Home East Side Access Project NYS Comptroller: Sky blue, East Side Access over budget

NYS Comptroller: Sky blue, East Side Access over budget

by Benjamin Kabak

In a sense, the MTA’s East Side Access project has gotten a pass from just about everyone. It’s a worthwhile project, but it was originally supposed to be in revenue service by late 2012. It’s nearly a decade over schedule and billions of dollars over budget, but few people seem to care. The media has barely covered it; the public doesn’t care. Unlike the Second Ave. Subway, it doesn’t disrupt lives, but it just goes on and on and on.

By and large, the MTA has been forthcoming with budget information on East Side Access. We know that the project will cost more than $8 billion, and we know that this figure is well beyond initial estimates. We know it’s been delayed and delayed again, and we know the agency is going to have to spend money on new rolling stock to meet demand. In all senses, managing the budget for this project has been a disaster.

Enter Thomas DiNapoli. The New York State Comptroller has the power to do any number of audits on the MTA with any sorts of conclusions, but I’ve often been frustrated by his results. He re-reports numbers that already available in MTA materials without offering guidance on controlling costs. This time around, DiNapoli has discovered that East Side Access is — gasp — over budget and late. Shocking news, I know.

“Time and again, the MTA has come up short on the goal to deliver the East Side Access project on schedule and within budget,” DiNapoli said in a press release. “While this project is an important addition to the regional mass transit system serving New York City and Long Island, taxpayers will have to bear the brunt of these unanticipated costs. There must be lessons learned at the MTA from this experience as they move forward with their capital program.”

Here are some of DiNapoli’s stunning conclusions:

The MTA’s current cost estimate for East Side Access is $8.25 billion, but that figure grows to $8.76 billion when the cost of additional passenger railcars needed to meet service demand is factored in.
The MTA has acknowledged that its initial cost estimates and schedules (which were released in 1999) were based on conceptual plans with virtually no engineering work behind them.

By the time design work had advanced in 2006, the estimated cost had grown to $6.3 billion and the completion date had been pushed back four years to December 2013.

Since 2006, the cost has grown by $2.4 billion, or 38 percent, and the completion date has been pushed back another six years. A range of factors, including overly aggressive schedules, the number of large concurrent infrastructure projects, a contractor that performed poor quality work and unforeseen construction challenges increased cost and contributed to delays.

The MTA estimates that there is an 80 percent probability that the actual cost of East Side Access may be at or below its current estimate, and that service could begin up to one year earlier than currently forecast. Conversely, there is a 20 percent probability of additional costs or delays…

Debt service on bonds issued by the MTA to fund the cost of East Side Access is estimated to exceed $300 million in 2019 when the project enters service. This represents nearly 11 percent of the debt service for the MTA’s entire capital program in 2019. Debt service is reflected in the operating budget and is funded with fares, tolls and tax revenues.

A rezoning of the area around Grand Central Terminal to permit higher density office buildings proposed by Mayor Bloomberg, in combination with the completion of East Side Access in 2019, is expected to increase overcrowding on subway platforms and surrounding passageways.

None of these bullet points were conclusions DiNapoli reached through his own analysis, and they were all available in MTA board books released to the public last May, if not earlier. DiNapoli is, in other words, telling us something we already know: The East Side Access project has turned into a boondoggle. Contractors are reaping the benefits, and we the taxpayers are getting worked over on a daily basis.

So how can the MTA control costs in the future? What does the New York State comptroller offer as to lessons for the future? Well, he offers up a big fat nothing. His ultimate bullet point concerning rezoning could be culled from recent newspaper headlines and has very little to do with the costs or completion of the East Side Access project.

I would love to see DiNapoli’s office do more. We all know there are problems, inefficiencies and massive budget overruns, but tell us why. Tell us how to avoid it for future problems, and add to the dialogue. Regurgitating public records is simply an additional waste of taxpayer dollars albeit from the Comptroller’s Office instead of the MTA.

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Berk32 March 7, 2013 - 12:30 am

well… at least he’s not following the footsteps of his predecessor and misinforming the public… “2 sets of books”…

Larry Littlefield March 7, 2013 - 8:19 am

Those who made the “two sets of books” claim, the transit unions, the Straphangers, various Comptrollers and politicians — were the biggest liars of all.

The claim: we can take more for ourselves right now, without making anyone else worse off, because there is hidden $billions somewhere.

