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Airports authority says cost of developing rail car could bust deal with Metro

By Lisa Rein
Washington Post Staff Writer
Thursday, April 22, 2010; B01

Officials building a subway line to Dulles International Airport say Metro is overcharging them for new rail cars, a budget-busting cost that they predict could delay the opening of the extension and force higher fees for Dulles Toll Road commuters.

Unless Metro agrees to eliminate a $75 million increase on 64 rail cars it is preparing to buy for the new Silver Line, the regional airports authority won't agree to the deal, the officials said.

At issue is Metro's plan to have the Dulles rail project pay the entire cost of developing the new cars. Authority officials say that is unfair when the investment will benefit the entire Metrorail system.

"It is not possible, nor is it reasonable, for the [Dulles rail] project to bear all these costs," authority President James E. Bennett told interim Metro chief Richard Sarles this month in a three-page letter obtained by The Washington Post.

The Metropolitan Washington Airports Authority is overseeing construction of the 23-mile rail line, which will stretch from East Falls Church to the airport and into Loudoun County.

The cars in question will carry riders on the first 11.5-mile leg, which is being built through Tysons Corner to Wiehle Avenue in Reston and is scheduled to open in 2013. They would be the first cars manufactured under a contract with Kawasaki Rail Car for 748 rail cars for the subway system. The contract would be worth as much as $1.9 billion.

The airports authority is paying for the Silver Line cars as part of the project's construction phase, but Metro, which will operate the extension, is responsible for executing the purchase.

Airports authority officials say they budgeted $190 million for the 64 cars, about $3 million each, based on cost estimates provided by Metro in 2007. But the price has increased to $265 million, or $4.1 million for each car.

Metro, meanwhile, will pay significantly less, $2.5 million each, for cars it will use elsewhere in the system, according to a financing plan presented last month to its board of directors. That plan would include a base contract for the 64 cars for the Silver Line and options to buy additional numbers of cars in phases.

The Dulles rail project would pay engineering, design and development costs for all of the rail cars, but Metro spokeswoman Lisa Farbstein said the practice is not unusual.

"It is standard in the industry that the first order of a given series" of rail cars costs more than the option "to purchase additional cars because there is no guarantee that the options will ever be exercised," she said.

Bennett, however, is lobbying Metro to spread the design and engineering costs evenly across the first 428 cars in the purchase plan, bringing the price to $2.7 million each.

"This is way over what we planned for," said Mark Treadaway, the authority's acting vice president for communications. "We need to look at an equitable partnership and spread this out more fairly."

The dispute underscores the challenge of expanding the rail system at a time when Metro faces multimillion-dollar deficits. The agency implemented a 10-cent fare surcharge Feb. 28 to cover a gap in its current operating budget and is considering fare increases and service cuts to close a projected $189 million budget shortfall for the fiscal year that begins July 1.

Metro is under pressure to begin replacing its oldest rail cars, which are more than 30 years old and make up about a quarter of the fleet. Federal safety officials have criticized the cars as being prone to "telescoping" in crashes. The striking train in the June 22 Red Line crash that killed nine people belonged to this class and compressed to a third of its original length.

By combining the order for the Silver Line fleet with 364 additional cars, Metro negotiated a better price, saving millions of dollars on the overall purchase, officials said.

"In some ways we're trying to have it to our advantage," said Metro board member Jim Graham, who represents the District and is also a member of the D.C. Council. "We are obviously challenged at every turn in terms of our budget."

Metro board member Jeff C. McKay, who represents Fairfax County, said the rail project is already benefitting from Metro's bargaining power.

"If they go it alone, they may end up in the same situation," said McKay, a Fairfax supervisor. "However, it makes no sense to the region to not broaden the procurement and cut costs for the transit system as a whole."

The $2.75 billion first leg of the Silver Line, to Wiehle Avenue, is funded by a federal grant, a special tax district for commercial land owners in Tysons Corner, contributions from Fairfax County and revenue from fee increases on the Dulles Toll Road.

If the Dulles rail project is not given a better deal on the cars, "commuters on the Dulles Toll Road and citizens of Fairfax County" will pay the extra cost, Bennett wrote to Sarles. The Silver Line cars already are on a tight timeline for delivery in November 2013, a month before the subway's scheduled opening. If the deal must be renegotiated, that date would probably slip, airports authority officials said.

Sarles is expected to review the concerns about how the deal will be financed with the Metro board in a closed session Thursday.

The Dulles rail project started with a contingency fund of about $300 million. About $70 million has been spent, according to the project's most recent budget report, on power substations, utility relocation, automatic train control equipment and design changes. The airports authority does not have plans to use the fund for rail cars, officials said.

"They're asking us to spend 25 percent of the entire contingency fund for an item that makes up 7 percent of our entire budget?" asked Mame Reiley, a member of the airports authority board who heads the Dulles corridor committee. "It's absurd."

However, the Federal Transit Adminstration, which is contributing $900 million to the rail project, said design costs were always to be included in the rail car budget.

"The budget included contingency amounts to manage unanticipated cost increases including this kind should they occur," FTA spokesman David Longo said in a statement.

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