The Back Story: The Less Interesting Truth About the BART Extension’s Rising Costs
In the next day or so, the Mercury News will publish a story about the BART Silicon Valley extension. The story will likely feature a “gotcha” headline about a “ballooning” $9.318 billion “cost estimate,” and will likely contain allegations of Valley Transportation Authority’s “secrecy” about the true cost of the project that was somehow “hidden” from the public by me or others. The story will emphasize that VTA staff and board members, such as myself, have somehow “only now” conceded that the cost of the BART extension now exceeds that of the federal “cost estimate” from 2020 that we somehow suppressed, denied, or disputed. Whew.
The writer and paper have followed this predictable, clickbait-worthy pattern in past “gotcha” stories about BART, undeterred by (typically less interesting) facts to the contrary. So, in anticipation of the story, here are the facts of which I’m aware:
- What is the latest cost estimate? First, as I told the writer, there is no $9.318 billion “cost estimate” for the project. The VTA submitted a $9.318 billion funding plan to the Federal Transportation Administration (FTA) in order to apply for funding under the FTA’s “New Starts” program. Specifically, in a recent letter to the regional FTA administrator, the VTA includes that $9.318 billion figure within a chart labeled “Summary of BSVII [BART to Silicon Valley, Phase 2] Funding Sources,” which was publicly released. We’ll have an updated cost estimate published in February of 2023.
- What’s the difference between a “cost estimate” and a “funding plan”? There’s a big difference: a cost estimate is based on an analysis of construction and development expenses. That analysis hasn’t been done in several years–not even by the federal government–but we’ll have an analysis available early in 2023. The funding plan merely describes how much and where the project will draw its funding, including federal, state, and local resources. It’s not a cost estimate.
- What will the BART extension cost? We don’t have a recent estimate, so any number offered would be speculative, but it’s certainly going to be more than $8 billion. Over the last three to five years, construction costs on every transit project in the U.S. have escalated rapidly, for reasons relating to systemic inflation, construction labor shortages, supply chain breakdowns, rising interest rates, and other factors. We’ll know more with the updated cost estimate, but we won’t really know what a project costs until the bids come in. Then expenditures will be considered by the VTA Board to decide whether to move forward, and contracts will be signed. Then we’ll know what it costs–and well before that, taxpayers will know what we’re paying..
- How did VTA arrive at this $9.318 billion figure? In May of 2021, the FTA released its risk analysis, and calculated a potential cost of $9.148 billion for the project. The FTA’s report (on p. 5–10) describes its cost risk model as using “factors as a multiplier of the cost of individual project elements to determine the cost for the worst plausible probable scenario cost, taken as the ‘upper bound’.” That FTA figure is the number that VTA is required to use for funding plans if we want FTA to approve any funding for the project. So, VTA updated financing costs (interest rates have doubled in this time), and included a construction cost inflation escalator, arriving at the $9.318 billion figure. We’ll know more about the actual costs when a full analysis is completed in February, but the real cost numbers will only emerge from the bidding process.
- What is this business about “hiding costs from the public” and “secrecy”? Text messages from a senior VTA official urged me to avoid publicly discussing the competing estimates for increased BART construction costs while private contractors contemporaneously prepared bids on that same multi-billion dollar project. If I had disclosed that information publicly, it would have encouraged those private contractors to increase their bids, costing taxpayers hundreds of millions of dollars. As I explained many months ago, “I would do precisely the same thing if I were confronted with this issue today, as should any other public official in similar circumstances” to save taxpayer dollars. The time for public disclosure of construction costs is certainly not during the bidding process, but it certainly is in the weeks before any public body makes a spending decision on that project. In other words, the public should know well before VTA or any other agency spends their money on a project. That’s the point of public disclosure rules: to inform the taxpayers, not to tip off potential construction bidders who will elicit even more money from those same taxpayers.
- OK, Sam, how do we know your purported reasons for keeping these cost projections quiet were just about saving taxpayers money, and not some other political reason? Because the Mercury News published text exchanges that revealed that the VTA official managing BART construction, Takis Salipeas, urged me to avoid discussing any potential project budget increases because ‘we have 9 major construction teams shortlisted’ [to bid on the project, and] ‘they [are] listening to everything!’ Despite this straightforward explanation for declining to publicly discuss competing cost estimates for the project, the Mercury News ran stories several times in successive weeks with headlines decrying that we “tried to hide” ballooning BART costs from the public. Sometimes, those accounts failed to even mention the exculpatory texts, or minimized them. It’s always more interesting (and very easy) to suggest that there’s a malicious or salacious motive when public officials are tight-lipped, but the truth is often much less interesting.
- Is there any good news in any of this? Yes! This month’s announcement that VTA will apply for “New Starts” funding provides a path for BART construction to move forward. The agency seeks to accelerate construction activities next year, including the boring machine purchase, building demolition, utility relocation, and site preparation. FTA’s support for the project remains strong, as the agency has long recognized BART-to-Silicon Valley among the highest-priority transit projects nationally. The FTA , has already committed $225 million to the project, and the Biden Administration just allocated $200 million more. Phase I of this project was completed in 2020 more than $80 million under budget, in large part because bidding took place during the Great Recession. If the economy continues to soften–as expected–next year, that could reduce pressure on construction costs.
- How do we halt these cost increases? As I mentioned earlier, every major transit project in the nation has seen costs balloon, particularly through the pandemic. Caltrain’s electrification costs increased by “only” a few hundred million dollars, however, because much of the construction on the project had already been completed (leaving a smaller share of the remaining construction budget to inflate). Therein lies the answer–as I told the Mercury News, we can control costs by doing two things: sign construction contracts, and get a shovel in the ground. That’s it–we don’t get the luxury of any assurances until a contract is signed.
Our taxpayers bear very high costs in all of these seemingly too expensive, too complex, and too large transit projects, but the most overlooked cost is the price of indecision and delay. Every year of delay adds hundreds of millions of dollars to the budget. Despite the very high price of moving forward, it pales in comparison to the cost of doing nothing.