RTD eyes privatization

FasTracks budget 'whacked' by cost of materials

Kevin Flynn, Rocky Mountain News

Published May 19, 2007 at midnight

Text size

More Local News

FasTracks is nearly $1.5 billion over its original $4.7 billion budget, forcing RTD to look even more closely at hiring private companies to build and operate rail lines.

The new, $6.2 billion total - a 32 percent increase - reflects requests for extras on FasTracks corridors and unexpected spikes in things such as steel, concrete and copper.

"The cost increases in construction materials really whacked us," Cal Marsella, RTD general manager, said Friday as he released a summary of a four-month internal review of the entire rapid-transit program.

One example: the cost of steel to be used in tracks, bridges and other structures went up from an average of 73 cents a pound in Colorado in 2003, when the FasTracks budget was being finalized, to $2.63 a pound last year, a 260 percent increase.

"We've had big hits on capital costs, but we're going to take effective corrective action to bring this program back in line," Marsella said.

It won't be simple.

The report shows RTD substantially increasing its borrowing, nearly up to the limit set by taxpayers in the 2004 vote that authorized FasTracks. But that, plus cuts in the original plan and other measures, still leaves the agency nearly $670 million short.

To close that gap, Marsella will propose that the RTD board approve several measures, the biggest of which is to put all of the new transit lines out for bidding by private companies.

Those private partnerships could do everything from designing and building the lines to financing them on their own and taking over complete operations for as long as 50 years.

The move, which wasn't mentioned during the 2004 FasTracks campaign, could attract worldwide interest from private firms already doing transportation projects in Europe, Australia and South America.

RTD already has received proposals from four investment banking partnerships competing to handle the task of farming out the lines to the private sector.

Primary candidates for privatization are the four corridors that are expected to use commuter rail rather than light rail. They are the Gold Line to Arvada and Wheat Ridge, Northwest Rail to Boulder and Longmont, North Metro Corridor to Commerce City and Thornton, and the East Corridor to Denver International Airport.

It's easier for RTD to hire private companies for commuter rail operations because light-rail employees are unionized. Given that, new light-rail lines would have to remain in-house without an agreement from the union allowing privatization.

Some RTD board members also are pushing the agency to use diesel, rather than electric-powered trains, on the commuter lines. Led by board member Lee Kemp, some members believe that the cost savings in having a single type of car and not building overhead electric lines and power stations would help close the gap.

The board is meeting today to go over details in the report.

As bad as the news is, it improved significantly from March, when an early draft of the revisions showed the total program could cost $6.5 billion - in 2006 dollars. That would have been close to $8 billion in actual expenditures over the 12 years of construction because of inflation.

Instead, the current estimate in 2006 dollars is just over $5.1 billion - which inflates to nearly $6.2 billion when spread out over the construction schedule.

That's almost $1.4 billion less than those early reports.

Marsella said even with the cost increases, the agency will deliver the basic program promised to voters.

But to do so, it will have to cut elements of the projects that had long been part of the plan. And it will have to insist that add-ons be paid for by the communities that want them.

"We're not shortening any lines, we're not taking any stations out," Marsella said. "But if you want new stations, you're going to have to find a way to pay for them. If you're going to hold me to the original $4.7 billion budget, you can't hold me to a higher scope of work.

"The door's open to additions to the project, but you're going to have to come up with the money."

That might go down hard in some corridors, such as East, where the original plan called for five stations along the route to the airport. During the required public participation following the election, the community and developers along the line lobbied to add three stations.

The revised plan incorporates only one, at Colorado Boulevard, but without parking. Two other proposed stations in the developing area southwest of DIA were dropped out of the budget.

RTD plans to go through the re-budgeting exercise each year, and Marsella said that might result in lowering costs along the way.

Or not.

"We have a history of boom and bust economies here," he said. "I'm not too worried about it. We just have to err on the side of caution."

FasTracks: Questions and answers

Why did the cost of FasTracks increase nearly $1.5 billion from the original estimate pitched to voters just three years ago?

RTD blames two-thirds of the problem on higher-than-expected surges in the cost of construction materials, mostly copper, steel and concrete, plus labor. Together, that accounts for just more than $1 billion of the $1.45 billion overrun. The other $420 million consists of add-ons to the project.

How will RTD cover the increase?

More than half, $810 million, would come from selling more bonds. RTD also plans to apply for more federal loans and grants, undertake other borrowing and seek higher contributions from local governments and organizations. Still, the agency is $670 million short.To cover that gap, RTD plans to partner with private transit builders and operators to take over some of the new rail lines for up to 50 years, accelerate construction, buy materials early and even sell of some RTD property.

Will there be cuts in service?

In some cases, yes. RTD will build stations for three-car trains instead of four-car trains. On the West Corridor RTD has cut proposed schedules so trains run every 15 minutes instead of every 5 minutes from Golden to the Denver Federal Center.

Will all trains and buses be rolling by 2017 as promised?

RTD says it can maintain that schedule. In fact, it intends to try to accelerate work to save money.

Will the money problems end up costing taxpayers more?

Possibly. RTD can't collect any more in sales taxes than the 0.4-cent increase voters allowed. But by extending debt repayments or entering into privatization partnerships, the existing tax could last longer than planned. On the other hand, by taking advantage of future opportunities to refinance and pay off earlier, RTD could reduce the tax on schedule.

RTD add-ons

Of the nearly $1.5 billion of FasTracks budget increases, about one-third are because of add-ons deemed necessary by RTD or requested by communities. To compensate for the $460 million of added costs, RTD has also made or proposed cuts. Here's a sample of each:

ADDITIONS

• An elevated station on the I-225 light-rail line at Colfax Avenue, rather than a ground-level station.

• An electrified, instead of diesel-powered, train system to DIA, adding to construction costs for overhead wiring and power stations.

• One extra station on the DIA line, at Colorado Boulevard, and the possibility of two more stations closer to the airport.

SUBTRACTIONS

• Eliminate proposed streetcar conversion of the light rail through Five Points, which would have allowed trains to go south to Civic Center and the Capitol.

• Build a single light-rail track on the West Corridor to Golden from the Denver Federal Center, instead of a double track.

• A grade crossing, rather than an overpass, for the rail line to DIA at Peoria Street.

What they're saying

• "Our job is to do everything we can to help RTD work through this problem. We're in the same position RTD is in with our new Justice Center. The increasing costs of steel and concrete, 150 percent in three years, is something no one could have anticipated. But within the next six months we'll work through this problem with them."

John Hickenlooper, Denver mayor

• "We were entrusted by the voters to put FasTracks together and to do it within the tax increase and within the 12-year build-out period. That is our goal and I think all the board members remain committed to doing that, and keeping that promise to the voters. But as with any game plan, you have to make adjustments along the way, so we will tackle each issue as we move along.

Chris Martinez, RTD board

• "If only somebody had warned the people of metro Denver that FasTracks might go over budget, we could have stopped this. Wait, we did warn them ... Now's the time to pull back and rescind the program and tax, and let RTD come back with a real plan."

Jon Caldara, Independence Institute president

• "Citizens in north Denver want a station that serves the neighborhood, and we wouldn't want the possible privatization of that project to compromise the success of the station."

Mike Tavel, north Denver resident and business owner near the Gold Line and Northwest Rail corridors.

What's next

• The RTD Board will discuss the FasTracks report at 8:30 this morning in its meeting room in the basement of 1600 Blake St., Denver.

flynnk@RockyMountainNews.com or 303-954-5247

Subscribe to the Rocky Mountain News