The city of Charlotte really wants to build a streetcar line. Queen City taxpayers probably will have to dig a bit deeper to pay for it, though, as construction bids have come in over 30 percent above projections. Such overages should come as no surprise, given the history of transit projects in general and the specifics of this project in particular.
Mecklenburg County has a dedicated sales tax to pay for the Charlotte Area Transit System’s capital needs and to cover the operating losses of its rail and bus network. Though CATS will build and operate the streetcar, no transit tax money is going to it. Instead, the city of Charlotte is responsible for financing the project and covering its operating losses. That’s a particular concern for the city as the federal government is paying $75 million toward the streetcar line’s second phase, and all costs beyond that fall entirely on the city.
Bids have come in over budget. As the Charlotte Observer reports, the city had estimated the cost of the line plus some city-funded related improvements at $93.2 million. It received two bids for the work, one at $123.3 million, the other at $128.5 million, both more than 30 percent above the city’s estimate.
Such cost overruns are par for the course. Over the past decade and a half, a series of academic journal articles has demonstrated that costs routinely are underestimated and benefits overstated to get transportation projects approved.
For example, in a seminal 2002 article in the Journal of the American Planning Association, Bent Flyvbjerg, Mette Skamris Holm, and Søren Buhl of Aalborg University described the results of a large-scale statistical analysis of transportation project cost overruns. Their article was titled “Underestimating Cost in Public Works Projects: Error or Lie.”
The researchers compared the estimated cost of projects at the time the decision was made to proceed to their final actual cost. Flyvbjerg and company’s dataset included 258 projects costing $90 billion over 70 years.
The authors found that costs were underestimated in 86 percent of projects, with the average overrun varying by project type. Rail projects came in on average 44.7 percent over their estimated costs, larger than the cost overruns in fixed-link (tunnel and bridge), at 33.8 percent, or road projects (20.4 percent).
Significantly, projects in the 1990s were just as likely as projects in the 1920s to come in over budget. As the authors note, “underestimation today is in the same order of magnitude as it was 10, 30, and 70 years ago.” It is as if project administrators had learned nothing from earlier projection errors. Based upon their analysis, the authors concluded that these original cost estimates were off not because of methodological errors, but rather because the project proponents were engaging in deception — lying — to get projects approved.
“Legislators, administrators, bankers, media representatives, and members of the public who value honest numbers should not trust the cost estimates presented by infrastructure promoters and forecasters,” they wrote.
Indeed, we’ve even seen it before in Charlotte. The Queen City’s first light rail line, running roughly from Pineville to Uptown was projected in 1998 to cost $227 million. The actual cost came in at over twice that amount.
Charlotte’s streetcar Gold Line is a strange project. The Gold Line really isn’t a transportation solution. The streetcars run on rails set in the car traffic lanes of major streets and stop for red lights, making them no faster than buses, while also being less flexible and more expensive to operate.
In actuality, the Gold Line is a politically motivated economic development scheme. Asking hard questions about its costs wouldn’t improve its chances of winning community support, and for that city taxpayers are likely to suffer.
Michael Lowrey is a contributor to Carolina Journal.