Massachusetts News
By Paul Joseph Walkowski

February 8--It was love at first glance: a $2.5 billion, eleven-year construction project to bring Boston back to the future -- and it was free, a gift from Washington. 

Although a Boston think tank warned that it would cost much more than that and said in 1993 that it was going to cost $12.4 billion, everyone scoffed. 

Begun in 1988 with funds from the federal "1987 Highway Bill," Boston’s dream of removing the pothole-laden, choppy, elevated concrete highway that skirted downtown Boston, and replacing it with an underground, environmentally safe highway system that would whisk commuters under the busy streets, is now said to be sixty percent completed and only slightly behind schedule.

The final verdict is not yet in on the plan itself. Every day, however, you can read the same question on the puzzled faces of skeptical commuters as they sit waiting patiently for four lanes of traffic to merge into two, or one -- and usually into oncoming traffic. The answer to the unasked question is now almost Biblical in its importance to taxpayers: have engineers guessed correctly, or will the final product be like its predecessor -- obsolete the day it opens and just one more gigantic waste of money for the state.

One thing that did get obsolete quickly was the price tag. Could anybody have guessed then that the $2.5 billion estimate would balloon into at least $12.2 billion -- a bill that is now going to be borne by Massachusetts residents.

Some did. 

The economists at the Boston think tank, The Beacon Hill Institute, didn’t guess. They made their own cost analysis. 

"We’d simply be in better shape today in terms of our fiscal condition if we had seen the obvious seven years ago," says David Tuerck, Executive Director of the Institute that in 1993 warned anyone who would listen that the Big Dig was seriously underfunded.

They Wouldn’t Listen

Tuerck, who is chairman of Suffolk University’s Department of Economics and past president of the North American Economics and Finance Association and a Heritage Foundation Policy Expert, says the problem lies with planners who refuse to listen to people they disagree with. "What they [urban planners] can’t or won’t do is anticipate the evolution of the political process that surrounds a project like this, or the vulnerability of a project to the political currents that surround it," he says. It is the "extras" such as community enhancements and design changes that drive costs up. Plus, "There were unexpected design improvements in 1988, unexpected increases in real estate values also in 1988, environmental costs in 1990. Somebody decided to worry about earthquakes in 1990, and we had to do something about that." 

Tuerck says it’s possible that if planners considered all these things when the project was being designed, something urban planners are supposed to do, "We might have decided that the project was never worth funding in the first place." That those responsible for planning failed as miserably as they did raises questions about how it could have happened in the first place. A shortfall of four or five billion is one thing, a shortfall of over $10 billion is something altogether different. 

The original plan called for construction to begin in 1988, the surface of the artery to be ripped up in 1989, the construction of the third Boston Harbor tunnel begun in 1990 and completed in 1994, a new northbound artery opened in 1995, a new southbound section opened in 1997, and the entire project completed by 1998. We’re not only behind schedule, we’re over cost, and the Massachusetts public is being told they’re going to have to make up the difference. 

"I would like to think that we [at the Institute] had forecasting powers beyond ordinary mortals; but unfortunately the sad story is that is was easy, even then, for anyone to see where it was heading. People involved didn’t want to see what was everywhere around them. They were forecasting a cost of $5.8 billion in 1993, and that was way beyond the pale. It was way low. Everyone should have known at that point that that was not going to be the cost."

Predicted $12.4 In 1993

In 1993 the Beacon Hill Institute estimated that the cost of the project would go to $12.4 billion, and everyone scoffed. Today, nobody’s laughing, and David Tuerck and the staff at BHI are astonished that so many are surprised. "The astonishment lies in the unwillingness to recognize what was so obvious. Only one radio show covered [our analysis] in 1993. It was a small radio station in Marblehead." The rest of the media and political establishment, he feels, simply accepted what was fed them and got on board the highway plan.

Tuerck says the real tragedy is that the $12.2 billion currently invested in the project could have been better spent elsewhere, perhaps on a scaled-down scheme or by investing in other projects the state sorely needs.

The question on everyone’s mind now is: where will the state get the money to pay the bill, a bill that, according to published reports, is estimated to run $50 million a year for the next forty years, assuming the best, and that next year unexpected costs don’t drive the final price tag up even more. Current thinking is that the money will come from increased Turnpike tolls, a proposal Tuerck finds unfair. Why should people who never use the central artery have to pay for its demolition, he asks.

Already state planners are worried that the state’s bond rating will be affected, further limiting our ability to raise needed funds at the time we need them most. 

Sell Our Bonds Directly

The answer to that question may be found in an obscure BHI research and policy paper published in 1991. Then, Steven J. Mollica, a principal of Mollica Associates, a Boston-based consulting firm that specializes in business and government, argued that Massachusetts ought to end the practice of going to Wall Street on bent-knee seeking investors. They ought to sell directly to bond buyers, and in the process, junk the rating services altogether. Estimating that the state’s underwriting fees which were paid to only two of the rating services was $10 million in 1993, Mollica made the case that regardless of what Wall Street said, "Massachusetts state bonds are virtually riskless. As long as people continue to live, work and purchase goods in Massachusetts, the state will honor its debts."

Turnpike Chairman James Kerasiotes and Big Dig Director Patrick Moynihan are meeting to discuss how project cost overruns can be met, and local talk shows last week are taking the question of funding to listeners and are hearing everything from legalizing prostitution, to establishing a state-run gambling casino, putting a new toll road on the Southeast Expressway with Boston resident exemptions, devoting a special lottery ticket to the project, to lowering elected officials’ salaries. Tuerck says he favors looking at public transportation costs elsewhere, citing the unexplainably low fares currently charged for the MBTA. 

As for press reports that the project is only $1.4 billion over budget, the answer can be found in what year you started counting. An analysis of the spending increases by Massachusetts News for the Big Dig shows that the project was underestimated from the very first state and federal proposals, with the first increase coming in 1987 when $800 million was added for increased state construction costs. It’s been that way ever since.
 

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