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Why Are U.S. Transit Projects So Costly? This Group Is on the Case.

The U.S. is one of the most expensive countries in the world for building transit, according to the Transit Costs Project. A research group at the NYU Marron Institute of Urban Management is working to understand why.

An excavator in a cement tunnel working to build a new underground transit line.
Underground construction of a new subway line.
(David Jancik/Shutterstock)
For the last two years, a group of researchers at the New York University Marron Institute of Urban Management has been building a big database of public transit projects around the world. Their goal: To understand what drives the costs of transit projects, what makes some places more expensive than others, and how costs can be brought down.

The Transit Costs Project is led by Eric Goldwyn, an assistant professor and program director in the Transportation and Land Use Program at the NYU Marron Institute, along with research scholars Alon Levy, Elif Ensari, Marco Chitti and a group of international contributors. To date, the group has built a database with details on hundreds of projects, sourced from popular media, trade publications and official plans. And they’ve begun publishing in-depth case studies on a handful of individual cities, including projects in Boston and New York in the high-cost category, and Stockholm, Italy and Istanbul in the low-cost category, based on additional data gathering and hundreds of interviews.

This month, the Transit Costs Project is planning to publish an overview of its findings. Among them: The United States is the sixth most expensive country in the world when it comes to building rapid rail projects. The reasons why range from the politicization of project management to the expanding role of consultants, the costs of labor, and efforts to limit disruption to normal traffic flow during construction. In this Q&A, Goldwyn speaks with Governing about what makes transit building so expensive in the U.S., and what might be done to improve costs. The conversation has been edited.

Governing: Can you tell me briefly about this research group and why you started digging into this topic? 

Eric Goldwyn: We’re all transport researchers and we’ve been following this stuff for years. We noticed that in America the costs seem to be higher than they are in other parts of the world. My colleague Alon, who has been collecting some of this data since 2008, started to see that U.S. projects across the board were more expensive. The first thing that we wanted to do was create a comprehensive database of these costs. Alon had been collecting a couple projects at a time and I had a database of probably 200 projects. So when we finally launched our project we hired some Chinese-speaking people and some people who can read Arabic: People who can cover a lot of places we couldn’t cover on our own.

Our database is now something like 900 projects in 58 or 59 countries. And, unsurprising to us, America has, I think, the sixth highest costs in the world. And it’s actually worse than that, because the thing that’s really expensive is building things underground versus at-grade or elevated. In the countries that are more expensive than the U.S., they’re building 65 percent or more of their projects underground, and in the U.S., we’re only building like 37 percent of our projects underground. So we’re choosing a less expensive method and we’re still very close to being the most expensive in the world.

Governing: So, at a broad level, why do costs matter? You mention that the U.S. is the sixth most expensive. Why shouldn’t it be? 

Eric Goldwyn: If it costs $1 billion a mile or $2 billion a mile, depending on the city you live in, it’s very hard to scale at more than a mile or two at a time. It’s very hard to raise those sums of money to build something. If you’re moving toward a more global average of, say, $350 million to $400 million a mile, then a total of $4 billion or $5 billion can get you 10 or 12 miles of rail instead of 2 miles. All of a sudden that’s a big line. You can do a lot more with it.

I can give an example from our Boston case. We looked at the Green Line extension, and the plan in the earliest phases was to build seven stations, going up to Medford, Mass. And because the costs became so prohibitive, they just cut that last station and didn’t extend it all the way. That reduces the amount of access people have to transit. And that means people in that part of Medford are still more likely to drive. So from our perspective, if you want to be serious about getting people out of cars, you need to come up with a public transport system that provides anywhere-to-anywhere connectivity, and for bigger cities, subways are really good at that.
Test trollies at the Union Square station on Boston’s Green Line.
Test trollies arrive at and depart from Union Square station prior to its opening, part of Boston’s Green Line light rail extension. (MBTA)
Governing: Is it also the case that high costs give opponents ammunition to oppose transit projects and turn political will against them? 

Eric Goldwyn: In general, if you want to build confidence in public works, you have to be able to do them on schedule and on budget. And if those budgets are artificially inflated or veer dramatically from global averages or peer city averages — which they do in a lot of ways — it just begs the question of, what’s going on? I think people’s conclusions tend to be incompetence, corruption or a combination of the two. I’m not saying I agree with them. But that does not breed positive feelings for transit or public works in general.

