Over Budget, Seven Months Late… and Counting

Phase 1 of the Rail-to-Dulles project was supposed to be the good phase. For quite a while, it appeared to be running on budget and on time, providing reason to be optimistic that the highly controversial Phase 2 of the project might do so as well. But it hasn’t worked out that way. The story has been chronicled in the Northern Virginia press but has gotten little attention downstate, even though Virginia taxpayers are helping to foot the bill for the mega-project.

The track and stations all have been built but a critical piece of the infrastructure — the installation of radios that don’t meet code — as well as leaky roofs at rail stations and various technical problems have delayed the opening seven months so far. Metropolitan Washington Airports Authority officials say they do not know when the rail line will open. Now, in the latest wrinkle, project manager Pat Nowakowski has announced his resignation, purportedly for reasons unrelated to the delays, according to the Washington Post, making resolution of the issues even more difficult.

When a project of this magnitude runs this late, and property owners in the Tysons area have invested millions of dollars in expectation of a Metro-led surge in demand, this cannot end well. Meanwhile, we have this piece of news: The office vacancy rate in Fairfax County crept another half percentage point higher in 2013 to 14.9%, the highest since the Savings & Loan crisis of 1991. So reports Inside Nova.  And, as I blogged yesterday, population growth in Northern Virginia has slowed markedly.

— JAB

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10 responses to “Over Budget, Seven Months Late… and Counting

  1. The Fairfax County office vacancy rate could be attributed to all the new tax districts focused mainly on C&I. Property owners pass this fee along in the form of higher rents. As contracts expire, companies are evaluating there options.

    – Rte. 28 Transportation Tax District – This special tax district operates on a levy of $0.18 per $100 assessed value on commercial and industrial zoned property, or property used for commercial or industrial purposes within the district.
    – Phase 1 Dulles Rail Transportation Improvement District – This special tax district operates on a levy of $0.21 per $100 assessed value on commercial and industrial zoned property (including commercial apartments), or property used for commercial or industrial purposes within the district.
    – Phase 2 Dulles Rail Transportation Improvement District – This special tax district has a tax rate of $0.20 per $100 assessed value on commercial and industrial zoned property (including commercial apartments), or property used for commercial or industrial purposes within the district.
    – Commercial Transportation Tax District – The countywide tax district operates on a levy of $0.125 per $100 assessed value on commercially zoned and used property in the county.
    – Tysons Service District – This special tax district operates on a levy of $0.050 per $100 of assessed value on all properties located in the district.

    • All of these taxes are for projects/increased density that were the subject of aggressive lobbying by the business community, most especially commercial landowners and developers. The Route 28 tax was imposed at the request of a landowners to improve Route 28 in exchange for higher commercial densities. Both Silver Line tax districts were supported by landowners expecting more density from transit-oriented development.

      The C&I tax was pushed aggressively by NVTA (the lobbying group) in order to permit more development. The NVTA is heavily financed by landowners and developers.

      The Tysons Service District was imposed by the Fairfax County BoS because the Tysons landowners and developers could not agree on another tax district to pay for some of the non-rail transit and road improvements necessary to support an urban Tysons.

      A good argument can be made that the landowners and developers received exactly what they requested. Density is expensive.

  2. Look the delay has been a disaster. Trust me, as a person who will rely on it on a daily basis once its open, its really a pain that its been delayed so much.

    But please justify how you say it is over budget. It most certainly is not. The budget was a lump sum, and no change orders have been applied except for a singular line item that was removed at the last second from the original contract documents in order to get shovels in the ground, as was known to be needed to be added back for $150 million.

    The latest changes for the communication contract are all out of the existing contingency fund, ie no additional funds.

    You can argue the project itself escalated in cost, but thats what happens when you wait wait wait multiple years, and also what happens when you have really terrible estimators and pure contract structuring (no bid/and the process from preliminary to final proposal was a disaster in bid process which ended up with a single high bid anyways).

    But those aren’t cost over runs, those are project cost increases that pre-date the construction phase. One way to have saved cost would have been to avoid all the stupid structural requirements that came about because of the Redline accident, which instead could have focused on the improvements made on shunts which by themselves would have avoided any deaths or incident. Instead feds over reacted and made it so our future transit has to be run like tanks on rails, which increases cost.

