Citing tariffs on imported steel, tighter immigration policies and rising wages, the Gold Line Construction Authority board Tuesday voted to build only half the Glendora-to-Montclair extension, saying runaway construction costs could prevent building out to Montclair.
By a 5-0 unanimous vote, the board authorized the surprise staff recommendation that the 12.3-mile extension needs to be built in two phases due to costs rising 38 percent, from $1.5 billion to $2.1 billion.
The Authority, which had scraped together $1.5 billion and had broken ground on utility replacement work, was about to award a design-build contract and make history as the first light-rail train extending from Los Angeles County to the Inland Empire when all four bidders said their costs would be way above the Authority’s estimated price tag.
In order not to derail the entire project, the Authority will use the money to build the first eight miles and new stations in Glendora, San Dimas and La Verne two years earlier than planned, by 2024.
The project from La Verne to Claremont, Pomona and Montclair becomes an iffy phase two, dependent on the economy, market forces and the agency finding the extra funding within the next two years.
“We have high probability we will be able to build from Glendora to La Verne with the funds we have now. To go beyond that, we need the $570 million,” said Habib Balian, CEO of the Construction Authority at the special board meeting in Monrovia.
If money was obtained from state Cap and Trade funds or the SB 1 gas tax — two places the Authority will be looking — the Montclair phase would not be complete until 2028, two years later than originally planned.
The Authority, known for building projects “on time and on budget” was blindsided by the sky-high bids, saying the project is being proposed in a perfect storm of tariffs imposed on imported steel by the Trump Administration, a hot economy driving up wages, and a market flooded with proposed rail and transit projects in which bidders can set their own price.
Prices for steel and cement have been rising since the initial estimates and requests for proposals in 2016. A report from Kenneth Simonson, chief economist with the Associated General Contractors of America, points to rising material and labor costs as the main culprits.
Specifically, Simonson cited:
He also pointed to tighter immigration policies that have kept down the number of foreign-born hourly workers, forcing construction companies to pay more for workers.
“Now, fewer of those workers are coming to the United States, and some who are here have been leaving the country or dropping out of the labor force to avoid detention or deportation,” Simonson said.
The change to two phases, making the line questionable in Claremont, Pomona and Montclair, was lamented by several board members Tuesday.
“I’m sad. It is news we don’t want to hear,” said Authority vice president and Claremont City Councilman Sam Pedroza. “At the same time, this organization can get through this.”
Ontario City Councilman Paul Leon, also a member of the Authority board, said he hasn’t given up on the full project.
“We can’t stop. We’ve got to move forward. There are unforeseen monies out there in the future. We just need to be the first ones to catch them,” he said during the meeting.
The Authority said it was surprised by the higher bids which came in hundreds of millions of dollars higher than the 2016 estimate. The Authority’s report said the bidders used escalators three times the typical rates.
Calling it an “unfavorable shift in market conditions” the Authority said the fast-paced economy and other reasons cited by Simonson “resulted in long-term construction project(s) becoming especially expensive and risky for bidders.”
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