I-485: On the Road to Spiraling Costs: $863 Million Project Now Totals $1.2 Billion — With More to Come

By Stella M. Hopkins, The Charlotte Observer, N.C.

Feb. 12–For years, the outerbelt transforming the Charlotte region has evoked praise, criticism and traffic-jam swearing.

Interstate 485 also carries a jumbo price tag.

Spiraling costs have driven the state’s estimate for the 66-mile loop from $863 million in 1989 to nearly $1.2 billion this year.

And I-485 will bust its budget during the final decade of construction, according to Observer analysis of figures from state accountants.

Authorized spending and projections for current and future portions exceed the state’s estimate by $20 million, the Observer found. Inflation is expected to add $45 million more to construction costs on three future projects. And land estimates for the final leg are woefully out of date and inadequate.

“It’s ballooning,” Sen. David Hoyle, a Gaston County Democrat and highway-planning veteran, said of inflation’s toll. “It’s out of hand.”

Land costs have soared as the loop spurred massive development. World demand has shoved up prices for steel and other building materials. Skyrocketing oil prices pinch highway budgets for paving materials and more. For example, the state paid contractors a total of $1.7 million to offset higher fuel prices on nine of the most recent loop projects, according to a transportation official.

“That’s really hurt us,” Bill Copeland, senior vice president with Rea Contracting, said of fuel and material costs. The Charlotte company has been the lead contractor on several I-485 legs and is a subcontractor on a current stretch.

Delays, design and other changes, environmental safeguards and the occasional mistake also have driven up I-485′s price.

Building roads faster could reduce inflation’s impact. But that takes more money. One controversial proposal: charging tolls on new roads.

I-485 spending to date tallies $925 million. That money has completed 47 of 66 miles and started work on all but five miles. The Observer’s review didn’t include the $38 million widening of the bottlenecked southern leg because it wasn’t part of the original project.

To be sure, figuring the cost of a loop or any large highway project, built over many years, is a complex art. And there is no yardstick against which to measure spending for one highway construction project with another.

Nationwide, costs vary hugely. Building on flat land is cheaper than carving a road from a mountainside. Building in a city can add the expense of rerouting traffic and utility lines.

“There can be an awful lot of variables,” said David Ellis, a research scientist with Texas A&M University’s Texas Transportation Institute. “There’s not a reasonable comparison.”

Land costs big factor

Used to be, land costs were not a major factor for highway planners, said Van Argabright, a state engineer who oversees transportation budget planning for Western North Carolina.No more.

So far, I-485′s land tab has come to $229 million. That’s one-fourth of total spending.

The final 5.25-mile stretch could drive that much higher.

The project — east of I-77 and arcing north of the University area, linking to I-85 — isn’t due to get under way until 2012. State engineers expect inflation will drive construction costs more than 25 percent higher than current budget estimates.

The state has spent $9.5 million buying 17 of the 126 parcels expected to be needed, transportation officials said. One engineer said those purchases represent an insignificant amount of the land needed. The budget for buying the balance is less than $19 million.

“That number is going to go up drastically,” said John Williamson, the state’s right-of-way manager.

The project’s land-acquisition estimate is nearly 10 years old, Argabright said. The state is trying to bring such estimates current, he said. But they take a lot of time and are hard because land values vary widely and can change rapidly.

“We’ll probably be doing a new right-of-way estimate in the near future,” Williamson said.

For comparison, the right-of-way costs for a neighboring 5.5-mile stretch of I-485 topped $40 million, more than twice the budget for the final 5.25 miles. And most buying for the last leg isn’t slated to begin until late 2009.

“The land is appreciating in that area at a fairly rapid rate,” said Fred Beck, a Charlotte land appraiser. “Waiting is probably going to cost the taxpayers a lot of money.”

The art of budgeting

The outer loop first showed up in the state’s long-range highway spending plan in 1974 with a price tag of $52 million for the first, southern leg. But the route hadn’t even been set. Construction began 14 years later. A final interchange for that section isn’t due to be started until 2010.

So back in 1974, there was no way state engineers could put a valid price on the project. Yet for planning purposes, they had to provide an estimate. So far, the actual cost of the leg has been nearly five times higher, with more to come.

The bigger the project, the tougher it is to estimate.

For some legs of 485, the itemized construction contracts are thick as novels, listing thousands of goods and services, from steel and asphalt to planting grass and laying pavement markers.

Argabright and others who plan and estimate projects must also factor in environmental requirements, engineering, asbestos removal and growing requests for bike lanes and such.

They get as close as they can on the cost. Then they add 10 percent to cover in-house costs, such as engineers to oversee building, and the unforeseen.

“It’s not an exact science,” Argabright said.

He and others have tried putting inflation-adjusted values into the budget, he said. But that became confusing when legislators and other policymakers tried to compare projects or shift spending to other years.

So the seven-year spending plan lists current prices.

“But we have a reserve pot of money for the inflation,” Argabright said.

The solution, said Sen. Clark Jenkins, an Eastern North Carolina Democrat, is to find more funding sources to build roads faster.

“The more you delay it, the more it is going to cost you,” Jenkins said.

Stella Hopkins: (704) 358-5173.

Too High? Just Right?

How does North Carolina’s spending for I-485 stack up against other loop budgets?That’s hard to say.

Raleigh, Atlanta, Richmond, Va., and Memphis, Tenn., built loops decades ago. Land and everything else was a lot cheaper.

Greensboro’s 45-mile loop is about one-third smaller than Charlotte’s and less than half done. In 1989, long before construction started, the state estimated the total cost at $369 million, said Mike Stanley an N.C. Department of Transportation engineer who oversees budget planning. Today, that’s risen to $1.1 billion. .

That’s almost as much as the longer I-485, but the comparison isn’t fair.

Construction on Charlotte’s loop started more than 10 years before the 1999 ground-breaking on the Greensboro project. Much of Greensboro’s loop doesn’t even have a start date.

Building I-485

Many companies have worked on I-485, from engineering firms to landscapers to utilities. Here are the general contractors:

— APAC-Atlantic Inc.

— Blythe Construction Inc.

— Blythe Industries Inc.

— Boggs Paving Inc.

— Crowder Construction Co.

— Dixie Grading & Equipment Inc.

— Gilbert Southern Corp.

— Lee Construction Co. of the Carolinas Inc.

— McWhirter Grading Co.

— Rea Construction Co.

— Tidewater Skanska Inc.

— W.C. English Inc.

SOURCE: N.C. Department of Transportation

Stella M. Hopkins

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Copyright (c) 2006, The Charlotte Observer, N.C.

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