM 's report states that the FTA needs reassurance of Norfolk's capacity to pick up the tab: "Reassurance is not the same as allocating funds. Reassurance does not prevent other funding strategies from being pursued."

W. Randy Wright, HRT vice chairman and a Norfolk councilman, said: "I would be surprised if this thing does not work itself out. I certainly understand what FTA's concerns are and their rationale - they want to know there's a means to the end."

In other HRT board business Thursday:

n Shucet's employment contract was modified to reflect his full salary. HRT is paying him $28,000 a month, and Norfolk is contributing another $12,000 a month. Shucet is working on a one-year consulting contract that can be renewed in six-month increments. HRT hired Shucet at the end of January to replace Michael Townes, who was pressured to step down.

n A possible bus fare hike was set in motion. Studies under way show HRT's $1.50 ticket is about 50 cents lower than similarly sized cities. While a new rate has not yet been proposed, the board set public hearing dates of April 22 and May 27 for possible changes.

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