    Again, say what you will on the above vs below debacle, the delays because of liability hand washing on contract items, and the no bid process, but don’t lie and say its “over budget” that is an inaccurate statement which has a very specific meaning.

    Thanks

    • I’m just quoting the Washington Post, which says the project is “$150 million over its targeted cost.”

      Maybe you define that as something other than a cost overrun — I won’t argue the point — but I’d say your rhetoric is a little over-heated when you describe what I write as “a lie.”

    • We need a new term to describe the cost escalation for big projects. Over budget doesn’t quite capture the concept. Over budget suggests to me that we’ve estimate the cost for painting a house to be $4000, but the actual bill was $4500.

      The issue is really that the owner of the house was persuaded to paint his house through a proposal that indicated the cost would be $2500. He makes plans to shift money from other uses to the painting project, only to discover the revised estimate would be $4000. Had the owner known the cost would likely be $4000 (or even $4500), he may not have agreed to get his house painted.

      In December 2004, the final EIS for Dulles Rail, Phase 1, prepared by the Warner administration estimated the cost for Phase 1 to be $1.1 billion in 2004 dollars. Adding cumulative inflation since 2004, the cost increases to $1.36 billion. But as we all know, the actual cost was around $2.8 billion. The actual cost was, therefore, more than double the cost promised even including inflation. Community groups that worried about excessive costs were dismissed. Yet, they were right. What if the public had been told the real cost in 2004 dollars would be more than double the $1.1 “promise”? And what if DTR drivers would have been told they would be paying the bulk of those costs? Would the project have been approved? Would it have been supported by the public? Does this same phenomenon apply to road projects too? You better believe it.

      The bottom line is that taxpayers tend to get screwed by transportation projects. Too bad the Post’s editorial moroons don’t get this.

  3. I’m not going to pile on and here’s why. If you take any large project – from Boeing Dreamliner to many weapon systems and the Panama Canal Expansion .. there are overruns.

    I’m not excusing it but the reality is that big projects cost estimation is as much an art as a science and many projects that we take for granted now days.. had cost overruns.

    it’s basically human nature… and the sporting game of standing around waiting to take pot shots at a project like METRO, while perhaps fun is not particularly relevant in the long run. 5 years from now, thousands, perhaps millions of people will be using METRO and all of this stuff will be in the rear view mirror.

    Of more interest to me is why cities tend to be governed by liberals…rather than conservatives – and cities are the economic engines of the country not the rural areas that Conservatives have their electoral power rooted in.

    The conservatives will go ape-crap over METRO – but life will go on.. and NoVa will continue to be the economic powerhouse that subsidizes rural Virginia with it’s right wing elected wacko birds that promise to water the tree of liberty and all that goofy stuff.

  4. I could probably dig this out myself but who is paying the price for the delays, and how much? Were there penalties built into the contracts and are they being applied? I agree that with projects of this scope cost projection is an art and unexpected stuff happens, but leaking roofs can’t be blamed on anything over than bad design or workmanship, and that should be the contractor’s cost.

  5. “The office vacancy rate in Fairfax County crept another half percentage point higher in 2013 to 14.9% …”.

    Wow! That’s horrible! I wonder what the average office vacancy rate is for the United States? Oh, here’s the answer … 16.9%.

    http://www.reuters.com/article/2014/01/06/us-realestate-officevacancy-idUSBREA0503H20140106

    And where is the nation’s second lowest office vacancy rate (major cities)? Washington, DC at 10.3%. I wonder where all those Metro trains go?

    Jeez Jim – if you going to support your arguments by cherry picking facts you need to be more artful than that.

    • According to Fairfax County, Sequestration and federal budget cuts have created a large downturn in commercial office leases. This amounted to a net decrease in commercial assessments. On the other hand, commercial values in Loudoun County are up 8.13% from both growth and new construction. Loudoun County had four times more commercial growth than Fairfax County (with commercial including industrial, retail and apartments). My source is an email to me from a Fairfax County supervisor.

      The current vacancy rate in Fairfax County offices has not been seen since 1991.

  6. Down our way in Fredericksburg/Spotsy/Stafford, what we’re seeing in vacancies in the high dollar locations but lots of action in the lower cost locations…

    I think a lot of businesses these days are moving away from high-dollar locations … we’re seeing lawyers, dentists, other professional services even locating in older, smaller residential structures in transition zones.

    he high dollar locations are sitting vacant meanwhile….

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