As our regular readers know, we often take a sceptical view of government estimates of the cost of public projects. We were sensitized to this subject way back in 1966 when we read an article by Joseph C. Houghteling, entitled Confessions of a Highway Commissioner, in the Spring 1966 issue of CRY CALIFORNIA, at p. 29, in which he revealed that the cost of California highways was on average “32 percent above estimates, most of the increment coming from additional right-of-way costs.” Bear in mind that this hefty cost overage was paid in spite of the fact that then as now, many offers for land acquisition were of the lowball variety, and even though, at least in those days, some 90% of land owners in the path of new freeways accepted Division of Highway offers without litigation and without so much as hiring a lawyer.
Over the years we have kept track of such stuff and learned that underpayment was par for the course, as revealed in congressional hearings of the 1960s. Since then studies have shown the same thing in California (again), Minnesota, Utah and Georgia. For some of such stuff in California see 40 Loyola L.A. L. Rev. at pp. 1146-1148; it will give you an idea of how large condemnors’ underestimates of the cost of right-of-way acquisition can be.
But now the record has been set by the “Big Dig,” the underground freeway tunnel system in Boston. “Big Dig” was originally estimated in 1998 to cost $2.8 billion (in 1982 dollars). Nice try. By the time the project was completed, the cost came to $14.6 billion (in 1982 dollars) , after allowing $$6.0 billion for inflation. The cost of the tunnel came to $14.5 billion (of which $7 billion came from the feds). Current estimates by the House Committee on Post Audit & Oversight indicate that interest on the bonds that had to be issued to finance this project is running at $100 million per year and over the life of the bonds will come to $21 billion.
Your tax money at work.
For the story go to boston.com of July 7, 2012, Eric Moskowitz, True Cost of Big Dig Exceeds $24 Billion With Interest, Officials Determine. Click here.