Thursday, July 15, 2010

Sticker shock

In the past weeks, I've a handful of posts about the Lake Oswego Streetcar project, either directly or indirectly.  The tone of the articles has been less than enthusiastic, generally--as I've been searching for the right balance between expanding high(er) capacity transit and serving existing needs.  One thing in favor of the LO project, though, has always been its relatively low cost, particularly including sunk costs.  Back in the 80s, the Jefferson Street Branch line was purchased from Southern Pacific for $2 million, and is now apparently worth around $80 million (though the recent downturn in the real estate market may lower that figure; an earlier article here quoted a figure of $50 million).  Given that the value of the right-of-way could be used for Federal matching purposes (up to a 1.5x match), the project seemed to be a good way to get a decent rapid transit line on the cheap. 

However, word now comes today from the Portland Tribune (hat tip to bojack via Al) that the price tag for the project is now in the range of $380 million to $458 million.


Time to break out the Dr Evil photo.

"Four... Hundred... and Fifty.... MEEELYUN dollars!"

Only I don't hear the delegates to the United Nations--or anyone else for that matter--laughing.

The good news, I guess, is that the "local match" is only $47-55 million, excluding the value of the Willamette Shoreline ROW. 

The bad news is that if the estimated value of the ROW goes down, potentially 1.5x that shortfall must be made up elsewhere.  Also, the match depends on re-authorization of a federal transit funding bill that expired last year; and while Congressman DeFazio has lots of clout in the House; this is the sort of thing that might find a hostile reception in the Senate, where one party seems determined not to spend any money on anything that might stimulate the economy. 

Of the $50 million or so in cash that local governments must find under the cushions, half of it needs to be spent up-front and would be lost were the project to get canceled (or not approved).  And only if the project is built do any Federal matching funds get provided.

Of bigger concern seems to be the ever-increasing budget for the thing.  In 2007,  according to the Daily Journal of Commerce, the projected cost of the line was $149 million for the transit portion (and another $83 million for the trail portion).  Now the cost is almost double. 

To quote Lando:  "This deal keeps getting worse all the time!"

The good news

The good news, of course, is that the increasing costs are being made public before construction begins.  This is a sign that the project is at least being run in good faith.  (Compare that to the Portland Aerial Tram, which didn't see its budget triple until construction had already begun; an audit revealed that OHSU managers had kept overruns to themselves until sufficient costs had been sunk, and canceling the project was no longer an option).  Some dollars have been spent on early planning; and more money is to be spent to complete the DEIS; but this is a small fraction of the total cost.  Sometimes, spending money to discover that something is a Bad Idea is necessary.  That said, even with the steadily increasing budget, the out-of-pocket price for a seven mile rail line still is not bad.  Were the existing ROW not available (or not available for a federal match), this project would probably be DOA; but at this point, it's still got legs.


An important question to ask is "why".  Not just why this project has seen its budget grow faster than dandelions, but transit projects in general.  The US economy, after all, is in a recession.  Lots of people are looking for work.  The spectre of deflation (an outcome which would make rich people very happy, and most of the rest of us suffer) is rearing its ugly head--and as noted above, the Senate (or a particular faction therein) seems to desire this outcome.   Yet the costs to build public works projects seem to be skyrocketing.   It's interesting to compare recent transit rail transit projects in the area:

  • Original MAX (1982-1986):  $214 million, 15 miles (approx $400 million in 2010 dollars, $27 million/mile)
  • Westside MAX (1993-1998):  $963 million, 18 miles (approx $1.4 billion in 2010 dollars, $78 million/mile, including a tunnel)
  • Airport MAX  (2001):  $125 million, 5.5 miles (approx $155 million today, $28 million/mile)
  • Interstate MAX (2000-2004): $350 million, 5.8 miles (approx $400 million in 2010 dollars, $69 million/mile)
  • Green Line/Transit Mall (2007-2009): $575 million, 8.3 miles ($590 million today, $71 million/mile).
  • Milwaukie MAX (estimated):  $1.4 billion, ~7 miles ($200 million/mile, including a bridge)
A definite trend can be observed... but again, the important question is "why"?  Heck if I know.  I can think of numerous possibilities (most of them no good), but as I have no particular evidence at hand to suggest what may in fact be the cause of the rapid cost escalation experienced in the past decade, I'll just leave it there.



  1. I'd focus on the Green line and Interstate- no tunnel or bridge, why so spendy?

  2. The Robertson Tunnel cost $184 million to build, which is equivalent to $250 million in today's currency. Subtracting that figure out, gives $713 million, or nearly $40 million/mile.

    Likewise, the cost of the bridge pencils out to around $300 million; subtracting that gives $1.1 billion, or $157 million/mile.

    Compared to these, the LO Streetcar is far cheaper; especially considering that the $450 million also includes the trail component of the project--a second tunnel.

    My concern is that given the projected demand (6,000 riders per day; many of them refugees from the 35), Federal cost-effectiveness criteria won't be met. The Feds, after all, have far better things to spend $250 million on.

  3. One obvious reason costs have gone up is that the region started with the low hanging fruit that cost less. Now it is doing projects that were obviously going to be more expensive, mostly because they are located in densely developed urban areas. I suspect Barbour Blvd will cost even more.

  4. but isnt this line also intended to remain single tracked? there wouldnt even be many stops (and most of those would be a single stop for both directions). are they condemning a lot of property? i really dont see where the money would be going?

    i think this has to be built barebones as a low-cost set of improvements to the willamette shore trolley. dont need to electrify it, dont need to connect into streetcar tracks, dont need a new maintenance facility-use existing WST one, probably dont even need to signal it if you only run a single car on the line. therefore put all the money into getting it to say 20 mph and run only one car on the line (to avoid signaling) and if you got it to 20 mph that one car could run on about 30 minute headways which would not be bad (@20 mph to go 5.5 miles would take 16.5 minutes). transfer to/from portland streetcar at bancroft/lowell.

    we all know spending $450 million on this line cant be justified in any way.

  5. One big part of that $458 million figure is the appraisal of the ROW itself. The value of the ROW is part of the cost by FTA accounting. So if the next appraisal goes down, then the cost of the project goes down. Of course this also means that the Federal match goes down even more so we have to come up with yet more cash.

    What if the appraisal will be based on what TriMet can get for it rather than what they would have to pay adjacent property owners if the ROW were in other uses? Who would want to buy an easement for a couple of miles of unbuildable ROW that must be used for rail transport? We might be in store for a big surprise here.

    While the project as a whole might be on the up and up, I don't think the enhanced bus proposal was a good faith effort toward what the FTA calls "Best you can do without a guideway investment." Riders will be discouraged by the elimination of half the stops north of LO, and moving the alignment to 10th/11th was uncalled for.

    There is also a real problem with the basic projections underlying the project. LO & WL have populations which are both the oldest and wealthiest of any of city in the region with more than 5,000 residents, according to the Census Bureau. Traffic on 43 has been going down for years (long before the recession), route 35 ridership peaked many years ago (although it is climbing right now), bus trip times have been getting faster even with the SOWA diversion, and jobs are moving out of Multnomah County. That 6,000 figure is just not supported by reality.

  6. How the value of the property is computed is certainly something which is prescribed by law and regulation--and given the nature of public easements. Railroad easements, as you note, frequently cost more to buy and create than they garner when sold. (An additional complication is that railroad easements are subject to abandonment, including constructive abandoment--which is why the Willamette Shore Trolley exists).

    We may be in store for a big shock, but not from the FTA deciding that the easements is only worth a fraction of what Metro thinks. The appraisal criteria are known to the agency.


Keep it clean, please