Articles

Follow the Money

Rail-to-Dulles is the most expensive public works project in Virginia history. To understand the maneuvering over what gets built and who pays for it, start by untangling the web of special interests.

by Peter Galuszka

The corridor between Tysons Corner and Washington Dulles International Airport is home to one of the most dynamic high-tech business communities in the world. But economic growth has far outpaced the ability of state and local governments to keep up. Roads are so congested that Northern Virginia could teach L.A. a few lessons about gridlock.

The great hope of business, political and civic leaders is a $4 billion proposal to run a 23-mile spur off the Washington Metro rail system through Tysons Corner, Reston and Dulles Airport. Boosters say the project would add the equivalent of four lanes of rush-hour freeway. Not only would Metrorail offer public transit to thousands of desperate commuters, they say, it would coax billions of dollars of new investment into Tysons Corner, transforming the disconnected tangle of offices and shopping centers into a vibrant, world-class business center.      

Yet there is frantic gnashing of teeth and mashing of calculators about the project, the sheer size of which seems to make it an unstoppable juggernaut with a life and purpose of its own. The $4 billion cost estimate, now four years old, could climb much higher.

Dulles Rail is the biggest cash cow to graze in Fairfax County since its dairy land turned into concrete decades ago. The construction and service contracts will run into the multi-billions of dollars. Corporations owning land near planned Metro stops will reap billions more in windfall value. And the bulk of the bills, as currently envisioned, will be paid by taxpayers and Dulles Toll Road commuters.

It’s the nature of politics in America: Whenever the spoils are that huge, and whenever there are big winners and losers, various interest groups emerge. They form organizations to promote their agendas, hire lobbyists, proffer self-serving arguments cloaked in the rhetoric of the public interest, donate money to politicians and seek to influence the bureaucratic process in their favor. With Rail to Dulles, the magnitude of the dollars at stake and the jostling of the special interests are on a scale and complexity that Virginia has never seen before.

Phase One of the 11-station project would run as an offshoot from Metro’s orange line past east Falls Church to Wiehle Avenue in Reston. Phase Two would take Dulles rail from Reston for six more stops through Dulles airport to Route 772 in Loudoun. At the moment, Phase One is estimated to cost $2.1 billion.

Some $900 million of Phase One would come from the Federal Transit Authority, about $525 million would come from the state of Virginia through Dulles Toll Road revenues and another $525 million would come from Fairfax County through a special tax district encompassing private businesses along the Dulles corridor. It isn’t known yet who would pay for the balance of $125 million or any possible cost overruns, says Marsha McAllister, communications manager for the state Department of Rail & Public Transportation.

There are no firm estimates for Phase Two, and McAllister warns that “the $4 billion total construction number was what was contained in an Environmental Impact Statement four years ago.” Assuming that construction costs have escalated by five percent annually since then, the price tag could well be 20 percent higher. Where that $800 million would come from is anybody’s guess.

Here are just some of the cross-cutting interests with a stake in the outcome:

• Rail vs. Road. Dulles Toll Road commuters are furious that the state reneged on a promise to stop charging tolls after the original construction bonds were paid off. Why, they ask, should they be asked to pay for construction of a rail line they won’t use? 

• Consortium vs. Consortium. Gov. Tim Kaine recently scotched plans to tunnel the line underneath Tysons Corner, fearing that the extra $200 million cost would threaten federal funding. That decision works to the advantage of Dulles Transit Partners, which has the inside track on getting the construction contract. The loser is a rival construction consortium headed by McLean-based WEST*GROUP, which was angling for the tunnel.

• Politicians vs. Smart Growthers. Elected officials of both parties, desperate for a solution to Northern Virginia’s region’s legendary traffic congestion, are in a panic to get the project built whatever it takes – even if it means supporting the less popular aerial track through Tysons. Bitterly disappointed are those who regarded the tunnel option as the impetus for transforming the dysfunctional suburban district into a world-class urban center that offers a mix of housing, offices and retail with pedestrian access to the stations. 

