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Port
of Seattle staff now estimate that Sea-Tac Airport’s
third-runway project will cost more than $1.1 billion.
The new figure is an increase of about 50 percent over
the last estimate, $773 million, released in June 1999,
five times the original estimate of $262 million (1992). The
figures were revealed to the Port Commission at its
meeting on 24 June. The three Commissioners in attendance
vowed to build the project, regardless of cost, & in
defiance of community opposition. The increases were blamed,
inaccurately, on delays caused by lawsuits & on “new” environmental
requirements. More
major cost increases are expected because the latest
figures do not include the full amount of fill required
for the runway embankment, do not include community mitigation,
and do not include the cost of borrowed money―all
big-ticket items to be added. Staff failed to suggest how the Port can pay these costs.
The Commissioners failed to ask. RCAA President Larry Corvari commented, "The
Port staff continues to reveal the costs for this project
one agonizing bite at a time. The public deserves full,
detailed, honest cost estimates. Even though the Port
has finally managed the B-word, the public still doesn't
know what the project will really cost. Do the Commissioners
know?" Estimate
Missing 11.8% of the Fill
The
most costly part of the runway construction is the “embankment”,
a vast mound of fill material extending for thousands of
feet north and south along the west side of the existing
Airport. It is the largest fill dirt project since the
Grand Coulee Dam. A total of 19.84 million cubic yards
of material must be brought to the site for the embankment,
by outside contractors.
But in the presentation on the 24th,
staff understated the fill requirement, as only 17.5
million
cubic yards. This 11.79 % discrepancy was not accounted
for, nor questioned by the Commissioners. The missing 2.34
million cubic yards have dropped out of the cost figures,
but only for the time being. The project requires this
fill, & it must be paid for. Where’s
the Great Wall?
Also
missing was any discussion of the cost of the “Great
Wall of SeaTac” and its three companion smaller walls.
These features were added to the project after the last
cost estimate was done in June 1999, apparently without
Commission approval, and so never included in the previous
cost estimates. How much do they add to the 1999 cost figures?
If the staff knows, they haven’t told the Commissioners. While
the staff and the Commissioners were quick to say that
the overrun is in large part the result of new environmental
requirements, no details were provided. For example, the
public does not know how much the Port would pay for the
system of detention ponds & underground vaults to hold
captured run-off (a figure of $200 million was being discussed
a year ago). No figure was provided for the cost of acquiring
water rights for capturing that run-off, as now required. Project ‘Creep’,
Bad Estimating, Lack of Foresight
In
fact, part of the latest overrun results from ‘project
creep’. In the last four years, staff have added
various new features, amounting (they say) to $55 million;
FAA has additional requirements, adding another $10 million.
Unidentified parts of the project were underestimated previously―another
$32 million. A
staff memorandum noted that “market conditions” had
added $20 million. This was explained as an overrun in
the purchase price for commercial property purchased or
condemned for the runway. David Soike, director of the
Capital Improvement Program, said that the properties were
bought at the top of the market, & thus at prices greater
than originally estimated. (The actual overrun on property
acquisition was in excess of $100 million.) An
RCAA spokesperson said, “These particular overruns
are perfectly normal and expectable. They certainly cannot
be blamed on project opponents, regulatory agencies, or
the courts. Contingency factors are built into cost estimates
to cover just this sort of thing.” Mitigation―Where
Is It?
Not a penny was listed for mitigation of project impacts
on the surrounding communities, despite repeated claims
by the Port that full mitigation would be provided. In
our July newsletter, we will present a more detailed analysis
of what mitigation is needed but is not yet budgeted. Here
are some highlights:
- Nothing
for noise insulation in schools under new, third-runway
flight corridors; there will be lots of new noise in
schools as far north as South-East Seattle.
- Nothing
for noise insulation for homes, businesses, & institutions
under third-runway flight corridors. There are substantial
numbers of them because up until 1990, the Port encouraged
the communities to build them in the corridor under the
the Sea-Tac Communities Plan, jointly written by
King County and the Port, & OK’d by the FAA.
- Nothing
for property buy-outs for properties in the new corridors
that cannot be insulated to noise-reduction standards.
- Nothing
for lost property values to businesses & homeowners
(hundreds of millions).
- Nothing
for lost tax revenues to nearby cities and special
districts (tens of millions).
Overruns―What’s
New?
The
runway project has a long history of enormous
cost overruns & under-estimating. The
first official estimate, in January 1992,
was $229 million, for a 7000-foot runway.
(That would have worked
out to $278 million for the longer, 8500-foot version.) In September 1994, the cost jumped to $364 million, for
the 8500-foot proposal. In January 1996, the number became $405 million. In 1997, the figure was revised to $587 million. By June 1999, the cost had swollen to $773 million.
By June 2003, $1.100 billion or more. None of those estimates included the Great Wall, the cost
of environmental mitigation, cost of borrowed money, or
community mitigation. What’s
the Financing Plan?
Conspicuous
by its absence was any sort of plan for financing
the shortfall in third-runway funds. The Port has raised & spent
$361 million to date. Roughly half of that went for land
acquisition. So far as we know, the Port has no additional
money at hand for this project—there’s
an apparent budget shortfall of $739 million! If
the project is to resume in 2004 & be completed,
as they hope, in 2008, they’ll need at least $180
million in new money, cash, every year, for four
years, plus. That implies very heavy borrowing. What revenue
streams will repay it? More money from the airlines? Not
likely. If airlines do agree to pay higher rents to finance
the runway, they’ll have to add an average of $20
or more to every Seattle ticket, & it would be cheaper—maybe
faster—to drive to Portland, or Vancouver, and
fly out of there. The airlines won’t like that.
More grants from the Congress through the FAA? Again, not
likely. Passenger facility charges (PFCs) are already tapped
out for the next 15 years or more. The only source left
would seem to be the Port’s real-property tax on
King County taxpayers. The Commissioners have repeatedly
pledged that the real-estate tax would NOT be used for
Airport purposes, especially not for the runway. Port
spokesperson Bob Parker told the KUOW radio audience
on 25 June that the project “pencils out” because
of savings to travellers & airlines. This seems to
be based on claims by Airport staff that using the third
runway in poor weather, rather than the second, will result
in great cost savings to the airlines & to passengers.
Without any back-up documentation, Mr Soike told the Commission
that starting in Year 2009, Sea-Tac airlines would save
$93 million or more annually using the new runway during
peak periods, as the result of reducing time spent in the
air, waiting to land. There seems to be no plan, no method,
to transfer those hypothetical savings from various airlines
to the Port to pay for the runway. Just how would that
work? Mr
Soike also asserted that, starting in Year 2009, passengers
would save $129 million a year or more (valuing their time
at exactly $28.16 per hour). But no-one explains how these
savings will be translated into cash in the hands of the
passengers, or how the Airport will then capture those
funds for its own purposes. The phrase “voodoo economics” comes
to mind. Components
of the $356 Million Increase
A Port staff memo identified
the components of the $356 million increase as follows:
- Costs of delay -- $55 million
- Additional environmental permit requirements -- $151
million
- Market conditions -- $20 million
- Project scope additions -- $55 million
- Costs that were underestimated earlier in the project
-- $32 million
- FAA requirements -- $10 million
- Program contingency -- $33 million
Copies of the complete memo [adobe
acrobat file 116K],
and of the staff Powerpoint presentation [adobe
acrobat file 353K] to the Commission are available
on our web library or through the RCAA office.
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