Quite possibly the most confusing graphic showing the buildings set to be demolished along 2nd Ave. (From The New York Times)
While rising real estate costs can come as no surprise to, well, anyone in New York City, opponents of the 2nd Ave. subway will have a field day with a report today that says costs on the planned subway line are already rising.
Take it away, The New York Times:
Rising real estate prices will force the Metropolitan Transportation Authority to pay about $54 million more than it had anticipated to buy five Upper East Side buildings and portions of 24 others to make way for construction of the Second Avenue subway, according to a new estimate provided to the authority.
The increase represents a kind of turnabout for the authority, which has benefited from the booming real estate market of the past few years by taking in billions of dollars in taxes on real estate sales and mortgages. The same boom is now costing the authority money at a time when it is already struggling with hefty budget increases on some major projects.
William Neuman’s piece presents a whole bunch of economics behind the cost increases and notes that the cost increase represents the normal two-year rise in land value since the initial 2nd Ave. real estate assessment in 2005. But with a week and a half to go before the first major contract is set to be announced, this $54 million increase can only portend more cost increases. Mysore L. Nagaraja, the MTA’s head of capital construction, claims that contingency funds and budget restructuring will, for the most part, cover these costs.
Recently, the MTA faced a similar problem with their Fulton Street transit hub. A nearly $100 million increase in Lower Manhattan real estate values resulted in cost overruns that led to a less ostentatious design on Santiago Calatrava-designed transportation hub.
Despite these overruns, the truth is simple: Now is always going to be the best time to shell out this money because the project will simply get more expensive as time passes. The New York real estate market is insane right, and it shows no signs of slowing. More and more people want to live in the City, and more and more people are willing to pay for that privilege. Further delaying the 2nd Ave. Subway means the project will cost more when it is finally completed.
Right now, the East Side needs a new subway line, and I expect we’ll hear more about the economics of this multi-billion-dollar project as time goes by. This real estate hiccup will be the first of many cost increases.