March 16, 1992

METRO RAIL COST-OVERRUN TAB ADDS TO CITY HALL FISCAL WOES

City already owes at least $100 million to LACTC.

By Chip Jacobs

Staff Reporter

Los Angeles City Hall's fiscal troubles will outlive the recession and may extend well into the 21st Century because of huge Metro Rail cost overruns the city agreed to help cover at the expense of its own anti-gridlock measures, officials told the Business Journal last week.

The city must fund half of all overruns on the subway's first leg -- up to a $125 million cap -- under a little-known agreement cut between the Los Angeles County Transportation Commission and the City Council five years ago, when the Metro Rail Red Line had barely broken ground. Because that 4.4-mile segment between Union Station and Alvarado Street is already at least $200 million over its original $1.2 billion price tag, the city presently owes roughly $100 million.

"We need the commission to come over and tell us what steps they are taking to put the brakes on the costs," said Councilwoman Joan Milke Flores. "The overruns are going to be with the city a long time to come."

In addition, the city has agreed to shell out as much as $90 million if overruns are incurred on Metro Rail's unbuilt $1.4 billion second phase, a 6.7-mile segment that will tie the Alvarado station with spurs in Mid-Wilshire and Hollywood by 1998. Still ahead are negotiations for handling any overruns that may occur on the third phase.

Those overrun charges incurred on the subway's first phase, which opens in September 1993, will undercut long-range city funding for a bevy of congestion-easing programs. Among them are shuttle-bus services in downtown Los Angeles, Westwood and Watts, freeway commuter vans, bus subsidies for the elderly and local spending for new light rail lines, according to Ed Rowe, general manager for the Los Angeles Department of Transportation.

"The city wanted Metro Rail and this is just one of the costs," he said. "Somebody had to foot the bill."

But Councilman Nate Holden, who negotiated the overrun limits on the subway's second leg, was angered by the $100 million bill for the first phase.

"I want to find out if the cost overruns are attributable to the LACTC falling asleep on the job or contract-change orders," said Holden, who chairs the council's transportation committee. "Somebody should justify this."

Right now, the commission and city negotiators are gearing up to set limits on what overruns Los Angeles will owe on a third subway route that will link the system with North Hollywood and an area southwest of Koreatown near the turn of the century.

The confirmation of Los Angeles' subway-overrun tab comes two weeks after the City Controller's office reported that city revenues were $208.6 million below budget projections when the fiscal year hit its midway mark Jan. 1. Contributing to that shortfall were business taxes, which were nearly $40 million off estimates because of the stagnant economy.

Aside from its commitment to pick up added costs, the city has also made up-front contributions totaling $54 million for Metro Rail's first two phases and still owes another $76 million, sources said.

Both the base contributions and the overrun deals were needed to convince the federal government that the giant public works project had local public support -- and the money to back it up. Washington, D.C., is paying $1.4 billion toward the cost of the subway's two routes, with the additional outlays covered by the LACTC, the state, the city and commercial property owners near subway stations.

Jay Curtis, executive director of the Los Angeles Taxpayers Association, predicted it will be up to industry to replace the additional money City Hall will lose on the overruns, even though developers are paying for tens of millions of dollars in transportation improvements to get their construction projects approved.

"Business will end up paying the greater part of the costs through additional taxes, because we'll have no growth economically, and lose thousands more jobs, unless we address our congestion problems with more than Metro Rail," Curtis said. "The city needs to make the LACTC get tough on contract administration and long-range planning . . . because these overruns are enormous. It's a travesty."

According to Rowe, the overrun charges will be paid out of the city's share of Proposition A, the half-cent sales tax approved by county voters back in 1980 to fund transit improvements.

Under the complex LACTC-city arrangement, annual city payments to Metro Rail, which began this year, are limited to 22 percent of Los Angeles' yearly Proposition A monies, plus a limited portion of funds in capital reserve accounts. Hence, the city -- which expects to collect $62.4 million in Proposition A cash this year -- forked out $6.3 million to the LACTC at the fiscal year's halfway point.

But Rowe downplayed the impact of the overrun charges on sales-tax funds, saying the city has planned for it and can stretch out the payments during the next several decades. "I'd be worried if we had a bill for $60 million due this year," Rowe added. Then again, without the overrun tab, "we could plow the Prop. A funds back into our accounts and start new programs or expand existing ones" like the shuttle buses.