• Landowner vs. Landowner. Tysons landowners with property near proposed Metro stops stand to become Double Lotto winners: Once for access to the Metro and twice for increased densities to go along with it. Through a special tax district in Fairfax County, landowners as a class would pay a portion of the tab for building Metro. But that district levies landowners at the same rate, regardless of whether they sit adjacent to a Metro station or are located a half mile away. The clear winners are a handful of landowners near the Metro stops.

• Fairfax vs. Loudoun. Eight of 11 Metro stops would be located in Fairfax County, one in Dulles Airport and two in Loudoun County. The Metro would spur investment first and foremost around the four stops in Tysons Corner, yielding a tax bonanza in commercial development. Some critics in Loudoun County wonder what’s in it for them: Loudoun won't get the development benefits until Phase Two. Yet Loudoun commuters relying upon the Dulles Toll Road to get to work in Fairfax will be paying a fortune in tolls over the next decade.

Adding to the general confusion, the project is still in flux. The Virginia Department of Rail and Public Transportation, a public entity tasked with spurring public-private investment in transit, currently oversees the project. But Gov. Kaine wants to transfer oversight to the Metropolitan Washington Airports Authority, a multiple-jurisdiction organization with its own distinct set of interests.   

Another big question is who will get the design/build contract for the project. The Department of Rail and Public Transportation awarded the preliminary engineering contract, for $45.5 million, to Dulles Rail Partners after a competitive bid. It now appears that Dulles Rail has an excellent chance of winning contracts for the entire project without any more competition. Some have called for open bids in the hopes of driving down the cost. If a negotiated contract for Dulles Rail comes in at much higher than $4 billion, this is likely to become a major issue.

The prospect of a negotiated bid is already raising eyebrows because Bechtel, one of the Dulles Rail partners, has a penchant for drawing controversy. Bechtel was at the epicenter of one of the most contested mega projects ever, the “Big Dig” in Boston, whose price tag started at about $2 billion in the 1980s and ended up in the $14 billion range.

Part of Bechtel’s modus operandi, critics charge, is to co-opt public officials with campaign contributions so they won’t be too critical when such their projects hit bumps or cost overruns. An official for Bechtel Infrastructure, part of the Dulles consortium, denies his firm operates that way. He notes that his firm’s work on the Boston project, finished in 2003, was limited to engineering and management, not the actual construction. Despite Bechtel’s denials, suspicions linger.

You can’t understand the game without a roster. Here is a detailed look at the major players:

The Politicians

Ever since Dulles rail was conceived, the special interests have made a sophisticated effort to get politicians on board. A sample of prominent backers includes:

• Gerald Connolly, chairman of the Fairfax County board of supervisors, is a consultant who also happens to be employed by SAIC, a defense contractor that owns land that would grain in value from the rail project. Connolly, a Democrat, has received at least $9,800 over the years in campaign contributions from major developers and construction firms connected with the rail project including, WEST*GROUP and Lerner. Bechtel Infrastructure has given him $150.

• Del. Kenneth R. Plum, D-Reston, member of the House Commerce and Labor committee, is a founder and chairman of the Dulles Corridor Rail Association, a lobbying group. He has received more than $6,700 in campaign contributions from business interests linked to Dulles Rail. Plum also has received $2,250 in political campaign contributions from Washington Group International.

• Del. Vincent F. Callahan, vice chairman of the Dulles Rail Corridor Association and chairman of the House Appropriations Committee, has received $1,000 in campaign contributions from Washington Group International.

• U.S. Rep. Frank R. Wolf, a Republican whose 10th district covers McLean to Winchester. A major supporter of the project, Wolf had backed a tunnel connecting four stops in Tysons Corner along the rail line, which also happens to be strongly supported by major Tysons real estate interests, including WEST*GROUP, Lerner and SAIC. Wolf has received campaign contributions worth $25,050 from Science Application International Corp (SAIC), a major landowner near the Dulles rail line, from 2002 to 2006. He got $9,750 from West*Group Management in 2004.

However, in a July 26 letter, Wolf urged Gov. Tim Kaine to reconsider the tunnel for fear of losing from the Federal Transit Authority and running the entire project off the rails. Kaine nixed the tunnel plan in late summer. 

• U.S. Rep Tom Davis, a Republican from the 11th District, co-signed the July 26 letter to Kaine asking that the rail project not be delayed because of a tunnel at Tysons. He has received $41,500 from SAIC from 2002 to 2006 and $11,250 from Lerner Corp.