Well everyone with power took, and took, and took. And what are the consequences now? Where are the hidden $billions?

If the books were right, they would have shown the MTA selling off the future by increasing and deferring retirement costs (bigger issue in other agencies) and running up debts (also in the Transportation “Trust” Fund for roads and bridges, in NY and NJ).

The two sets of books were the opposite of what Generation Greed claimed, and continues to claim, even as the consequences hit and hit and hit and hit.

Berk32 March 7, 2013 - 8:58 am

the previous Comptroller – Alan Hevesi – was the originator of ‘2 sets of books’

Larry Littlefield March 7, 2013 - 9:55 am

And despite what was later revealed about him, pandering pols and advocates continue to repeat it.

Michael K March 7, 2013 - 12:35 am

Well said.

Adirondacker12800 March 7, 2013 - 1:48 am

t was originally supposed to be in revenue service by late 2012

… it was originally supposed to be open by the late 70s….

D.R. Graham March 7, 2013 - 3:23 am

The only provisions made for East Side Access back in the 70s was the 63rd Street bi-level tunnel under the East River. Other than that I can’t recall any written estimates for moving the commuter rail portion of the tunnel forward besides Second Avenue Subway.

Nathanael March 9, 2013 - 12:29 am

Long before that, the tunnel currently used for the #7 train was originally planned to carry the LIRR into Grand Central. (This was well before the tunnel actually got built.)

Someone March 7, 2013 - 9:33 am

…Back then, the upper 63rd Street tunnel was in danger of being cancelled.

D.R. Graham March 7, 2013 - 3:26 am

“A rezoning of the area around Grand Central Terminal to permit higher density office buildings proposed by Mayor Bloomberg, in combination with the completion of East Side Access in 2019, is expected to increase overcrowding on subway platforms and surrounding passageways.”

I love the fact that he mentions this…I hate the fact that he offers up no solution to the obvious problem mentioned. Yet the people of New York vote by party and he is elected. The day we all start voting by issues and not party is the day the people take back the state.

Larry Littlefield March 7, 2013 - 7:08 am

“Yet the people of New York vote by party and he is elected.”

If people voted by party he would not have been elected.

“The MTA’s current cost estimate for East Side Access is $8.25 billion, but that figure grows to $8.76 billion when the cost of additional passenger railcars needed to meet service demand is factored in.”

However, if you adjust for the fact that politically the people of New York City only count for half as much as those on Long Island, unless they are in the executive/financial class or the political/union class and drive everywhere, the adjusted cost is just $4.4 billion, or about the same as the Second Avenue Subway!

Larry Littlefield March 7, 2013 - 8:31 am

“I would love to see DiNapoli’s office do more. We all know there are problems, inefficiencies and massive budget overruns, but tell us why. Tell us how to avoid it for future problems, and add to the dialogue.”

He can’t tell you, because those who benefit from this are among the contributors to the state legislature.

1) The bidding process has been scammed. Every time the MTA puts out a bid, it also puts out an estimate. The estimate is used as the bottom number by the bidders, who add a percent. Then for the next project, the MTA raises its estimate.

2) The MTA is paying the cost for PRIVATE SECTOR pension underfunding, in the construction industry, not only for companies who worked on its past projects but those working on projects in general.

The unionized construction companies, which the state legislature says must be used by the MTA, are part of multi-employer pension plans. In the stock market bubble these companies slashed their contributions to the plans, enriching executives, while handing out hugely expensive retroactive pension enhancements to the unionized employees. Everyone grabbed their fraudulent windfall and left.

So who is going to make those pension funds whole? Not those building private buildings — they’ll go non-union instead. Not those who benefittted. So they are socking it too the MTA. That’s why the head of the contractor’s association says the problem is bids are too low, and profits are too low, not the other way around. But he won’t say why either.

Some news of this leaked in the last contract negotiation between the construction unions and companies. The companies claimed that unionized workers used to cost 10.0% more, offset by better higher quality workers, but now cost 40.0% more. They wouldn’t say why. It wasn’t higher cash pay or lower productivity. They took some of it out of the hides of younger generations or workers. They are trying to get the rest from the MTA.

3) Soft costs are through the roof. Every time someone with power kveteches, the MTA adds consultants, information campaigns, blacked out construction periods leading to longer timeframes, etc.

