MTA's capital cost efficiency push to be tested by funding threats

The New York Metropolitan Transportation Authority spent more than two decades building what was dubbed the world's most expensive mile of train track.

The $11 billion cost of the East Side Access project to bring Long Island Rail Road commuter trains deep under Grand Central Terminal didn't stem from quality materials or state-of-the-art technology, but years of delays, power struggles with Amtrak and misfires like accidentally hiring 200 extra construction workers.

The project, originally slated to cost $4.3 billion and open in 2009, entered service in 2023, 22 years after construction began.

This combination of vast cost overruns and epic delays came to epitomize the agency's reputation, as projects like the Second Avenue Subway and the 7 train extension to Hudson Yards took years too long to build and racked up billions of extra costs.

Now, the MTA says, it's turned a corner. The agency announced that, from 2020-2024, it found $3 billion of savings on its capital projects.

The now-efficient MTA will put its construction skills to the test as it undertakes its biggest capital plan ever. The ability to finish projects on budget will become more crucial as federal, state and economic pressures mount.

The sprint to find savings began in 2020, with the consolidation of the MTA's Capital Construction organization into Construction & Development, led by the agency's now-CEO Janno Lieber. Prior to 2020, each of the MTA's sub-agencies had handled its share of the capital plan alongside its operations.

C&D's current president, Jamie Torres-Springer, laid out the agency's methods finding savings so far. They include:

• Planning more efficient projects.
• Bundling projects in different stations together in the same contract.
• Doing all of the work a station needs at the same time.
• Using design-build contracts. (Torres-Springer estimates these are now 70% of the agency's work.)
• Working with contractors to find more efficiencies.
• Moving work in-house.
• Hiring and training staff on project management.
• Buying a new digital project management system.
• Saving money on insurance.

Perhaps the biggest success story from the C&D era is the Park Avenue Viaduct replacement of the elevated structure that carries Metro North Railroad trains in northern Manhattan.

Thanks to a suggestion from the contractor behind the project, replacement of the 130-year-old structure is now four years ahead of schedule and $95 million under budget, Torres-Springer said.

Eric Goldwyn, program director at New York University's Marron Institute of Urban Management, said it's not a surprise the MTA implemented a lot of these changes.

"The reality of where their costs were going, it was untenable," Goldwyn said. "You just can't scale at $4 billion a mile. You have to have a reflective moment and say, 'Okay, what can I do better?'"

For Phase II of the Second Avenue Subway, the MTA estimates it can save $1.3 billion by building smaller stations, putting important work aboveground and reusing a tunnel that it had already dug between 110th Street and 120th Street.

The money saved, Torres-Springer said, goes back into the capital budget. The agency has a list of nearly $100 billion of state-of-good-repair needs and a legal requirement to make stations wheelchair-accessible. When contractors found a cheaper way to install elevators, Torres-Springer said, the MTA just used the money saved to build more elevators.

Philip Plotch, a researcher at the Eno Center for Transportation who was working on the MTA's planning committee for Phase I of the Second Avenue Subway, said he can see that the agency is taking a more rigorous approach.

"When we were doing the planning and some of the design, there wasn't a focus on cutting costs, like there is in the second phase," Plotch said. "And I think that is partly because some people didn't take the project seriously."

But he is skeptical about some of the savings estimates. The agency has touted its dramatically lower insurance costs, which Torres-Springer said is due to better management practices. Plotch said that without the details of the prior and current insurance plan, it's hard to judge whether that was a good deal, or whether the MTA is getting less coverage.

And the tunnel under 110th Street that the MTA will reuse?

"That was something that has been assumed for a long time, that they would reuse that," Plotch said. "So I do question their assumptions, but only because they don't have any details. Maybe they're going to use it differently than they planned on using it."

Rachael Fauss, senior policy advisor for Reinvent Albany, who has been advocating for greater transparency of transit costs, said it's difficult for outside observers to understand what the MTA spends on construction.

"Absent really large academic deep dives, like what NYU Transit Costs does, there's not a way to verify this," Fauss said. "It's a trust exercise."

As the evidence of the MTA's newfound efficiency adds up, it's becoming more and more integral to the agency's operations.

As part of negotiations for the MTA's $68.4 billion 2025-2029 capital program, Gov. Kathy Hochul tasked the agency with supplying $3 billion more than initially planned. The agency decided to find the $3 billion through savings, rather than borrowing.

Torres-Springer said he expects C&D will be able to achieve the $3 billion the same way it saved the first $3 billion. He also hopes to get some revenue out of transit-oriented development initiatives. MTA Chief Financial Officer Jai Patel said the agency hasn't previously taken advantage of its real estate assets, and C&D has helped open up that potential for revenue.

"We get sort of a ground lease" through a TOD deal, Patel said. "We get revenue from advertising, rentals, any of the parking. It's just all the different components that we can monetize."

The MTA may have to plug more than a $3 billion hole in its 2025-2029 plan, because $14 billion of the plan is supposed to come from what is now a hostile federal government.

The initial $14 billion figure was already optimistic, New York Comptroller Thomas DiNapoli wrote in October; the federal government increased its contribution to the MTA thanks to the Infrastructure Investment and Jobs Act, but that funding expires this year, and there was never a guarantee today's Congress and White House would renew it at the same levels.

After a year of the Trump administration taking swings at the MTA on an almostmonthly basis, it's "not realistic" to count on the $14 billion, Fauss said.

MTA leadership is taking a wait-and-see approach to the federal funding. At the agency's January board meeting, Torres-Springer said C&D is working on a contract for the Second Avenue Subway, but won't be able to finalize it until the Trump administration unfreezes the funds dedicated to the project.

"Predictability of funding is what's key to keeping a big capital program like this afloat," Torres-Springer said. "There's no reason that the federal government has cut off funding for Second Avenue Subway, that they haven't restarted it. And we need predictability of funding to keep this project on time and on budget ? something that the federal government has also demanded of us."

Torres-Springer said the uncertainty of federal funding has not impacted contractors' confidence in working with the MTA.

"Before we give the notice to proceed on the contract, we make sure that we have the money in place. So when a contractor signs an agreement with us, they know that they're going to get paid," Torres-Springer said.

The cost of construction is increasing, and it will only be accelerated by tariffs and immigration actions by the federal government. The MTA's contracts usually make contractors bear the burden of inflation, Torres-Springer said, so the agency has been awarding contracts as fast as possible before inflation can set in. Last year, the agency said it awarded a record $15.8 billion of contracts.

If the agency can manage to fund its capital plans the agency's ability's construction management skills will soon be put to the test.

The MTA may have shaved $1 billion off of the designs for the Second Avenue Subway Phase II, but executing those designs will be more difficult. Managing a megaproject is difficult, Plotch said, and not really comparable to the average station upgrade.

"I think the MTA has gotten a better handle on these big projects because they've done more of these big projects, and they have the right people in place to manage them," Plotch said. Still, "it's hard to give a grade when you're talking about projects that take five or 10 years to build, right?"