Transportation Infrastructure:

Progress On and Challenges to Central Artery/Tunnel Project's Costs and Financing

RCED-97-170: Published: Jul 17, 1997. Publicly Released: Aug 6, 1997.

Additional Materials:

Contact:

John H. Anderson, Jr
(202) 512-8024
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO evaluated: (1) the estimated cost of the Central Artery/Tunnel project in Boston, Massachusetts; and (2) Massachusetts' plans for financing the project.

GAO noted that: (1) as of March 1997, Massachusetts had estimated that the total cost of the Central Artery/Tunnel project was $10.8 billion--$400 million more than the $10.4-billion estimate contained in its September 1996 finance plan; (2) this increase occurred primarily because of growth in the project's estimated construction costs; (3) costs actually increased by more than $400 million, but the state assumed in its $10.8-billion cost estimate that the increases would be partly offset by savings, primarily from the project's owner-controlled insurance program; (4) however, the state also assumed that most of these insurance savings, $778 million, would not be realized until 2017, long after construction is completed; (5) as a result, the project's total funding needs through 2004, when the project is scheduled to be completed, are $11.6 billion--$778 million more than the project's $10.8-billion cost estimate, (6) furthermore, uncertainties exist about whether the savings projected by the state in the insurance program will be achieved; (7) the state's $10.8-billion cost estimate also depends on achieving the aggressive cost containment goals established for the project; (8) while the state has made some progress in its cost containment program, officials acknowledge that it has some ambitious goals that will be difficult to meet; (9) Massachusetts has implemented a plan to finance its share of the project's cost, including a strategy to finance funding shortfalls; (10) furthermore, funding shortfalls could be an additional $100 million to $500 million more if the state does not meet its cost containment goals; (11) to finance the shortfalls, the state plans to borrow $1.7 billion through a combination of revenue bonds issued by the Massachusetts Turnpike Authority and grant anticipation notes, as authorized by legislation passed in 1997; (12) however, this plan may be insufficient to meet the project's financing needs because it substantially covers the funding shortfalls only under the best-case scenario modeled in the feasibility study; (13) in addition, while the financial markets will decide whether the use of grant anticipation notes is feasible, uncertainties exist about the use of these notes because the amount proposed by Massachusetts is unprecedented and relies on borrowing against federal funds that may not be authorized by the Congress until after the next federal highway authorization expires, sometime around 2003; and (14) the state imposed additional limits on itself to constrain the growth of state debt in order to improve its credit ratings.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The requester asked the FHwA Executive Director about this recommendation during the agency's FY 1999 appropriations hearing. The Executive Director expressed FHwA's disagreement at that time and informed the Chairman it would not be implementing the recommendation.

    Recommendation: To provide a more realistic estimate of the cost and financing of the Central Artery/Tunnel project, the Secretary of Transportation should direct the Administrator, Federal Highway Administration (FHwA), when FHwA requests the Commonwealth of Massachusetts to prepare a new Central Artery/Tunnel project finance plan, to include in that plan a revised estimate of the project's costs and funding needs that more closely reflects the state's actual experience with its cost containment program.

    Agency Affected: Department of Transportation

  2. Status: Closed - Not Implemented

    Comments: Massachusetts last submitted an updated Central Artery/Tunnel project finance plan to FHwA in October 1998. This finance plan update included a contingency plan to pledge a portion of the state's gasoline tax to the project in the event that sources of financing were less than expected. However, this plan was based on the current cost estimate of $10.8 billion. The state has not and does not plan to develop a contingency plan to cover shortfalls in the event of project cost increases, as GAO has recommended.

    Recommendation: To provide a more realistic estimate of the cost and financing of the Central Artery/Tunnel project, the Secretary of Transportation should direct the Administrator, FHwA, when FHwA requests the Commonwealth of Massachusetts to prepare a new Central Artery/Tunnel project finance plan, to include in that plan a contingency plan for financing the project if costs increase further or if the sources of financing are not sufficient.

    Agency Affected: Department of Transportation

 

Explore the full database of GAO's Open Recommendations »

Sep 14, 2016

Sep 2, 2016

Aug 8, 2016

Jul 28, 2016

Jul 13, 2016

Jul 7, 2016

Jun 24, 2016

Jun 21, 2016

May 26, 2016

Looking for more? Browse all our products here