Officials at the LACTC, which vowed to keep subway costs from soaring when it took over the multibillion-dollar project from the Southern California Rapid Transit District in 1989, say most of the overruns occurred on the RTD's watch. To reduce future costs and establish private-sector-style efficiency, the commission several years ago created the Rail Construction Corp. to oversee subway design and construction.

In general, the increased costs stacked up when Metro Rail construction contractors filed change orders as the result of "unforeseen conditions." At many of the subway stations in downtown Los Angeles, for example, contractors routinely discovered hazardous wastes, boulders and utility lines requiring more work -- and more commission money.

Costs also spiraled because of federal funding delays and problems securing rights-of-way, according to Linda Bohlinger, the LACTC's director of capital planning and programming.

"The concept was for the city to be involved financially so it would help in reducing costs and getting the project's permits expedited," Bohlinger said.

Yet, two LACTC board members said they are worried construction management reforms implemented by the commission and RCC may not have gone far enough to protect taxpayers and Proposition A accounts.

"The moral of the story is that the commission has not been hard enough on contractors like it promised," said LACTC Commissioner Nick Patsaouras. "They have not gone after their (contractors') errors and omissions and allowed them to pursue claims through the insurance companies."

Added Commissioner Ray Remy, president of the Los Angeles Area Chamber of Commerce, "I've been concerned the multiplicity of things the commission is doing is making effective oversight difficult, and not just on rail construction."

Meanwhile, Bohlinger and other LACTC officials acknowledged that the $200 million is only a rough overrun estimate for phase one. Indeed, documents show that projection was made in March 1991. In just the last six weeks, the Business Journal has reported two new sets of charges, adding up to $52 million, for the project.

copyright Los Angeles Business Journal

Money Train, published in Los Angeles City Beat. Why would U.S. Congressman Ernest Istook from Oklahoma come to Los Angeles to raise money? Perhaps because he holds the purse strings to critical federal transportation dollars.
March 10, 2005

MOVING DOWN THE ROAD, Pasadena Weekly
http://chipjacobs.com/a_movingdown.html
Moving Down the Road, published in the Pasadena Weekly. The Caltrans 700,000 square-foot tower owes its existence to the 1994 Northridge earthquake, union muscle, and a tincture of politics.
July 10, 2003

TUNNEL VISIONS, Pasadena Weekly, Caltrans Tenants Association
http://www.caltranstenants.com/tunnel.html
Tunnel Visions, published in Pasadena Weekly. Caltrans may dig deep to find a way out of its 710 Freeway debacle.
(Part III of Corridor of Shame series)
May 22, 2003

THE UNTOUCHABLES, Pasadena Weekly, Caltrans Tenants Association
http://www.caltranstenants.com/slumlord.html
The Untouchables, published in Pasadena Weekly. Slumlord Caltrans uses legal immunity to hold tenants and the cities of Los Angeles, Pasadena, and South Pasadena at bay, as long-needed repairs to homes the agency owns along the proposed 710 Freeway route fester. (Part II of Corridor of Shame series)
May 15, 2003

NO EXIT, Pasadena Weekly
http://chipjacobs.com/a_noexit.html
No Exit, published in Pasadena Weekly. Once stately properties that Caltrans bought 30 years ago to complete the still unfinished Long Beach 710 Freeway stand as a testament of neglect by one of the most powerful agencies in California. (Part I of Corridor of Shame series)
May 8, 2003

SOME MTA DRIVERS GET PHYSICAL, Daily News of Los Angeles
http://chipjacobs.com/a_mtadriversphys.html
Some MTA Drivers Get Physical, published in Daily News Los Angeles. Attacks on Metropolitan Transportation Agency riders not always punished and nearly 20 cases remain unsolved or lost due to poor record keeping.
June 24, 1996

SUBWAY TUNNEL WALLS AT RISK, REPORT WARNS, Daily News of Los Angeles
http://chipjacobs.com/pdfs/subwaytunnelwallsatrsk1.pdf
Subway Tunnel Walls at Risk, Report Warns, published in Daily News Los Angeles. Just three years after the first segment of the Metro Red Line was opened at a cost of $1.45 billion, the Army Corps of Engineers says the subway’s concrete walls are at risk of being eaten away by chemical-laced ground water.  MTA officials say water-damage threat small. 
April 11, 1996

