- Cost overuns rising 44% for first phase to $2.3 billion
- Estimates also rising for next phase to add trains to bus stop
San Francisco is stepping in to help resolve a funding shortage for the nearly $2.3 billion first phase of the Transbay Transit Center, a Cesar Pelli designed regional transportation hub that seeks to evoke the grandeur of New York’s Grand Central Terminal.
The city is preparing to issue debt that would help bridge the financing gaps in the project to link 11 transit systems in eight Bay Area counties, whose costs may raise the cost of the first phase bus terminal by 44 percent, said Greg Harper, chairman of the Transbay Joint Powers Authority, which is overseeing the joint venture among the city and county and local transportation agencies. Harper attributed the overruns to the city’s strong economy, which is increasing the cost of construction bids.
“Everything is going well, we just need some more money,” said Harper, in a phone interview. “We need to wrap up the financing so we can complete the project.”
The transit center, which is being funded with a hodgepodge of sources including federal grants and loans, sale of prime downtown property and local taxes, is scheduled to open its first phase, a new bus depot, next year. A second phase, which could cost nearly $4 billion, would bring in regional Caltrain lines and the proposed high-speed rail. The goal is to ease congestion for the region’s 8.6 million residents by linking mass transit systems.
Transbay has been beset with challenges including delays in selling land that forced the authority to take on a $171 million bridge loan with Goldman Sachs Group Inc. and Wells Fargo & Co. to keep construction going. Besides arranging additional financing, the city of San Francisco also will play a greater role in managing the project to help control costs, said Scott Wiener, a member of the city’s board of supervisors who supports the project.
“The city has a good track record in managing public works projects, so we’re going to play a much bigger role than anticipated,” said Wiener, in a phone interview. “We’re trying to stop the bleeding.”
The cost to complete the first phase has risen from about $1.6 billion in 2010 and could hit $2.3 billion, according to Metropolitan Transportation Commission documents. The cost of the second phase to route train lines into the center has risen from about $3 billion to nearly $4 billion.
The agency is working with the officials in City Controller Ben Rosenfield’s office on plans for the financing, which Harper said would likely include sale of commercial paper with terms of three to five years. After a meeting between officials of the Transbay authority and the controller’s office about two weeks ago Harper said he’s confident “they would move forward soon on it.”
Officials in the Rosenfield’s office declined to discuss details because they’re “still working on a proposed financing plan,” said Nadia Sesay, director of public finance for the controller, in an e-mail.
San Francisco also passed a resolution in 2014 to sell some $1.4 billion of bonds through a special district that would be backed by increased tax revenue from property the authority sold around the transit center. But those bonds won’t be sold until the new property tax base develops more. Those taxes could bring in $1 billion toward the cost, said Maria Ayerdi-Kaplan, executive director of the authority, in an e-mailed statement.
The terminal, which will include a five-acre roof-top park, as well as commercial and retail space over five levels, is being designed by Pelli Clarke Pelli Architects, best known for the Petronas Twin Towers in Kuala Lumpur and New York’s World Financial Center.
The state of California’s transportation department donated land in and around the center to the authority as its contribution to the cost. The authority has sold about $660 million of land to fund construction, said Ayerdi-Kaplan.
The sale of the last parcel, approved March 10 by the authority’s board, will let the authority pay off the loan from Goldman Sachs and Wells Fargo, Ayerdi-Kaplan said, and use a $171 million Transportation Infrastructure Finance and Innovation Act, or Tifia, loan from the U.S. Department of Transportation for construction costs rather than repaying the banks.
Other revenue sources financing the project have included a $400 million American Recovery and Reinvestment Act grant, part of the economic stimulus package passed in 2009 after President Barack Obama took office designed to spark the economy.
Details of how the second phase, needed to connect the bus stops at the center to rail lines, will be paid for are less clear. Part of the land sales and Tifia loan were initially expected to cover those costs.
Without the trains the project fails to perform its goal of linking the region’s transportation systems, said Andy Bosselman, a local transit critic and founder of Arithmetic Skincare in San Francisco.
“Right now it’s just a giant bus stop without any rail connections,” said Bosselman.