Issue Summary (Updated January 2009)
North Shore Connector

The Issue:

The Port Authority of Allegheny County continues to move through the construction stage, and almost every bid has come in above projections. So will the project’s final price tag resemble anything close to the estimated cost of $435 million?

What We Know:

The project known as the North Shore Connector was originally approved for funding by the Federal Transit Administration in 2003 at a cost of $362 million. The Connector project was denied approval in 2001 when the cost was $390 million. That proposal had an additional third stop on the North Shore. After the not recommended notice arrived, the Port Authority reworked the proposal by deleting the third stop and reducing costs to $362 million, the FTA gave the project a medium rating to go ahead.

After 2003, the costs of the project escalated and bids for the work came in well above budgeted figures requiring new estimates of construction costs which were obviously not going to be acceptable. The Port Authority then proceeded to drop the important Convention Center link, a heretofore integral part of the justification for the project and yet the new cost forecast still rose to $435 million. That, in turn, means that the North Shore portion of the project alone had increased in cost by over $100 million or almost 40 percent.

Nonetheless, even using the ridership forecast from the proposal approved by the FTA in 2003, the cost per new rider on the system is unconscionably high. Predictions call for 4,400 new users per day by 2030, some 20 years after the completion of the project. Assuming a conservative 7 percent annual cost of capital along with the expected $8.5 million per year in operations and maintenance expenditures, the cost per new roundtrip on the system over the first 20 years is calculated to be $48.

Bear in mind too that the Port Authority’s ridership figures included the use of the Convention Center link to the Steel Plaza Station. So the cost estimate of $48 per round trip is very conservative. Moreover, in calculating the economic and transportation benefits of the project, much was made of the number of employees within a half mile radius of the new stations, with an average of 37,612 workers per station. However, as a result of removing the convention center station, that average figure would be reduced to no more than half the 37, 612 figure used to justify the project originally.

Thus, it is clear that the FTA completely abandoned its obligation to focus on the already tenuous cost-benefit ratio and allowed a massive increase in the ratio of costs to benefits to occur and still agree to the increased level of funding. This is a clear failure on the part of a bureaucracy to do its job as steward of taxpayer money.

Finally, the inevitable cost overruns for this type of project have not been factored in, making the FTA’s stance even more shocking.

Since shovel met dirt, the project has imposed many other additional costs on the region. These include shutdowns of major roadways to accommodate construction; costs to businesses in and around the area of construction in Downtown; and costs and inconvenience to the riders who used the Gateway station where the tunnel will enter Downtown.

Recommendations:

This episode needs to be kept constantly in the public’s eye to remind them and politicians what happens when unbridled greed and arrogance replace sound analysis and reason.