The Landowners

Named for the intersection of two, once-rural roads, Tysons Corner has grown over the years into a sophisticated Washington-area destination with 25.6 million square feet of office space and four million square feet of retail. Its Tysons Galleria and Center shopping malls host tony stores and hotels, including a Ritz-Carlton. The business center is home to many of Northern Virginia’s leading high-tech firms, which are enjoying the defense and homeland security spending bonanza. Major developers include Lerner Corp. and WEST*GROUP which has patiently built up Tysons from its inception.

One reason that the Tysons developers so adamantly back the rail project is that it gives them a reason to seek increases in office and retail densities in the Fairfax County comprehensive plan and zoning.

Mike Cavin, an official of a computer company who has studied the Dulles rail project, says that densities, measured in “floor area ratios” (FARs), run about 1.5 in the Tysons area. Yet he believes that the major commercial entities there could seek FARs of from 3.0 to up to 5.5 if the rail line goes through. Higher densities of that magnitude would provide a windfall in property valuations worth hundreds of millions, maybe billions, of dollars. Says Cavin: “These guys would reap big property value increases on their books” the moment FAR increases are approved.”

Those real estate values would provide the impetus for landowners to raise billions of dollars to refashion Tysons Corner into a more cohesive, pedestrian- friendly community with a better balance of housing, offices and retail amenities. About 100,000 people work there each day, but only about 17,000 live there. Creating a balance of residents and workers potentially would take tens of thousands of commuters off the strained highway arteries serving the region.

Indeed, McLean-based WEST*GROUP, led by Gerald Halpin, and other local companies have strongly lobbied for a tunnel through Tysons: Underground Metro stations would add more value to the properties above. But tunnel advocates include those with no financial interest in the outcome. Construction of an above-ground rail line along major thoroughfares, many fear, would bring traffic to a screeching halt for extended periods. Furthermore, smart growth proponents contend that the looming, above-ground rail lines will divide Tysons into unconnected islands, dashing the dreams of improving connectivity and access within the business district.

Tysons developers are major players in local political campaigns. WEST*GROUP’s Halpin, for instance, has contributed many thousands of dollars to local and state candidates connected to the Dulles rail project. In recent years, the real estate mogul has given nearly $400,000 to Democratic candidates and $45,250 to Republicans. He helped Kaine to the tune of $40,000 when he ran for lieutenant governor with former Gov. Mark Warner, to whom Halpin also gave $50,000.

Halpin later gave $85,000 to the “Tim PAC” for Kaine and helped bankroll Kaine’s Williamsburg inauguration this January for $25,000, according to the Virginia Public Access Project, which compiles data on contributions. Halpin has also given other local leaders money, including Connolly, Callahan and Plum.           Despite the contributions, Halpin did not get his way on the Tysons tunnel. Although Kaine had strongly preferred the tunnel option, he nixed it for fear that the added expense would jeopardize federal funding for the project. Despite the failure to win the tunnel, WEST*GROUP, which owns undeveloped land in the Tysons area plus multiple developed properties, still stands to benefit from higher density zoning if the rail line goes through.

In a written response to questions from Bacons Rebellion, WEST*GROUP officials said that the Dulles rail project “is a critical component for the Northern Virginia Transportation system, but that the project should be built “so that it is both attractive and easily accessible for all riders from the beginning.” User services such as elevators, bridges and conveyors must be built from the beginning and not subject to deletion for cost reasons later by the developer, the company says.

WEST*GROUP officials cited a $2 billion construction figure for Phase One that includes the tunnel option, which is less than the most recent. $2.3 billion price tag for the aerial option. That's why, the firm said, any contracts should be bid competitively.

WEST*GROUP gives political contributions because it “has been in business for 42 years” and is active in the community, a spokesman said.

Big Transit

When it comes to mega projects, Bechtel and Washington Group International are hardly strangers. Bechtel built the famed Grand Coulee Dam and WGI erected Pennsylvania Station in New York in 1910 and, more recently, the Hudson-Bergen light rail line in New Jersey and another one connecting Los Angeles with Pasadena. The two formed a consortium in 2004 that bid competitively for the design and engineering work worth $45.4 million for Phase One of Dulles rail.

