THE MONEY PIT

	August 8 , 2000
	Thinking big and digging big in Boston. Our economics correspondent, Paul Solman, of WGBH-Boston reports.

PAUL SOLMAN: Boston's main road on a typical day. Like so many of America's urban highways, the central artery has too few lanes, too many vehicles. And this seven and a half mile road was built back in the 1950's. Boston's central artery was designed for 70,000 cars a day, and now it has to cope with something like 200,000. And as you can see, it's not coping very well. So in 1985, the Big Dig was begun, the largest public construction project in history, a 15-year, now famously over- budget effort to bury the central artery under the city. AL MacPHAIL, Resident Engineer: This elevated highway that you see behind me here now and all the traffic on it, that is all going to go underground. This is all going to be park. It will make Boston into a gorgeous city, perhaps one of the best-looking cities in the world. PAUL SOLMAN: Gorgeous? Perhaps, but with a price tag that's exploded from $2.5 billion to nearly $14 billion, cities around the country are watching Boston with a mix of fascination and horror, says the Big Dig's new boss, Andrew Natsios, who took over after the overruns. ANDREW NATSIOS, Massachusetts Turnpike Authority: Many, many large cities have old, crumbling infrastructure that have got to be dealt with in the next five or ten years, or they're going to be in serious trouble. They'll be unlivable if they don't do something. PAUL SOLMAN: Americans online, however, are reading about little but the overruns. The danger is that the Big Dig's price tag will become its legacy, especially after a widely reported cover-up which the FBI is now investigating. Meanwhile, in Congress, Senator John McCain keeps digging away at the project's excesses. SEN. JOHN McCAIN: In 1985 it was supposed to cost $2.5 billion. Now we don't even know if it's going to cost 13-point-some. The taxpayers deserve a lot better than that. PAUL SOLMAN: Boston's Big Dig, then, could be an object lesson which teaches other cities to shy away from projects they arguably need to undertake. ANDREW NATSIOS: The political controversy surrounding this could have the effect of throwing cold water on any plans for farsighted infrastructure development around the country. PAUL SOLMAN: So why is the big dig so dizzyingly over budget, and what is the fallout for all the other American cities facing big or not-so-big digs of their own? Well, to begin with, says Harvard's David Luberoff, urban projects are always hard to price. DAVID LUBEROFF: If you're building a highway through Kansas, you know roughly what it's going to cost to build a highway through relatively flat farmland. Now imagine you're doing a project that's using a relatively unique technology, and you are going through a part of the world that is essentially landfill from the 19th century, and nobody even has a very good map of what's down there, so your estimates are likely to be off. SPOKESMAN: We still haven't run into any, like, old boats that were buried or sunk. PAUL SOLMAN: Some of the costs lie hidden in the landfill used to expand Boston over the centuries. They're cutting into a wall of it right here. Engineer Paul Goguen: PAUL GOGUEN: That's part of an old wharf line, and you can see the vertical pilings for the wharf. Those were probably put in, you know, 100, 200 years ago. PAUL SOLMAN: This tunnel, which will extend the mass turnpike to the airport, is moving forward at a rate of three feet a day. One machine, like a drill in a coal mine, chews up the surface; another frees objects like pilings and rocks. The old landfill of Boston is removed and loaded onto trucks to return it to the countryside whence it originally came. As the landfill is sheared away at the bottom of this animation, hydraulic jacks shove the tunnel further underneath the busy railroad tracks shown in black above. But that entailed an additional cost. To keep the tracks from shifting, the soggy soil below was actually frozen by installing an expensive network of pipes filled with salt water chilled to minus-ten degrees centigrade. PAUL SOLMAN: And so here, this is actually... This is ice. PETER VAN DIJK, Tunnel Engineer: This is ice. We had to freeze the ground. To do that we had to drill pipes into the ground while the trains are going, so we did that mostly at night and weekends, with several hundred trains passing every day. And our aim is of course that no one train gets held up, and up to now we've been able to do that. PAUL SOLMAN: No trains have been delayed? PETER VAN DIJK: No trains have been delayed. PAUL SOLMAN: And when you dig up a city, you can't just post a sign saying, "closed for alterations, see you in 15 years." There are subways, water, gas, and electric lines, all of which have to be kept running. For cars, the Big Dig has meant ever-changing off ramps and detours so the fabled Boston driver isn't driven further round the bend. PAUL SOLMAN: This is one of those great Boston moments here: No stop sign. It's just a question of who has the bigger car or the older car or nerves of steel, I like to think. The Big Dig snarl has arguably had one benefit: Traffic has slowed down enough for TV interviews. The Big Dig: Is it worth it? The big dig? PASSENGER: Thumbs up, Big Dig. CAR OF PEOPLE: We need the work! PAUL SOLMAN: You need the work? As it turned out, the upturned thumbs belonged to Big Dig workers, who have benefited greatly from our tax dollars at work. Big Dig PR man Sean O'Neal: PAUL SOLMAN: How many people work on this project? SEAN O'NEAL: 4,850. PAUL SOLMAN: And