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World Trade Center: Consulting Firm Has Allowed Project's Costs To Soar Out Of Control, Auditors Say

By By CHRIS HAWLEY 02/ 7/12 09:18 PM ET AP

World Trade Center
One World Trade Center, now up to 90 floors, rises above the lower Manhattan skyline and the Hudson River, Tuesday, Jan. 24, 2012 in New York. The tower is scheduled to be completed in 2013. (File, AP Photo/Mark Lennihan)

NEW YORK -- The agency that is building the new World Trade Center is "dysfunctional" and has let costs get out of control on the $14.8 billion project, auditors said Tuesday.

The projected cost of the complex has risen $3.8 billion since 2008, when it was estimated at $11 billion, Navigant Consulting, Inc., said in its audit of the Port Authority of New York and New Jersey.

Third parties have promised to reimburse the Port Authority for much of the construction, but the agency's remaining bill is still expected to reach $7.7 billion, up 28 percent from the last estimate of $6 billion, auditors said.

The audit was ordered by the governors of New York and New Jersey. It strongly criticized the Port Authority, which also runs New York area airports, seaports and Hudson River crossings.

The Port Authority is "a challenged and dysfunctional organization suffering from a lack of consistent leadership, a siloed underlying bureaucracy, poorly coordinated capital planning processes, insufficient cost controls, and a lack of transparent and effective oversight of the World Trade Center program that has obscured full awareness of billions of dollars in exposure to the Port Authority," auditors wrote.

New York Gov. Andrew Cuomo and New Jersey Gov. Chris Christie called the increase "staggering" in a joint statement.

"This record of historic failure must be reversed," they said.

Scott Rechler, vice chairman of the Port Authority's Board of Commissioners, said costs went up after the Port Authority stepped in to manage delayed projects that were being built by third parties, including the 9/11 memorial and a performing arts center.

"We got the memorial open by its 10-year anniversary, and I think it's something we were all very proud of and proud of how it turned out," Rechler said. "But now we're at a crossroads and we have to take a step back and focus on where we are from a cost standpoint."

The authority's new director, Patrick Foye, said Tuesday the agency was taking the findings seriously and would begin an overhaul of the agency's structure. Administrators were already considering one of the auditors' recommendations, putting capital spending decisions in the hands of one person, he said.

"Recommendations like that are going to be very helpful in maximizing the value of every dollar we spend at the World Trade Center and every other capital project in the port's portfolio," Foye said.

The agency's debt has risen from $9.1 billion in 2001 to $19.5 billion, auditors said. The Port Authority receives no tax money, so those funds will have to be paid off through airport surcharges, bridge and tunnel tolls, port fees and rent from the agency's other properties.

Cuomo and Christie ordered the review after the agency's board voted to raise bridge and tunnel tolls in August.

The Port Authority has lost millions of dollars in revenue because of lower traffic at its ports, airports and river crossings due to the economy.

Meanwhile, the World Trade Center has suffered a number of construction setbacks.

The company that is laying steel for One World Trade Center, the signature tower, has run into financial problems, and the Port Authority has stepped in to pay some of its bills. A mistake in the design means the Port Authority will have to spend millions of dollars on temporary loading docks for the building. And the builders of the 9/11 museum are fighting with the agency over infrastructure costs.

The 104-story One World Trade Center is now 90 stories high, but the pace of construction has slowed. Foye has blamed winter weather and says it is still on schedule to open in late 2013.

The World Trade Center plan calls for five office towers, a 9/11 museum, the 9/11 memorial, a large subway station and a performing arts center.

But construction of Two World Trade Center, the second-tallest building in the complex at 88 stories, has been postponed because of a lack of tenants.

Three World Trade Center, which was supposed to be 80 stories high, is under construction but has also struggled to find tenants. Developer Larry Silverstein has said he may have to cap the building at seven stories if he cannot get more companies to move in.

Silverstein's company also owns two other buildings on the site, Four World Trade Center and the already-completed Seven World Trade Center.

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Filed by Jade Walker  |