“We are currently in negotiations for a fixed-price, design/build contract,” says Jennifer Augment, manager of communications for Dulles Rail Partners, the consortium. WEST*GROUP had at one time been part of the consortium but dropped out for potential conflict-of-interest reasons. Negotiations for the next $2.1 billion Phase One could take several months. If the state and the consortium cannot come to an agreement, then the state will put the contract out for competitive bidding. Otherwise Bechtel and WGI have the inside track for the whole project.

Such a fixed-price, design/build paradigm is the modern way to go for such big time players as Bechtel and WGI, Bechtel officials claim. Years ago, a state would assign contracts for a major building project in bits and pieces, in part to satisfy political constituents. But computers and newer construction management policies make it more cost- and time-efficient to manage and build the entire project while subbing out much of the work.

At least that’s the argument of Augment and Howard Menaker, a Washington-based communications manager for Bechtel Infrastructure in Washington. “Bechtel has worked on a number of public-private partnerships,” says Menaker, “and we offer more continuity. The work is done far faster and with less money.”

While Menaker’s statement fits a definition of modern construction management, Bechtel’s record in management is spotty. Bechtel and partner ParsonsBrinckerhoff got the lion’s share of the blame for the $14 billion “Big Dig” project which connects Logan International Airport with downtown Boston and other neighborhoods through a huge system of tunnels and bridges.

The “Big Dig” became a Poster Child for mismanagement of public works projects with massive cost overruns. Accusations flew that materials used were substandard and that asbestos threats were ignored as completion schedules got pushed back and expenses grew from about $2 billion back in the 1980s to more than $14 billion when the project was completed in 2003. The project got another black eye earlier this year when a section of tunnel broke apart and killed a passing motorist.

In 2003, The Boston Globe published a scathing investigation of the project that in part lambasted Bechtel for creating a web of lobbyists and political money to grease its way in the Big Dig and blunt criticism. So extensive was Bechtel’s practice of contributing to politicians and pushing lobbyists on them that it drew comment from Alan Altshuler, a land planning professor at the Harvard Graduate School of Design. The Globe quoted Altshuler as saying: “This was a case where (Bechtel executives) are obviously being very responsive to the politics in Massachusetts . . . You would have wanted a legislative oversight committee or someone to say, ‘Hey, that’s wrong. These guys should not be active in Massachusetts politics. They are powerful enough.’”

Altshuler, coauthor of 2003 book on mega projects including the Big Dig, declined through a spokeswoman to be interviewed by Bacons Rebellion. Bechtel has issued an 18-page-long, point-by-point rebuttal to the Globe series. Menaker says that a major difference between Dulles and the Big Dig is that Bechtel and ParsonsBrinckerhoff were merely design and construction managers in Boston, while in Virginia they hope to be general contractors as well. In the case of the Big Dig, the Commonwealth of Massachusetts was the general contractor, he says. In Virginia, with Bechtel and its partner in charge, things should be different, he implies.

Is Bechtel following a similar business model in Virginia? Some signs suggest yes.

For starters, Bechtel and WGI have hired a highly well-connected lawyer John G. Milliken, a partner at Venable LLP, a prominent Washington law firm whose roster of partners also includes former U.S. Sen. Birch Bayh of Indiana. Milliken has extensive ties and experience with Virginia’s transportation policy makers. From 1990 to 1994, he served as state Secretary of Transportation under then Gov. L. Douglas Wilder. He is now chairman of Virginia Port Authority board and helped lead the transition team for former Gov. Mark Warner. Contacted by Bacons Rebellion, Milliken says he “has done legal work for the consortium” for a couple of years but insists that he does no lobbying for them.

Menaker says that Bechtel gave no money to local or state politicians in Massachusetts but conceded that Bechtel does give money to federal candidates in 36 states. At first, he stated that the same was true in Virginia, but after checking his records, he noted that Bechtel Infrastructure did, in fact, donate more than $17,000 to local and state politicians, including members of the General Assembly and members of the Fairfax Board of Supervisors.

