Saturday, June 28, 2008

Fastracks Costs : More Than Construction Inflation

Seeing Reuteman at the Denver Post arguing that the tax payers should give RTD even more money for Fastracks was annoying to say the least. Reutman's argument is based on the semi-false claims that RTD has been trumpeting this whole time. That is, the aren't getting as much in sales tax revenues as they told the voters they would and that their large construction cost increases were unforeseen. The problem is, these claims are only half-truths.

Earlier in this decade when RTD was getting ready to go to the voters we were seeing costs of commodities like copper and aluminum outpacing inflation. Steel prices were rising quickly back then. For example, Chinese consumption was increasing by 20% per year (about 1/2 of the total US annual output of steel). RTD had no business making the sort of cost assumptions back then that they did. They ignored what was happening then and they're paying the price today. It's not just that recent rises have been so steep, it's that they underestimated increases as they were happening 5-10 years ago. Recent increases make the situation that much worse.

We can see this in the West Corridor. The West Corridor was originally going to cost $508.2 million (RMN). Ac couple years after the vote, the cost had gone up to $744 million. That's a 40% increase. Even over a few years higher than projected construction costs would have not led to 40% more.

RTD trimmed down the costs for the West Corridor including reducing potential capacity by reducing station size and single tracking part of the line. That brought the cost down to $634 million. In the year since then the project cost for the West Corridor shot back up to $707.6 million (RMN).

RTD says that the lion share of that change was due to construction costs increases. How can that be? The Colorado Construction Cost Index went up 6.1% last year. Yet costs on the West corridor went up 12%. They've aleady made about $275 million worth of "cuts" on a line that was originally going to cost $508.2 million. There's more to the issue than just unanticipated construction cost increases.

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