San Francisco approved a $260 million bailout of the major Transbay transportation and development project Tuesday after multiple errors have sent costs soaring to nearly double the initial estimate.
The multibillion-dollar project’s bailout, which was introduced by Mayor Ed Lee, was approved by the Board of Supervisors in a 10-1 vote.
Board members have expressed concerns about the cost escalations, but say the project is too important not to assist with funding to ensure its completion. The board vote authorizes the issuance of certificates of participation debt which would be paid back through the capture of property taxes within the Transbay area.
Since 2008, the project costs have increased by about 90 percent, from $1.189 billion to $2.259 billion. The latest shortfall estimate shows $260 million is needed to complete Phase 1 of the project by December 2017.
Tied to the rebuild of the Transbay Terminal, which is hailed as the “Grand Central Station of the West,” is the redevelopment of 40 acres within the area bounded by Mission, Main, Second and Folsom streets.
Last week, Supervisor Scott Wiener said, “We’re making the best of a bad situation where we have a project that incurred substantial cost overruns.” He noted the “Transbay Transit center is so critically important to the future of transportation in this city and this region.”
After the vote Tuesday, Supervisor Aaron Peskin, the lone dissenting vote, said, “Bottom-line, the Transbay Joint Powers Authority is not a city agency. I understand that San Francisco is between a rock and hard spot and if we don’t cough up this quarter of a billion dollars this project won’t get done. But I felt that it was important that somebody say this entire fiasco was not OK.”
A Metropolitan Transportation Commission review of the project in September identified numerous failures that had led to the soaring costs. Inaccurate engineering estimates and complex design led to fewer qualified bidders, and optimistic escalation cost factors did not reflect today’s actual market trends.
The bailout is for Phase 1 of the project. Phase 2 would extend Caltrain and California High Speed Rail to an underground Transbay station by 2024. The estimated cost for the second phase is $3.9 billion, and funding for that phase of work is not yet identified.
The bailout plan of Phase 1 uses more than $600 million in tax increment dollars from the area that were slated to go toward Phase 2 instead.
The project is overseen by the Transbay Joint Powers Authority, which was created in 2001, and is comprised of representatives from the San Francisco Municipal Transportation Agency, the Mayor’s Office and the Board of Supervisors, AC Transit and Caltrain.
Last month, Mark Zabaneh was named the new interim executive director of the Transbay Joint Powers Authority, replacing Maria Ayerdi-Kaplan, who retired.
Another change has also occurred amid the cost escalation: the Department of Public Works has an agreement with the authority to assume management of the construction. Additionally, a cost review panel was created, which includes the city controller, to provide oversight of project costs.
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