Consultants' fees add to light rail costs for the Silver Line in Charlotte
In 2007, Charlotte opened the $463 million Lynx Blue Line. The cost: about $50 million a mile.
In 2018, the city finished the $1.1 billion Lynx Blue Line extension. It cost about $110 million a mile.
Now the city wants to build the Silver Line, a roughly 29-mile light-rail line from Matthews to the airport. The projected cost is about $8.5 billion, or about $300 million a mile.
The train could open in the 2030s. So in about 25 years, the cost per mile for light rail in Charlotte would go from $50 million to $300 million a mile — a six-fold increase.
This is not just a Charlotte problem.
Runaway costs are impacting transit projects across the nation, and experts aren’t sure why — though the increasing use of consultants, who are generally more expensive than in-house staff, is one reason experts point to.
This week’s Transit Time will attempt to explain a small part of those increases by focusing on a recent consulting contract approved by Charlotte City Council.
The no-bid contract is with InfraStrategies, a California-based transit consultant, for “financial modeling.” The consultancy is run by former Charlotte Area Transit System chief executive Carolyn Flowers. It’s worked with the city before, as well as transit systems in Nashville, Austin, Boston, Chicago and New York.
Charlotte’s contract could be for as much as $1 million a year for three years. To be sure, the increase in light rail costs isn’t driven solely or even primarily by consultants — there are plenty of other factors, like inflation — but the case illustrates how costs can accumulate, even in the absence of any real building, on a major project like the Silver Line.
The city agenda says the InfraStrategies contract is for things such as “updating capital and operating cost estimates for transit and/or transportation programs; testing various program definitions; updating factors such as revenue growth rates, cost escalation, financing strategies; and incorporating new or adjusted federal financing mechanisms.”
That’s a bit of a word salad.
To understand what InfraStrategies does, let’s look at a 2021 presentation the consultant made for the Charlotte Area Transit System. At the time, CATS and the city were analyzing the feasibility of their proposed $13.5 billion transit plan.
The consultant determined how much money a proposed penny sales tax for transit would raise over nearly 50 years.
InfraStrategies took the existing year half-cent sales tax revenue and then doubled it to account for a full penny. It then used an estimated annual growth rate of 4.4% and then tallied up how much it would generate over a half century.
I created an Excel spreadsheet to do the same thing, and it took about five minutes.
(At the time, Transit Time wrote that the InfraStrategies growth rate of 4.4% might be too optimistic after reviewing more than 20 years of sales tax growth. After that article, the consultant then lowered its annual growth rate in a subsequent analysis to 3.8%.)
InfraStrategies also projected how much debt the city can take on at once, and how much it will cost to maintain and operate transit projects. In 2023, its staff will also look at different ways to pay for transit projects, such as federal grants and loans. It will also consider whether it makes sense to build some projects in phases.
That is more complicated than estimating how much money a tax will bring in, but not by much.
InfraStrategies is not doing detailed ridership forecasts. It’s not designing the rail line and determining how much each bridge, train platform signalized road crossing will cost.
A key question is: Does the city of Charlotte need to hire an outside consultant to do this?
In other words, does it need to spend $1 million a year, or would it make more financial sense for CATS to hire one or two full-time analysts to do the financial modeling in house?
Ron Tober, a former chief executive of CATS, said it’s common — and OK — to have outside consultants do financial modeling. But the price tag surprises him.
“But $1 million a year seems like a lot of money,” he said.
InfraStrategies referred questions to the city. But we can look at how other departments and governmental agencies do long-term transportation planning.
The Charlotte Department of Transportation is responsible for maintaining and building city roads; sidewalks; and bike lanes. It has an annual budget, and also spends tens of millions dollars from bond packages.
Assistant City Manager Liz Babson, who used to run CDOT, said InfraStrategies will be primarily working on transit projects for CATS, but it may also help with financial modeling for non-transit projects.
She said that in the past she said CDOT “has not used consultants for financial modeling.” She said CDOT relies on the city’s finance department for projections.
The Charlotte Regional Transportation Planning Organization (CRTPO) is a federally required group that makes decisions about which highway projects should be built and when. It’s supported by a small group of city of Charlotte staff.
CRTPO director Robert Cook said “we rely on NCDOT staff in Raleigh to determine …project costs and if adequate funds are available to pay for them.”
Since CRTPO relies on the North Carolina Department of Transportation, Transit Time asked the DOT how it does financial projections. It has an annual budget of $5 billion.
A DOT spokesperson said the department works with the legislature’s Fiscal Research Division and Office of State Budget and Management “to develop a consensus revenue for the next 10 years for the entire state.”
Two years ago, City Council member Ed Driggs was critical of InfraStrategies’ revenue projections of 4.4% a year.
Driggs now chairs the transportation committee and has taken a lead role in trying to advance the city’s transit plan. He says he supports the city’s decision to hire InfraStrategies.
“Considering the scope of the plan, $1 million a year just isn’t a lot of money,” he said.