Norfolk, Va., light-rail overages leave funding concerns

Cost overruns on Norfolk's light-rail project have created a potential cash-flow crunch for the $338-million starter line, Hampton Roads Transit's board learned Feb. 25, The Virginian-Pilot reports. The increasing costs rolled out over the past couple of months prompted the Federal Transit Administration to hold up $26.8 million of federal money already approved for the project, HRT President and CEO Philip Shucet said.

HRT needs the FTA to
release those funds by April for the agency to be able to continue to pay the
bills.

"FTA is well aware that
if you hit the wall on cash flow and stop work, you’re going to increase the
cost," Shucet said. "No one has an interest in that happening."

Federal regulators have
told HRT leaders they need assurances about project spending and financial
stability before releasing more money. Specifically, the FTA wants to be sure
that federal funds are going to pay only for enhancements to the project and
not for tasks that went over budget. And authorities also want to know that HRT
can fully fund the rest of construction.

Shucet said he’s
confident the agency will be able to provide the documentation the FTA needs
and that the agency will continue to pay its bills on time and avoid additional
delays. Last week, HRT released what it considers its final budget for light
rail: $338 million.

"Now that we have a new
cost-to-complete, we have another month of hard work ahead," Shucet said. "We’ve
got to get a financial plan in place that is credible."

A report prepared by
consultant AECOM indicates that the federal money is being held in two separate
pots of $13.4 million each. One pot would be released when the FTA gets proof
that no federal money will pay for cost overruns. The money can be spent on
what’s known as "betterments" to enhance safety, security and livability. The
other pot would be available when the FTA is satisfied that there are
sufficient resources to finish construction. Light rail is expected to open in
May 2011. 

Shucet said HRT is
working to categorize each new cost as an enhancement or an overrun to present
to federal regulators. HRT has financial commitments totaling $288 million, the
previous light-rail budget. Of the $50 million in new costs, the state has
agreed to cover up to $20 million. The FTA wants a plan for funding the rest.

Shucet said the agency is
working hard to identify the money from other federal and state sources.
Norfolk, however, is ultimately responsible for any gaps

AECOM ‘s report states
that the FTA needs reassurance of Norfolk’s capacity to pick up the tab: "Reassurance
is not the same as allocating funds. Reassurance does not prevent other funding
strategies from being pursued."

W. Randy Wright, HRT vice
chairman and a Norfolk councilman, said: "I would be surprised if this thing
does not work itself out. I certainly understand what FTA’s concerns are and
their rationale – they want to know there’s a means to the end."