MTA SPENT BIG TO SUGARCOAT TUNNELING, Daily News of Los Angeles
http://chipjacobs.com/pdfs/mtaspentbig1.pdf
MTA Spent Big to Sugarcoat Tunneling, published in Daily News Los Angeles. During the 1994 holiday season, the Metropolitan Transportation Agency spent about $400,000 in public funds to bring a Yule-tide bonanza to Hollywood boulevard. Opponents say humbug to mitigation efforts, labeling it as pork barrel or misguided.
September 24, 1995

HOMES OWNED BY CALTRANS NOT KEPT UP, RECORDS SHOW, The Los Angeles Times
http://chipjacobs.com/a_homesowned.html
Homes Owned by CalTrans Not Kept Up, Records Show, published in The Los Angeles Times. Dozens of homes the state acquired along the un-built Long Beach (710) Freeway pathway sit in such disrepair they either can’t be leased or whip up renters’ complaints about slumlord practices. Twenty-seven homes still part of the holdings are not even needed to construct the long-delayed project. Caltrans defends maintenance.
April 26, 1995

CALTRANS MISSED SAFETY DEADLINE, San Gabriel Valley Tribune
http://chipjacobs.com/pdfs/caltransmissed1.pdf
CalTrans Missed Safety Deadline, published in  the San Gabriel Valley Tribune. Despite a legally etched state deadline, Caltrans missed a key deadline to strengthen more than 1000 freeway bridges, including most of the structures crippled in the Northridge earthquake. Bridge contracts overdue.
February 4, 1994

PROBLEMS PILE UP ALONG METRO LINE, San Gabriel Valley Tribune
http://chipjacobs.com/pdfs/problemspileupmetro1.pdf
Problems Pile up Along Metro Line, published in San Gabriel Valley Tribune. First came the charges of shoddy construction. Then the claims of massive cost overruns.  Now more troubles are brewing for Los Angeles’ new subway:  wage violations against workers actually building the Metro Red Line.
October 16, 1993

FREEWAY WORK: A PERILOUS PAYCHECK, San Gabriel Valley Tribune
http://chipjacobs.com/pdfs/freewayworkperilouspaycheck1.pdf
Freeway Work: A Perilous Paycheck, published in San Gabriel Valley Tribune. Caltrans workers face death everyday and Caltrans needs to further protect its exposed maintenance crew.
Sept. 4, 1993

TRANSIT COMMISSION AUDITORS CAST EAGLE EYE ON TUTOR’S COSTS, Los Angeles Business Journal
http://chipjacobs.com/a_transit.html
Transit commission Auditors Cast Eagle Eye on Tutor’s Costs, published in Los Angeles Business Journal. Los Angeles County Transportation Commission auditors are questioning tens of thousands of dollars in overhead expenses that powerhouse Metro Rail contractor Tutor-Saliba Corp. submitted two years ago, according to a preliminary audit obtained by the Business Journal.
September 28, 1992

METRO RAIL COST-OVERRUN TAB ADDS TO CITY HALL FISCAL WOES, Los Angeles Business Journal
http://chipjacobs.com/a_metrorail.htm
Metro Rail Cost-Overrun Tab adds to the City Hall Fiscal Woes, published in Los Angeles Business Journal. The City of Los Angeles is on the hook to pay $100 million in Metro Rail Red Line construction overruns under a little-known cost-sharing deal with the Los Angeles County Transportation Commission.
March 16, 1992

Title: The man
URL: http://www.chipjacobs.com/wd_theman.html

Almost broke, living on handouts with his mom in a shabby apartment outside post-war Los Angeles, Gordon Zahler, a paralyzed kid in his mid-twenties got an idea. He'd re-sell the music of a dead man -- the music his father, Lee Zahler, composed during his workhorse career in early Hollywood. Within a few years, mother and son would be working for MGM on a Doris-Day romp and for Hollywood's most beloved hack, Ed Wood Jr., on Plan Nine from Outer Space. A decade later they had a house above the Sunset Strip in a comeback story too farfetched for any screenplay.