Heck, sometimes I got the impression that there were five engineers watching each worker work. One from the contractor, to ensure the work got done, because the unions encourange the minimum work possible. One from the MTA, to ensure the contractor didn’t rip us off by doing bad work, which they always do if they can since their “right” to future work cannot be taken away. The environmental guy, to make sure there was no asbestos. And the noise guy, because the neighbors complained.

Larry Littlefield March 7, 2013 - 8:36 am

By the way, this isn’t just at the MTA. I had solar panels put on my roof. The applications before and the inspections afterward took a total of one year. The installation took one day.

Since the panels were unaffected by two hurricanes, I no longer feel aggrieved that I had to stay home from work more than once so someone could look at the roof beams in the crawl space. But still, that costs money!

Someone March 7, 2013 - 10:56 am

I had solar panels on my roof as well. It took three years to file the paperwork and inspect it, and just one day to install it.

So, no one’s noticing anything wrong about that?

Nathanael March 9, 2013 - 12:31 am

The permitting for solar panels goes much, much quicker than that upstate.

Soooo…. it’s not strictly a NY State thing. It’s worth examining *exactly* where it’s a problem.

David Brown March 7, 2013 - 9:30 am

The problem with politicians like DiNapoli is they really are oblivious to what is actually going on (Or he is just trying to make himself look good). No one should be in shock that this project is overbudget and behind schedule. There is one Subway Station (Smith & 9th St) that has been shut down well beyond what was forecasted. Why? Because they can get away with it. East Side Access is essentially a “Too Big To Fail” mistake (Fulton St Transit Center is another). The only way to stop it, is not to allow the MTA to start any new major projects until stuff like this are finally finished. By the way doesn’t Nassau County Executive Edward Mangano look smarter everyday getting rid of the MTA in the County. I would love to see NY City do that with the subways and busses (Wind down the MTA operations (Such as the Transit Center), and essentially take them over and hand them off to someone else (Like Mangano did) with the plan to get the busses and trains operating better, and cleaning up messes like Chambers St “J” and bringing back the Gimbels Passageway).

VLM March 7, 2013 - 9:34 am

By the way doesn’t Nassau County Executive Edward Mangano look smarter everyday getting rid of the MTA in the County.

That is possibly the least intelligent thing anyone has said here. Have you looked at how people view NICE? Have you ridden? It’s an unqualified disaster and Nassau is getting shafted on multiple fronts.

SEAN March 7, 2013 - 11:23 am

I agree. NICE is a complete joke, as I’ve been riding more in the last few months & noticing what changes were made. Outside of 46 new Orion busses, the Clever Devices AVS on most of the fleet has been turned off for several months, an ADA violation.

At Roosevelt Field, bus posissions were rotated, but the signage doesn’t reflect such changes.

As for on time performance, NICE makes NJT & Bee-line look like rock stars. I could go on, but it would make me agravated.

Subutay Musluoglu March 7, 2013 - 10:12 am

I agree that Napoli has not uncovered anything new in his analysis of East Side Access (ESA), which is most unfortunate, because it’s right there staring him in the face. Throughout his report, he repeats several times how much the project has grown since the Full Funding Grant Agreement (FFGA) was executed with the Federal Transit Administration. See specifically on Page 4, left hand column, next to last paragraph. The formula for calculating FFGAs are outlined in the FTA’s New Starts guidelines, which in conjunction with the National Environmental Policy Act (NEPA), regulates the complex analyses that take place in the study phase of a given project, during which time its merits and cost effectiveness are evaluated.

This is somewhat ironic, considering that in the early-mid 1990s the MTA intentionally accepted a lower Federal share of the FFGA for the 63rd Street Connector project to connect the then stub end 63rd Street Tunnel to the Queens Boulevard Line. The cost of the Connector was lower relative to the anticipated costs of ESA and the Second Avenue Subway (SAS), which at that time were very, very early in their respective Alternatives Analysis / Major Investment Study processes. As such, the MTA and the State of New York reasoned that they had the ability to absorb a higher share of the Connector (known as the “local match” under FTA New Starts guidelines) and by doing so, be in a stronger position to ask for a higher Federal Share for SAS and ESA. While no one expected the heady days of the 1970s, when entire systems such as the Washington Metro and Atlanta’s MARTA were built with 80% Federal /20% Local shares, it the hope was to get at least in the range of 50% – 60% for SAS and ESA. So the Federal share of $2.7 B for ESA looks very favorable when the project cost stood at $4.7 B (exclusive of rolling stock), but now looks relatively smaller in the context of the overall current cost of $8.7 B.

