Wednesday, May 14, 2008

Denver's RTD likes to tell us that their cost over runs with FasTracks are as simple as an "unforeseen" rise in construction costs. Those are a large part of the issue for them. In itself isn't an excuse since their are financial instruments they could use to help mitigate those risks much like Southwest Airlines does with buying heating oil options to mitigate their jet fuel cost changes.

RTD's problems go beyond that. As previously mentioned on far too many parts of the Fastracks project they have been and still are overly optimistic about future costs for those items. That's not surprising since the lower the projected cost of the project when they went to the voters in 2004, the more likely they can get it to pass.

Another example of the lack of good project management by RTD came out last week. It seems that in RTD's ambition to get Union Pacific to move a major operation yard out to Fort Lupton, RTD purchased land for them out there. They weren't close to finalizing a deal but that didn't stop RTD from buying land at 3 to 8 times the going market rate.

Fort Lupton is more or less like the rest of Colorado east of the Front Range. It's relatively flat, empty high plains. Current market prices for agricultural land is $10,000 to $15,000 an acre. That's for agricultural land. UP recently bought 39 acres for $80,000 (a bit more than $2k per acre). Yet RTD lept in and bought land for $28k to $83k an acre! The result is that RTD's spent $15 million for land that it has no need for, especially with UP needing nearly three quarters a billion dollars to make the move.

RTD's costs for Fastracks have been driven up by construction related inflation. RTD failed to mitigate those risks. But their problems with managing this project go beyond their inability to plan for the future. They're simply struggling to make good decisions in running the project in cases like this. They're putting the cart before the horse. It should be no surprise that the project's costs have already gone up to $6.1 billion from $4.7 billion before they've even laid the first rail. Those costs are likely to be driven even higher as the state's review showed last week. At what point do the taxpayers say enough is enough and get RTD to change the scope of the project to prevent even more billions spent on what is essentially a downtown transportation system?

No comments: