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Old Posted Feb 14, 2007, 12:42 PM
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NY Times

M.T.A. Says It Can’t Handle Cost Overruns on No. 7 Project

February 14, 2007

The new leadership of the Metropolitan Transportation Authority signaled yesterday that it had deep concerns over a deal with the city to build a $2.1 billion extension of the No. 7 subway line, saying the authority did not have the money to pay for possible cost overruns or other additional expenses.

“It is M.T.A.’s position that we are under no legal obligation to absorb any additional costs or overruns,” Elliot G. Sander, the new chief executive, wrote in a letter to Assemblyman Richard L. Brodsky, a Westchester Democrat. He was responding to a letter from Mr. Brodsky expressing concerns that the project could exceed its budget. Mr. Brodsky made Mr. Sander’s letter public yesterday.

In an interview yesterday, Mr. Sander said he would not grant any contracts to proceed with the work until the financial issues were hammered out.

Under the project, the No. 7 line, whose western terminus is Times Square, would be extended to the Javits Convention Center on the West Side. The city and the authority signed a deal in September in which the city agreed to pay for the project and the authority agreed to be in charge of design and construction. The city, however, capped its contribution at $2.1 billion.

Mr. Sander said the authority’s long-term spending plan for major projects was already handicapped by widespread cost increases.

“At this point our position is that if there are cost overruns, we’re not in a financial position to be able to assume those,” Mr. Sander said. He said paying for any part of the No. 7 extension could jeopardize other projects, like the Second Avenue subway, a Long Island Rail Road link to Grand Central Terminal, and maintenance of the transit system.

He said other unbudgeted costs had to be considered, including a projected $150 million for new subway cars needed to run on the extended line. Mr. Sander, who inherited the deal when he took over the authority in January, said he spoke yesterday to Daniel L. Doctoroff, the deputy mayor for economic development, to explain the authority’s position.

“We want to get it done, but we have to work through these financial issues,” Mr. Sander said.

Mr. Doctoroff said the discussion was premature because there was no indication that the project would exceed its budget. “Our view is that we certainly had an understanding and that the city would be responsible for all costs up to $2.1 billion and that the M.T.A. would bear the responsibility for costs above that,” Mr. Doctoroff said. “We’re going to sit down and talk, but our view is, the deal is the deal.” Both Mr. Doctoroff and Mr. Sander said they believed that the project would go forward.

Mr. Brodsky, the chairman of an Assembly committee that oversees the authority, said in an interview he feared that hidden costs could harm the authority’s bottom line.

“If we keep to the basic principle, which is the city will pay and the M.T.A. will build, we’ll be O.K.,” Mr. Brodsky said. “But right now there are hundreds of millions to almost a billion dollars of costs that the M.T.A. would probably have to absorb that would endanger the Second Avenue line, the East Side link and other parts of the capital program, and that is simply unacceptable.”
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