for how many years? SEAN O'NEAL: Starting in 1991. PAUL SOLMAN: And going until? SEAN O'NEAL: 2005. PAUL SOLMAN: So 14 years, 5,000 people full-time. SEAN O'NEAL: Correct. PAUL SOLMAN: When you count labor costs, management fees, insurance, interest, and inflation, every day on the Big Dig costs another $4 million, which adds up to about a billion for every extra year. Now, everyone knew there'd be extra expenses, so why weren't they in the original bids? Because in Massachusetts, like most states, contracts go to the lowest bidder. Therefore contractors often make unrealistically low bids to get the job, knowing they can charge more as problems crop up. DAVID LUBEROFF, Harvard University: It's the same thing as when somebody comes in your house and they open the wall and they say, "oh, by the way, as long as we're in here, we have to redo your wiring and, you know, we didn't know that the joists were rotting," and all of these other things. PAUL SOLMAN: So the price of the project goes up with each change and delay. The incentive for contractors and officials is to not budget for such problems, but hide them. SPOKESMAN: Dealing with some very heavy traffic this afternoon. Northbound along the central artery... PAUL SOLMAN: So it made sense for public officials and contractors alike to undervalue the Dig's true cost and keep estimates low, especially since Massachusetts was seeking federal highway funds. Once Congress approved the project, however, cost- consciousness went out the window. DAVID LUBEROFF: The entire political dynamic of this project was predicated on the assumption that the federal government would pay most of its costs. So there was never any incentive to say, "no, we can't afford that." There was some tough negotiating, but if somebody else is going to pay for your vacation, you're less likely to go to the two-star hotel instead of the four-star hotel. PAUL SOLMAN: Small wonder, then, that the project's costs mushroomed. Or, as Senator McCain put it: SEN. JOHN McCAIN: It's a fundamental aspect of the free enterprise system and economics: If there's no penalty associated with increased costs, why not lay on increased costs? PAUL SOLMAN: In fact, Congress won't pick up any more of the tab. The last several billion of overruns are being shouldered by Massachusetts taxpayers. Yet many don't seem upset. PAUL SOLMAN: If your family had to pay $2,000 or $3,000 in taxes, like the typical Massachusetts taxpayer does, for this Big Dig, to try to make it work better; a reasonable investment? MAN: Oh, yeah. PAUL SOLMAN: Yeah? $2,000 or $3,000? MAN: Whatever it takes to make it better. WOMAN: I think when it's all said and done, I think the city will be more beautiful, I think that the traffic will be less, but I do think it will be beneficial in the end. PAUL SOLMAN: Others are less enthusiastic, especially those who don't come to Boston all that much. PAUL SOLMAN: It's costing your family $2,000 to $3,000 in taxes for the Big Dig, which is what we're doing. Is it worth it to you? MAN: Is it worth it to us? PAUL SOLMAN: Yeah. MAN: No. PAUL SOLMAN: Why not? I mean, you're here in town. I mean, it will be easier to drive here. MAN: Well, for the amount of times we'll drive here, we won't get the value out of it, but the same is true with any public facility-- hospitals. People who use it get more value than people who pay for it; that's the way it is. PAUL SOLMAN: Former Massachusetts Secretary of Transportation Fred Salvucci helped start the Big Dig. He thinks the project is a role model, both good and bad, for other cities nationwide. FRED SALVUCCI, Massachusetts Institute of Technology: Do we want to replace America's aging infrastructure or not? I think the answer is compelling and overwhelming: We must. If you fail to do it, you're going to destroy the American economy. I mean, every city has facilities like this that within the next 20 years are going to come to the end of their life. PAUL SOLMAN: Yes, says Salvucci, the Dig is way over budget. But in the end, it will have achieved its purpose with excellent safety and engineering, little evidence of actual corruption, and parks and open space where an ugly highway long cast its shadow. So, if we need public investments like the Big Dig, how best to fund them? Well, says business professor Joe Giglio, by doing things much as they were done here in Boston. JOSEPH GIGLIO, Northeastern University: I think we ought to recognize that the initial estimates for projects are underestimated. They're underestimated because that's the only way we're going to persuade the American public to proceed with it. PAUL SOLMAN: Giglio sees it as a kind of con game. To sell the public on a project, politicians under-represent the true cost, and contractors keep the fiction going. But Giglio thinks it's all a necessary evil that benefits the public. JOSEPH GIGLIO: Ultimately it's in our interests to do so because we get projects done that would otherwise have not been completed. And if we all step back, we all catch the joke and we understand how the game is being played. It's not a local or regional con game, it's a national con game. But it works. PAUL SOLMAN: It may work, but it's based on a cynical idea of fooling most of the people most of the time. It's true that when the new central artery opens in 2005, the people of Massachusetts may well embrace it and forgive or forget its hefty price tag. But what will the rest of America remember -- that taxpayers were conned? If so, the Big Dig could be a major stumbling block to other projects needed to repair the roads and bridges of the 21st century.