Governing: One of the things that comes up in the reports is that politicization of decision-making at the micro-scale raises costs. Can you describe an example of how that works?

Eric Goldwyn: There are a couple different ways. If you look at Seattle, for instance, their board at Sound Transit is all elected officials. And they have to approve the decision to pick a locally preferred alternative. Building transit is sometimes controversial at a very local level. Some people maybe want the train to go here or there or don’t want it to cut through this or that sensitive area. So when you have elected officials who feel the heat on those things, they might say, you know, “Let’s study this alternative.” Or “Let’s not make a decision on this for another three months.” Or, “Let’s extend the comment period so people can air whatever they want to air.” You can look at the West Seattle and Ballard project — they’ve extended the comment period one or two times and they’ve postponed making a decision on the locally preferred alternative. That’s just kicking the can down the block.

To use simple numbers, if you have a $5 billion project and you assume 5 percent inflation per year, then every year you’re not making a decision, it costs $250 million. Every six months you’re not making a decision, it’s $125 million. So if you decide to study something for six more months, OK, we can do that, but you have to understand that’s going to add, at a minimum, $125 million to this project cost. It’s useful to understand some of those tradeoffs. Delaying something that you’re going to do, after you said you’re going to do it, comes at a cost.

The same is true of building an expensive station. In Boston, if they’d agreed to build cheaper stations from the outset, the money saved on building the six stations a little bit cheaper could have been used to build that seventh station. You could have had seven stations that are less ornate and less bespoke and customized, but, you know, it’s transit: You’re not supposed to stand there and gaze at the murals. You’re supposed to get on a train and get on with your life.

Governing: Is there a relationship between previous efforts to cut costs and the high costs we have now? One thing I was noticing in your reports was that the outsourcing of design and professional work can raise costs when public employees don’t have the in-house expertise to manage those projects. 

Eric Goldwyn: Consultants are usually more expensive than in-house staff. And you need consultants for certain things. If you look at New York or Boston, you don’t need to have a station designer in-house because you don’t build that many stations. But oftentimes what we’ve found is that consultants are brought on to answer the questions of, what do we need to be doing? Rather than an agency telling the consultant what they need to be doing, the consultant starts to do stuff and the agency is like, “Well, that’s not really what we want. We need you to go study this other thing.” They’re billing you by the hour and those costs accumulate.

There was a light rail project in North Carolina that never advanced into getting federal money. Because this agency had never really built anything, they had to hire a consultant. They spent like $150 million just on the consultants doing the design work and the meetings. That’s $150 million that’s gone to nothing; the project is dead. In that example, what you would like to see is if the federal government had like a SWAT team of experts who could come in and help a city that is thinking about doing a light rail or a streetcar and has never done something like that before. In the Italian case that’s exactly what they’ve done. There’s a group in Milan called Metropolitana Milanese which has existed since the 1950s. They have built, planned and designed a 60- or 70-mile metro subway system. They’ve been hired out by other cities in Italy to help them with their planning and design work.

You’re always going to need to hire people to build this stuff, but some of the design, planning and early engineering is within the realm of what a professional civil servant could do. These are somewhat standardized, off-the-shelf technologies. You’ve got to fit them into the city and there are unique quirks that need to be dealt with, from geology to utilities to property owners, but fundamentally it’s some track either buried in the ground, elevated, or underground. And the stations are just boxes with different flourishes.

Governing: You mentioned Milan. What are the commonalities, if there are any, in cities that have lower costs for these transit projects? 

Eric Goldwyn: The one thing we see is a heavy emphasis on standardization of design and really trying to economize as much as possible. In Istanbul, they’re building something like 300 kilometers of subway. And they’ve been making changes and optimizing things as they go. They’ve learned lessons about how to build the most efficient station for their circumstance. Using different tunneling technologies, they’ve figured out ways to do less excavation but still create all the space they need for passengers and platforms.

In the U.S., where labor costs are quite high, wherever you can have a better interaction between time and labor, the cheaper a project is going to be. So if you’re doing something that is very time intensive, it’s going to be very expensive. If you’re building something large, it’s more time-intensive than something that’s small. And if you’re doing it with expensive labor, those things multiply.

