Audit: Norfolk officials knew of light-rail overruns, kept silent

NORFOLK

Several high-ranking city officials knew light-rail costs were skyrocketing as early as 2007 but failed to reveal the information in a timely manner, a state audit has found.

City Manager Regina V.K. Williams, former City Councilman W. Randy Wright and Assistant City Manager Stanley A. Stein knew about overruns and did not immediately divulge that information, the audit says.

All three denied this week that they intentionally withheld information. Wright and Williams said they delayed informing the council only once, in 2009, and that was for about a month. They were fearful that news of escalating expenses would jeopardize state money for the project, they said.

Councilman Paul R. Riddick, who chairs the Hampton Roads Transit board that is managing the light-rail project, said after reading the report, he believes Williams, Stein and Wright withheld vital information from the council.

"They were not forthcoming with the council. As a result, we've got a real mess," he said.

The Virginia Department of Transportation's inspector general conducted the audit, released this week, at the request of Hampton Roads Transit's new president because of concerns about cost overruns.

The state inspector general indicated that HRT officials intentionally misled federal, state and some city officials about the amount of the overruns, to the point of maintaining a second set of books.

HRT is constructing the city's 7.4-mile light-rail line, the biggest public works project in Norfolk's history. It is expected to open in May.

Originally slated to cost $232 million, the budget has ballooned to $338 million. It is being paid for with city, federal and state money. Norfolk is responsible for overruns.

Mayor Paul Fraim said he doesn't believe the council was misled.

"If they knew, what was their motivation not to tell us?" Fraim said. "They've never pulled a punch before, and I find it hard to believe they did in this case."

Williams is stepping down as city manager in January in part because of the light-rail costs. Stein will be the interim city manager. Wright, the driving force behind light rail, was defeated in May in part because of light rail's escalating budget.

The report based its findings partly on the e-mails of former HRT President and CEO Michael Townes, who was forced to resign in January.

In December 2007, Townes e-mailed Stein that contracts were coming in millions over budget, the audit says. Stein told Townes that Williams likely would inform the council either in a meeting or by a confidential memo.

"As you can imagine, we (read that at least I) am sensitive that we don't have newspaper accounts of overages so early into the project," Stein wrote.

The council was briefed on light rail in January 2008 and was told that changes due to requests from Norfolk State University would cause the project to go over budget. No firm figures were provided.

Williams had the final say on what information was revealed to the council and when, she and Stein have said.

The audit indicates that Williams knew weeks after that meeting that two light-rail contracts were a combined $24 million over the budget and did not report that to the council. Moreover, the audit indicates that in May 2008, Norfolk officials were told the project could be as much as $47 million over budget. Again, that information was not immediately divulged.

Williams said updates were often presented to the council in one-on-one conversations the auditor was not privy to.

The audit indicates that in a closed meeting in June 2008, the council was briefed on rising costs. The state obtained a copy of the presentation, in which the council was learned the project could be as much as $49 million over budget.

That private briefing had not been publicly disclosed. The Virginia Freedom of Information Act does not generally allow for budget updates in closed sessions.

In September 2008, after The Virginian-Pilot reported that city officials were frustrated that they had not received an updated budget from Townes, he sent an e-mail to an HRT staffer.

"Unfortunately we allowed ourselves to be set up by Stanley and Regina," he wrote. "They have had detailed estimates since April that have been updated regularly. We didn't provide 'all the back-up' which gave them the excuse they wanted to 'diss' us."

In another HRT e-mail from the same day, a staffer wrote: "In my opinion, this gives us the opening to lay it on the line about how and what info we have provided and has not been communicated to council."

Taxpayers did not learn about any cost overruns until December 2008, when The Pilot reported that light rail was running about $56 million over budget.

That figure was found in documents obtained under the Freedom of Information Act.

Townes e-mailed Wright in February 2009, warning that changes requested by the city "have created additional unforeseen costs."

In May 2009, an exchange between Townes and an HRT staffer that was copied to Wright indicated that Stein did not yet want threats to the budget reported to the council.

Stein said that's true, but is was taken out of context.

"I did not want that to be reported, but only because HRT told us they did not yet have good numbers," he said. "The numbers kept changing, from week to week and sometimes from day to day. It was very frustrating."

In mid-2009, the audit says that Williams, Stein and Wright "were provided information regarding threats" to the light-rail budget that would eventually cause a second round of massive cost overruns. "Documents support that full disclosure of threats to the project... were not provided to all members of the Norfolk city council," it says.

Williams said she heard rumors about rising costs in 2009.

When she asked Townes, she said he repeatedly delayed giving her figures.

"I'm not going to the City Council to tell them I'm hearing a rumor," she said.

Wright said last year that he, Fraim and other city officials agreed to keep the costs a secret for about a month to allow the Commonwealth Transportation Board to approve $20 million in funding.

"All hell broke loose once the story about cost overruns ran," he said. "Had that happened before the meeting, the guys on the board would have run for cover.

"I was protecting my city. That $20 million would have come out of Norfolk's budget."

Harry Minium, (757) 446-2371, harry.minium@pilotonline.com