Railroad deal, consultants fuel Gary airport expansion overruns

2012-12-16T00:00:00Z Railroad deal, consultants fuel Gary airport expansion overrunsKeith Benman keith.benman@nwi.com, (219) 933-3326 nwitimes.com
December 16, 2012 12:00 am  • 

Documents obtained by The Times show how a Gary/Chicago International Airport Authority anxious to show progress on an ambitious expansion project let costs escalate to a point where it now must make a last-minute plea for funds.

Those documents show $54.7 million of the increased costs were driven by additional railroad improvement projects, some of them miles away from the airport near downtown Gary. Escalating legal and consultant fees also played a major role.

Railroad relocation and improvement projects for three different railroads now account for $92.5 million of the expansion project's total $166 million cost, according to a last-minute funding request the airport submitted to the Federal Aviation Administration at the end of August.

The cost for railroad projects alone is now more than the original $90 million estimate for the entire expansion project.

John Clark, CEO of JClark Aviation, who prepared the FAA request, said it is easy in hindsight to question the airport authority's decisions at any juncture, but no one foresaw the significant changes railroads would demand during negotiations.

"This project needed to move forward for many reasons," Clark said. "So the city of Gary, the airport and the Regional Development Authority did what they needed to do to move the project forward."

 

The costs

When the airport received a pledge of $57.8 million in support from the FAA in January 2006, airport officials said the project could be completed by 2010. But only sporadic progress was made until early 2011, when the FAA and airport agreed on a deadline of December 2013 for completing the project.

The FAA request in August shows fees for Washington, D.C., lawyers negotiating with railroads have ballooned to $722,875 at last count -- a 1,035 percent increase from the original estimate of $50,000. Design fees for moving just the tracks at the end of the main runway have exploded 564 percent to almost $2 million from an original estimate of $300,000.

Program management fees for supervising the runway expansion are another area where costs have increased. The FAA request states those will run an estimated $3.7 million, a 475 percent increase from the original estimate of $650,000.

Much of that leap is due to the fact the airport authority originally expected to oversee much of the project with its own staff. But when the project was stymied almost to a standstill, the authority hired Los Angeles-based Aecom to do the job at a cost of $2.8 million.

Since Aecom came on board in September 2010, steady progress has been made in revving up the long-delayed expansion, including reaching the final agreement with three railroads.

But the increases in legal and consultant costs have continued throughout the past two years. Some board members have expressed reservations about the price hikes, although few have ever voted no to any of them.

The FAA request also shows costs of moving railroad tracks got their biggest jolt when a final memorandum of understanding was reached between the airport and three railroads in April 2011. That agreement added new rail projects, some as far as four miles away from the airport.

The Times acquired the FAA request and memorandum of understanding through a public-records request, as it did numerous other airport expansion documents.

Railroads have always been a huge part of the equation when it comes to the expansion project, because a Canadian National rail line running from Griffith to Gary's Kirk Yard looms over the northwest end of the airport's main runway on a high embankment. That rail line must be moved so the runway can be extended to 8,900 feet from its current 7,000 feet.

That will allow the airport to meet new FAA regulations for runway safety as well as land larger commercial passenger aircraft.

Despite the big price bump under the final memorandum of understanding with railroads, the airport authority's seven-member board voted unanimously in favor of the railroad agreement at its April 25, 2011, meeting.

"This is a gigantic step, because we have been trying to get the railroads together for just this type of agreement for a long time," Airport Authority Chairman Nathaniel Williams said shortly after the vote.

For their part, railroads have always said they were trying to be helpful in the airport project, but didn't want to incur any long-term increase in costs because of the expansion.

"We were approached and there was a long series of negotiations to see how we could make this kind of accommodation for the airport," said Patrick Waldron, a spokesman for Canadian National Railway.

The largest single increase was $26.5 million to rehabilitate an unused rail line known as the Fort Wayne Line. Railroad Norfolk Southern wants to use the tracks to run trains to the Indiana Sugars factory on Gary's east side. Currently Norfolk Southern uses another track to get there.

Airport consultant Clark said in hindsight people could challenge the airport's decision on the rail moves and "say the railroads are benefiting on the back of the airport.

"But at the end of the day, if it creates a situation where railroads can operate more effectively and the airport can operate more effectively, then it's a good deal for both and a good investment in infrastructure," Clark said.

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