Transportation Infrastructure

The Boston Central Artery and Tunnel Project--now estimated to cost $10.8 billion--is one of the largest, most complex, and expensive highway construction projects ever undertaken. However, because savings from a self-insurance program will not be available until 2017, the project will require $11.6 billion in funding through 2004, the scheduled completion date. This report evaluates (1) the estimated cost of the project and (2) Massachusetts' plans for financing it.

GAO noted that: (1) as of March 1997, Massachusetts had estimated that the total cost of the Central Artery/Tunnel project was $10.8 billion--$400 million more than the $10.4-billion estimate contained in its September 1996 finance plan; (2) this increase occurred primarily because of growth in the project's estimated construction costs; (3) costs actually increased by more than $400 million, but the state assumed in its $10.8-billion cost estimate that the increases would be partly offset by savings, primarily from the project's owner-controlled insurance program; (4) however, the state also assumed that most of these insurance savings, $778 million, would not be realized until 2017, long after construction is completed; (5) as a result, the project's total funding needs through 2004, when the project is scheduled to be completed, are $11.6 billion--$778 million more than the project's $10.8-billion cost estimate, (6) furthermore, uncertainties exist about whether the savings projected by the state in the insurance program will be achieved; (7) the state's $10.8-billion cost estimate also depends on achieving the aggressive cost containment goals established for the project; (8) while the state has made some progress in its cost containment program, officials acknowledge that it has some ambitious goals that will be difficult to meet; (9) Massachusetts has implemented a plan to finance its share of the project's cost, including a strategy to finance funding shortfalls; (10) furthermore, funding shortfalls could be an additional $100 million to $500 million more if the state does not meet its cost containment goals; (11) to finance the shortfalls, the state plans to borrow $1.7 billion through a combination of revenue bonds issued by the Massachusetts Turnpike Authority and grant anticipation notes, as authorized by legislation passed in 1997; (12) however, this plan may be insufficient to meet the project's financing needs because it substantially covers the funding shortfalls only under the best-case scenario modeled in the feasibility study; (13) in addition, while the financial markets will decide whether the use of grant anticipation notes is feasible, uncertainties exist about the use of these notes because the amount proposed by Massachusetts is unprecedented and relies on borrowing against federal funds that may not be authorized by the Congress until after the next federal highway authorization expires, sometime around 2003; and (14) the state imposed additional limits on itself to constrain the growth of state debt in order to improve its credit ratings.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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