It is not unusual for the design of large scale projects to be tinkered with after FFGAs are executed. This can be for a multitude of reasons – addressing late engineering challenges, responding to local issues / community concerns, responding to local construction / labor market conditions, requiring contract repackaging (as we have seen on the Fulton Center and ESA). So while cost increases are not uncommon on other urban rail projects receiving FTA New Starts funding, the sheer scale that has occurred on ESA has been astounding and requires close examination. The FFGA was executed before entire design packages representing significant portions of the overall project, such as the concourse and street entrances, were still early in their respective design evolutions and their full scope and costs were not understood. Even today, the final concourse fit-out contract package is still being refined. Besides the caverns and tunnels, the concourse represents a significant portion of the ESA project. I find it incredible for such a significant project element to still be in flux this late into the project timetable.

What is going on here? Scope creep? Maybe. There is a tendency on these massive projects to keep refining the design and tinker with specific elements, with the admirable objective of reducing costs. Value engineering, a technique to identify specific design elements for cost reduction and alternative construction techniques to receive lower contractor bids, are supposed to save money, but I believe it has become a self perpetuating cycle, where the incessant search for cost reductions and schedule savings actually contributes to more delays and drags out the project. For example, let’s say a much higher than anticipated bid is received on a given contract. If an agreement cannot be reached with the contractor, then the owner directs the designer to redesign the contract, breaking out certain elements, moving them to other packages, etc. This is not a simple process. Calculations have to recalculated, materials and quantities have to be re-estimated, drawings have to be redrawn. Scope is reduced, sometimes leading to a reduction in functionality. By the time the new contract is ready to be readvertised, it’s possible that market conditions have improved to the point where more favorable bids can be received, but isn’t it also possible that increased labor costs and schedule delay associated with a redesign process, now susceptible to other market forces and good old inflation, actually makes it costlier in the long run? Is anyone examining this?

I realize that I am not close to the inside calculations and machinations of the project, but to an outside observer the process of repackaging contracts, breaking out elements and moving them around appears haphazard and endless, and more importantly, not adequately explained to the public. Is this a result of bad leadership? Is this just the cost of doing business where large mega projects are concerned? I don’t know, but at some point, someone has to say “pencils down!”

And on a side note, I learned a few years ago that the MTA was in a position to start significant tunneling work as early as 2006, before the FFGA was executed, with its own Capital Program funds that had already been identified and set aside for just that purpose, but chose to not to do so, for reasons that are not quite clear. Regardless, I wonder where the project would stand today if this had been done.

All of this leads to possibly the most important question that needs to be asked by Napoli and the political leadership of the State of New York – what roles have been played by MTA Capital Construction, the ESA Program Manager, and ultimately, the MTA Board? Because the MTA had never managed a project with the sheer size and scope of ESA, in 1999 it wisely chose to appoint an outside program manager when the project progressed to the Environmental Impact Study phase, concurrent with Preliminary Engineering. A program manager with the engineering expertise and past experience from similar projects would presumably help keep ESA on schedule and within budget. Whether this has occurred is highly questionable. After several years of this arrangement, the MTA created Capital Construction, presumably to assemble its own in-house team of talent that can manage ESA and the other mega projects. Again, this was done presumably to get a better handle on the overall program. However, is it possible that all this did was create additional layers of bureaucracy and personnel with overlapping functions, and conflicting objectives? Is the MTA Board aware of this? Those on this thread know very well that board members are briefed in private by agency staff and are presumably aware of the behind the scenes challenges. But are they asking the tough questions? I hope they are. And if not, at which point are they obligated to be accountable to us, the taxpayers of NY State who are paying for this?

This is not meant to be an attack on the MTA. On the contrary, we eagerly await the completion of this project, critical to the economic and social success of New York’s next century, and can mutually agree that we wish the MTA great success in finally completing ESA. But as ESA costs increase, there will be less funding and a lack of public trust and credibility to embark on other projects, such as those needed to make ESA work to its fullest potential, as well as future phases of SAS.

Larry Littlefield March 7, 2013 - 12:09 pm

“And on a side note, I learned a few years ago that the MTA was in a position to start significant tunneling work as early as 2006, before the FFGA was executed, with its own Capital Program funds that had already been identified and set aside for just that purpose, but chose to not to do so, for reasons that are not quite clear.”

