McMahon: Lessons from a costly LIRR tunnel
Federal prosecutors suggested this week that a "culture of fraud" has afflicted the Long Island Rail Road. They were referring to alleged phony disability claims by LIRR employees -- but the phrase could just as well describe the chronic lowballing of past cost estimates for the LIRR's East Side Access connection to Grand Central Terminal.
Even as the U.S. attorney's office was preparing to indict 10 more LIRR retirees this week, the Metropolitan Transportation Authority was confirming that the cost of East Side Access had risen to $8.2 billion -- nearly $1 billion more than the amount budgeted in 2009. The target date for completion has now been pushed back another year, to 2019.
MTA officials cited the difficulty of tunneling beneath more than a dozen intersecting LIRR and Amtrak lines at the Harold Interlocking complex in Queens. But if such complications were unforeseen in the current capital budget, they were hardly unforeseeable. MTA officials say the "risk informed" approach to cost estimates now used by the agency would have confirmed, at least three years ago, an 80 percent likelihood that the East Side Access price-tag would exceed $8 billion.
The MTA is already on the hook for nearly $5 billion in East Side Access construction costs, more than double the figure cited by agency officials when the project was first put on track in the late 1990s. Back then, little mention was made of the Harold Interlocking issue -- or of the immense subterranean work the project has required in Manhattan.
East Side Access entails an all-new midtown train terminal, rivaling the space now allocated to LIRR at Penn Station, 15 stories below Grand Central. A projected 80,000 Long Island commuters to the East Side will save an average of 30 to 40 minutes on their daily round trips -- although the long escalator ride up to street level may feel like a commute in itself.
The decisive political force behind this grandiose project was probably former U.S. Sen. Alfonse D'Amato, whose clout in MTA matters was strengthened by the 1994 election of his political ally, Gov. George Pataki. At the peak of his power in Washington and Albany, D'Amato pushed East Side Access as a prime regional transit concern, even though other projects arguably deserved higher priority.
Having feasted on the political capital generated by their commitment to one of the biggest public works projects in New York's recent history, Pataki and D'Amato aren't around now to pick up the check. And at this point, it's unclear where the added billion dollars for East Side Access -- or the rest of MTA's next five-year capital plan -- will come from.
Advocates of the project have long suggested that the availability of a one-seat train ride to the East Side will boost Long Island real estate values. But what about the negative impact of a further increase in regional MTA taxes?
Because if taxes are not increased (again), the remaining choices are limited to the following:
* Demanding bigger subsidies from Albany -- which is just another way of passing the buck to downstate residents and businesses, who generate a disproportionate share of state tax revenues, while further hampering the competitiveness of struggling upstate areas.
* More borrowing, which will only add to MTA debt -- which has already more than doubled, to $32 billion, in the past decade.
* Plead for more money from the federal government -- which itself is bleeding red ink and still hasn't forked over a $2 billion loan the MTA needs to balance its current capital plan.
* Higher fares for LIRR riders -- over the united, knee-jerk opposition of Long Island pols, notwithstanding the fact that riders barely cover half of LIRR operating expenses as it is.
* Savings through greater operating efficiencies -- which inevitably will require pitched combat between the MTA and politically powerful unions whose expensive and unproductive contracts boost costs.
Joseph Lhota, who became MTA chairman last year, is pledging to get real about capital plans in the future. The era of underestimating big capital projects is over, he says.
Lhota's approach is refreshing, but MTA chiefs tend to have a short half-life. His boss, Gov. Andrew M. Cuomo, should promptly take steps to ensure that a rigorous, risk-adjusted approach to estimating construction costs becomes a permanent part of the planning process for every public agency in New York.
It's too late to turn back on East Side Access, but it's never too early to cast a skeptical eye on cost estimates for future megaprojects -- starting with the new Tappan Zee Bridge, for which the Cuomo administration is due to unveil a financial plan next month.
E.J. McMahon is senior fellow at the Manhattan Institute's Empire Center for New York State Policy.