Governing: How should officials approach the question of labor? People often don’t want to make labor cheaper because you don’t want to pay people less. There’s positive aspects of having high labor costs too. 

Eric Goldwyn: One of the reasons we did our Stockholm case is that it’s a low-cost city, but their labor costs are very high. I think we figured out that their tunnel workers make basically the equivalent of $90,000 a year, and then double that in benefits. In this industry there are lots of labor-saving technologies, like tunnel-boring machines, for instance. But the way that our project agreements in the U.S. are often structured, they don’t really capture all of the benefits of that labor-saving technology. It’s not about paying people less. It’s about, don’t spend as many hours doing something, and don’t use as many people to do that thing. You know, I don’t want to work in a tunnel: Those people that do should get paid well and get good health benefits.

We also have very generous overtime, and that is not a common occurrence in other places we’ve looked at. In France it’s capped at 25-50 percent of the hourly rate, but you can only work 10 hours of overtime or something. In New York, if you work Saturday and Sunday, you get paid double time. If you work after the standard eight hours you get bumped up. And the way we do work, we only let them do work on some awkward hour on the weekend, so that means you’re automatically paying the double rate.

There are a lot of things that are very mundane and people wouldn’t think are that important, but if you don’t let a lane or two of traffic be shut down so they can dig a big hole, that just means they’re going to dig it much more slowly and they’re going to have to dig it at weird hours of the day, so it’s going to be much more expensive. If you just said, “yeah it’s going to be annoying, but let’s just do it and get it over with,” that would be, I would argue, a better way to go.

Governing: So what are the recommendations, and what levels of government should be implementing them? 

Eric Goldwyn: At the federal level, it would be nice to see some sort of group of experts who have built mass transit work as a public-sector consultant. They could be hired out at a discounted rate by different municipalities or transit agencies.

At the top level, the politics in decision-making, we see that as the most important part of all this. We need to have champions in office who are cheerleading these projects. One of the things that’s interesting in this research is how often government agencies or utility companies gum up these projects because they want something. If you want to shut down a street to cut a hole and build your subway station, you need a department of transportation to approve that. But you’re most likely going to hit some sewer pipes or electric lines or whatever. So if you need to have those moved or power them down, you need to get the utility to sign off on that. Getting all those people to agree is not easy. Sometimes they’ll say, “We’ll do it, but you have to give us new pipes, or you have to replace a mile in each direction.” There’s all these opportunities for extraction, and there needs to be someone at a high enough power, like a mayor, who is saying, “Cut the crap. We need to get this done. They’ll replace whatever it is that they’re taking out but they’re not going to do extra stuff.” You can’t keep trying to extract more and more bribes from these megaprojects.

We also argue a lot in favor of making things transparent in terms of costs. One of the big things that they did in Italy to combat increasing costs from corruption — they had a big corruption scandal in the 1980s — was making what’s known as reference prices. This is what it costs to pour a cubic yard of concrete, what it costs to build a mile of embedded track, and so on. Because that information is public it has this two-way effect. The contractors now know this is what we can build to, and the public knows and the agency knows that when they get in a bid and it looks very different from these numbers, something must be up. That transparency, we think, is really quite useful.

Governing: Can politicians depoliticize things? 

Eric Goldwyn: Well, it’s not that exactly. You want it to be more politicized in some sense, because you want people to say this is important and we care about this. And you want them to say that continuously. You don’t want them to say it once and then give up on the project, because that’s often what happens. But you don’t want them meddling into the project. What you want is a governor who is like, “Yes, I approve the spending on this, it achieves the goals I want to achieve. You, the technical experts, are empowered to figure out how to get there.” You want someone who will macromanage, not someone who will micromanage.

It all comes down to having people at the top that are like, “it’s important that we build this thing in a cost-effective, speedy fashion.” If you have a governor, mayor, head of agency who is laser-focused on that stuff, it solves all of these downstream problems. Because they won’t tolerate the operating agency saying they need to build all this other stuff. At the political level it’s got to be a recognition that our costs are whacky and we have to get a grip on some of this stuff if we’re serious about building transit and decarbonizing the transport system and, from my perspective, building better cities.
Jared Brey is a senior staff writer for Governing. He can be found on Twitter at @jaredbrey.
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