Anchorage airport millions over construction budget

Posted: Tuesday, March 25, 2003

ANCHORAGE -- A huge makeover project at the Ted Stevens Anchorage International Airport is running $186 million over the original budget.

State transportation officials said they need authority to borrow more money to finish the work. But some state lawmakers, who must approve new borrowing, and local airlines, which ultimately would foot the bill, said the project needs to be scaled back.

The project includes terminal, road and parking improvements. The centerpiece is a new 447,000-square-foot Concourse C that will house nine jet gates, a ticketing area, a baggage claim, a security screening hall, offices and operations support space.

The construction originally was expected to cost $230 million, but the estimated cost has risen to $416 million. The project also is about two years behind schedule, according to Dave Eberle, the state Transportation Department regional director who is in charge of the project.

The construction has been beset by cost overruns and delays since the start in 1999. Contributing factors are a flawed design, a decision to start construction before permits were in hand, an expansion of the project and post-Sept. 11, 2001, security changes.

Originally slated to be completed and operating by last summer, completion is now expected in May 2004. Construction of the concourse was delayed more than a year after the Anchorage Building Department in spring 2000 refused to permit most of its structural design over worries that it could collapse in an earthquake.

That delay, which Eberle blamed on flaws in the original plans submitted by Coffman Engineers, the firm hired by the state to design the building, added about $33 million to the total cost of the concourse, he said.

''It's our position that the delay related to permitting ties back to some fundamental design errors created on their part, which gave rise to all these added costs,'' Eberle told the Anchorage Daily News.

The Transportation Department already had ordered some of the materials, and some of the initial work had begun on the new concourse before the city had issued the permits.

Will Veelman, a principal at Coffman in charge of the firm's Anchorage operations, declined to comment.

Eberle also blamed much of the cost overrun on security-related redesigns made after the 2001 terrorist attacks.

''Osama bin Laden is responsible for a good share of it,'' he said. The Transportation Department estimates that $23 million of the added cost of Concourse C is related to the increased security requirements.

Another $22 million was tacked on to the total cost of the concourse after the planners added 90,000 square feet to its original layout.

The largest chunk of the overrun is $108 million for the reconstruction of the airport's existing main terminal, most of which is related to seismic upgrades and security measures, according to Eberle.

With about 57 percent of the total project complete, the Transportation Department has spent about $175 million of the $259 million currently available for the project.

About $233 million of that came from revenue bond sales and interest earned on investing the bond proceeds before spending them. The remaining $26 million came from federal transportation programs.

Eberle said the Transportation Department will ask legislators for approval to sell another $63 million in revenue bonds this year to cover part of the growing costs.

While it is a state entity, the airport is self-funded by passenger, airline and tenant fees.

The airport doesn't tap the state treasury to fund its operations, but some lawmakers worry about the cost overruns. They're cautious about approving more borrowing in light of the current financial situation in which many of the airlines find themselves.

''This project is out of control,'' said Sen. Donald Olson, D-Nome. ''Here we've got a project that's over budget, behind schedule, and they're asking for more money.''

Olson was among several legislators at a joint Senate and House Transportation Committee meeting this month during which Transportation Department officials detailed the scope of cost overruns.

The idea of borrowing more money to cover the rising costs of the terminal redevelopment project isn't sitting well with some of the airlines. As users of the airport, they pay fees that repay the bonds.

Alaska Airlines, the airport's largest tenant, proposes that the state defer other construction and reduce the scope of the terminal redevelopment project until it gets a handle on the overruns.

''The main thing that we're hoping to see is the deferment of other capital projects, and we're talking continually with the (Transportation Department) about that,'' said Jack Walsh, a spokesman for the Seattle-based airline.

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