I believe the federal government doesn’t way to pay for projects the states are going to do anyway. So if you start construction before their 20 year application period, you forfeit your chance of having them cover 20 percent of the costs that get inflated by 50 percent. (For road projects the Feds cover 80 percent).

Subutay Musluoglu March 8, 2013 - 7:08 am

I do not believe that is it. There was never any doubt that ESA was going to receive a Federal match under New Starts – it was only a matter of when and exactly how much. ESA was already well along in the New Starts pipeline at the time, ranking very high in the FTA’s ratings for New Starts projects and only 6 months or so away from receiving a FFGA. I did not go into more detail because I was not privy to the discussions, but my understanding was that there was political posturing (a pissing match essentially) occuring between then MTA Chairman Kalikow and the FTA. The disagreement revolved around the differing cost estimates between MTA and the FTA, a problem that continues to some extent today. I will leave it at that.

Larry Littlefield March 8, 2013 - 7:52 am

Well, you are right about one thing: East Side Access and the Second Avenue Subway were planned as part of one big plan. In the mid-1960s. The last thing we need is more people packing on the Lex.

One thing they could do is get MetroNorth to Penn up and running at the same time. And then eliminate the free transfer to the subway for commuter rail travelers at Grand Central, directing those folks to Penn. That wouldn’t be so nice for Metro North Harlem Line commuters, however.

Nathanael March 9, 2013 - 12:34 am

Build Phase II of SAS and give the Harlem Line commuters free transfers at 125th St. (Yeah, yeah, I know…)

Christopher A. March 7, 2013 - 10:26 am

Thinking about ESA….

Does anyone know if there were any projections about increased usage on the Lexington Ave. line, with new LIRR riders coming into Grand Central?

It seems like MTA project management is non-existent. There have been so many things missed early in the project’s definition that I’d be embarrassed to be associated with management of the project. But should we expect otherwise from anything done in NYS these days?

Someone March 7, 2013 - 10:52 am

Now this has officially gone out of hand. ESA, in addition to be overpriced, over-delayed, and uncared for, is also poorly planned. DiNapoli should have caught this earlier on.

SEAN March 7, 2013 - 11:32 am

How has this gotten out of hand?

Someone March 7, 2013 - 12:38 pm

The overpricing of the project and the poor planning for it.

Benjamin Kabak March 7, 2013 - 12:40 pm

Still not seeing how this has “officially gotten out of hand.” My whole point is that DiNapoli isn’t saying anything new. The MTA has come clean on all of the information in his report, and they did so years ago.

Rob Stevens March 7, 2013 - 11:56 am

Don’t forget that this was the “cheaper” alternative — the MTA’s original 1960s plan was to build a separate terminal at 48th St.

Simon March 8, 2013 - 10:12 am

This essentially is a separate terminal.

Someone March 8, 2013 - 4:21 pm

Two levels, two terminals.

Nathanael March 9, 2013 - 12:36 am

If it weren’t for turf wars, the MTA would have bitten the bullet, connected the ESA tunnels to the Park Avenue Tunnel, and put the LIRR trains into the EXISTING part of GCT. Saving an *enormous* amount of money and effort.

But that would require that Metro-North and LIRR COOPERATE. And worse, that the electrification systems be altered. (Which needs to be done anyway.) So instead we get a gigantic underground cavern.

Digging gigantic underground caverns is really very expensive. It’s what sank “ARC”. Connecting to existing surface stations is more disruptive, but *much less expensive*.

Justin Samuels March 9, 2013 - 6:29 pm

Unifying the third rails would cause big adjustments to the rolling stock,and other issues. Also, the terminals in Grand Central are basically filled up by the Metro North during peak hours. Simply connecting LIRR tracks to them may not have resulted in enough space, so operationally it wouldn’t work. So they decided to build a new cavern.

AMM March 8, 2013 - 7:23 am

I’m surprised that no one has mentioned the obvious explanation why large projects go over budget and over schedule: the original budget and schedule were unrealistic.

Basically, it’s because if you submit a realistic budget and schedule, your project won’t get approved. Or, if it’s considered essential, you’ll get replaced by someone who _will_ submit a less realistic proposal.

This happens everywhere, not just in NYC and not just in government projects. Large corporations have the exact same problem. It happens when the group or entity involved is large enough that politics and appearance trump reality amd history. (Second-hand quote from someone in my company: “reality is whatever we agree it is.”)


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