Moreover, Bechtel Infrastructure gave $50,000 to a political action committee called Citizens for Better Transportation, which represents some of the largest builders and developers in the state and has advocated tax increases to pay for more transportation projects. The company also gave $5,000 to the Yes Campaign, which supported referenda to raise more money for roads in Northern Virginia and Hampton Roads several years ago.

The Bechtel consortium, Augment says, has no position on whether a tunnel should have gone through Tysons Corner or any other policy aspect of the Dulles rail project, despite widespread rumors to the contrary. “We serve the people who hired us,” and she adds that those people make the decisions.

The Outlanders

In theory, Dulles rail would be a boon to fast-growing Loudoun County, which would see three stops not far from its borders in Fairfax and then two more after the Dulles airport stops. Except for a short underground section at the airport, the planned stations follow the routes of the Dulles Toll Road and then the Dulles Greenway, a public-private toll road. The above-ground rail line would run right through the median strips with walkways taking passengers over the multi-lane highways.

What isn’t known yet because preliminary engineering for Phase Two hasn’t begun, is how exactly these stations and walkways will be laid out and what provisions for parking will be made for commuters. 

The vague nature of the project doesn’t end there. Its true cost isn’t known since definitive engineering hasn’t started. A 1997 estimate put the price at $1.45 billion. By 2001, the tag had escalated to $4 billion. Under that now-out-of-date scenario, Phase Two will cost $1.9 billion. But, then, Phase Two isn’t likely to be finished until 2015 so anything is possible.

Some Loudoun officials pay lip service to the plan because it would be the first public rail to serve the county, which has been overwhelmed with growth for years. Some landowners and landowners near the stops would benefit just as their counterparts in Tysons Corner would from rezonings allowing for higher densities, although, realistically, that lies years in the future.

There are some short-term benefits, however. Many residential development in Loudoun are handled through real estate trusts or REITs, which need to put returns in the hands of investors. Even the illusion of having public transit someday gives REITs a market boost.

Yet there are also plenty of critics. Dulles Rail’s Loudoun stops are miles from some of the busiest commuting corridors, such as Route 7, and doesn’t run to Leesburg, the county seat where much of the county’s office space exists. In theory, the rail line would offer affordable public transit to low-paid airport workers at Dulles International. Problem is, many of those workers live far to the west of the airport, where they can find cheap housing. They would not be served at all by the rail line.

For Washington-bound commuters, there had been a plan for Bus Rapid Transit (BRT) involving regular bus trips through radio-timed stoplights on main arteries such as Route 7. These, critics say, could deliver commuters to downtown Washington in 30 minutes rather than an hour on the Dulles Rail line. Local officials, however, abandoned BRT for the rail line, even though rail is many times more expensive. 

Some, like Reston commercial developer Chris Walker, believe that the only reason Dulles rail exists is that it is “all pork, a huge earmark. [The] Dulles [project] is so stupid that even in the free world, it makes no sense.”

Another critic, Ken Reid, a town council member in Leesburg, says Loudoun County's liabilities for the project remains a mystery. “Loudoun will have to pay enormous subsidies and operating deficits,” he says, although “most of the jobs and people won’t be living near the Metro line.” Moreover, Reid doesn’t expect to see Loudoun served until 2026 -- 10 years later than the figures bandied around. He expects that the entire project will end up costing at least $6 billion, not $4 billion. 

Assuming a payment structure similar to Phase One, Loudoun’s car-borne commuters will bear much of the rail’s cost through higher tolls. It will be hard to find alternative sources of state funding since the Virginia Department of Transportation road budget is in serious shortfall as it is. As for the county’s share, it isn’t clear whether or not Loudoun could set up a special tax district similar to Fairfax’s.

Indeed, as far along as the project is, Dulles rail poses more questions than it answers. Opportunities for public input have been limited largely to an environmental impact statement finished several years ago, before the engineering and planning for just Phase One was completed. There seems to be no additional forum for more public input nor is there likely to be one if Bechtel and Washington Group International win a no-bid contract to build the entire project.

In sum, the Virginia’s largest public works project ever is likely to lumber down  a bureaucratic track, nudged one way or the other by special interests, lobbyists and politicians, until it either collapses under its own weight or finally gets built. The public will just pay the bills. 

-- September 29, 2006