Monday, March 21, 2016

La Guardia Airport’s Revamp Hits $5.3 Billion: Price tag balloons more than $1 billion from previous estimates

The Wall Street Journal
By Andrew Tangel
March 20, 2016 8:59 p.m. ET

The official price tag for La Guardia Airport’s overhaul has risen to $5.3 billion—more than $1 billion higher than previous estimates—as officials grapple with how to pay for major transit projects in the region.

The new tally accounts for increased cost estimates related to a looming project to replace La Guardia’s Terminal B and redevelopment work that stretches back more than a decade. A capital-spending plan from 2014 pegged the cost of the airport renovation at $3.6 billion, and more recent projections hovered around $4 billion.

The revised figure, which was released late Friday, comes amid growing tension inside the Port Authority of New York and New Jersey, the airport’s operator, as officials consider replacing its aging Midtown Manhattan bus terminal and digging two new Hudson River rail tunnels.

Transforming the airport, which has often been ridiculed by officials because of its dilapidated state, has become a priority for New York Gov. Andrew Cuomo, a Democrat, who controls the bistate agency along with New Jersey Gov. Chris Christie, a Republican.

But the arithmetic behind the evolving estimates for La Guardia’s overhaul has become a source of friction inside the Port Authority, with some officials growing frustrated as they seek clarity on the project’s costs, people familiar with the matter said.

Port Authority Chairman John Degnan, whom Mr. Christie appointed, has become increasingly irritated with the project’s changing scope and rising costs, these people said.

Mr. Degnan declined to comment about internal Port Authority discussions in a brief interview on Sunday.

But the chairman, who sets the Port Authority board’s agenda, said he wasn’t comfortable that earlier estimates for La Guardia’s overhaul “accurately reflected the true costs of the project.”

Mr. Degnan said he still has questions about La Guardia’s potential costs. While replacing the airport’s Terminal B is a “very high priority,” he said the Port Authority also had to weigh other urgent capital needs that have emerged elsewhere.

“As the project has expanded and as the numbers have been worked out, there have been other developments,” said Mr. Degnan, pointing to the bus terminal and Hudson River tunnel projects. “We don’t live in a static environment.”

Other Port Authority officials said New Jersey officials at the agency appeared to be trying to inflate the price of La Guardia’s overhaul as a political tactic ahead of negotiations over other big projects, including the Manhattan bus terminal.

Mr. Degnan said “every project needs to be balanced against the most compelling needs.”

As the Port Authority was working on the Terminal B replacement, Mr. Cuomo launched a design competition in October 2014. A panel appointed to judge entries proposed changes to the project, including a new grand entryway known as a central hall.

The grand entryway is now estimated to cost $310 million, lower than an early potential price tag of up to $400 million.

The design panel also recommended unifying Terminals C and D with the rest of the airport, but it remains unclear how much that portion of the project might cost.

A spokeswoman for Mr. Cuomo declined to comment. The governor has previously criticized what he characterized as a piecemeal effort by the Port Authority to fix La Guardia, which Vice President Joe Biden once criticized as something out of the “Third World.”
Mr. Degnan has advocated speeding up plans to construct an estimated $10 billion new bus terminal a block west of its current location in Manhattan, but he has run into resistance from New York officials who suggested a new facility in New Jersey might make more sense.

Port Authority Vice Chairman Scott Rechler, appointed by Mr. Cuomo, said the Port Authority’s planned capital contribution for design and construction of the new terminal, central hall and supporting infrastructure remained the same.

The Port Authority’s board “has an opportunity to begin a new era at LaGuardia” as the project would “create a 21st century airport befitting the State of New York and the region,” he said in a statement.

The revised estimate of $5.3 billion for La Guardia’s broader overhaul was noted in a resolution that is set for a vote at Thursday’s monthly meeting of Port Authority commissioners. The resolution moves the airport renovation forward.

The $5.3 billion price tag took into account more than $600 million in redevelopment projects at La Guardia stretching back to 2004, including work on a substation and parking garage. It also includes a $182 million in reserves for potential costs the Port Authority might face.

The new estimate also reflects cost increases since February. Those include $225 million related to Port Authority staff and overhead costs, up 53% since last month, and $190 million for external consultants, nearly double the February estimate.

Port Authority officials said earlier internal estimates didn’t fully account for staff costs and overhead related to the entire airport, and that consulting costs now reflect work beyond Terminal B.

The estimated cost to design and construct the new Terminal B is now $4.02 billion, up 2% from an estimate of $3.93 billion last month.

Port Authority officials said that increase was the result of changes requested by the airlines, federal security officials and the consortium of companies chosen to build the terminal. But they said the agency wouldn’t be on the hook for those costs. 

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