An open letter from City Manager Regina V.K. Williams to the City Council, citizens of Norfolk, and the Virginian-Pilot. This was distributed today with the subject, “Civic Connection breaking news item”:

On Friday, December 17, 2010, I awoke to read the most jaundiced reporting and headline I could imagine: “Audit: City Officials Knew of Overruns, Kept Silent”. I typically rise above the Pilot’s zeal to make rather than accurately report the news, but when the personal integrity and professional conduct of myself and my staff are attacked without substantiation, I must challenge the assertion with facts.

I have never, nor ever would, nor would Stanley Stein withhold information from our governing body or the public. It is our job, however, to make sure the information provided to the City Council and the public is accurate and complete to the best of our ability. On numerous occasions in group and one-on-one sessions, the Council was advised that completing the light rail project was going to cost more than originally budgeted; the actual amount of the increase was unknown; and, the City Administration was working diligently to obtain from Hampton Roads Transit (HRT) the actual amount, details of the increases, and a statement of how HRT intended to fund the amount.

What Has the City Done to Ensure HRT’s Budget Projections Were Accurate and Complete?

It is important to provide historical facts on the light rail project. While fully supporting the light rail project, going back to 2001-2002, I cautioned that the City would be embarking on the most complex capital project we could imagine. Based on my San Jose experience with light rail, I indicated we could not underestimate that while the City and HRT had mutual goals, our prioritizing and focus would differ.

Regina V.K. Williams, City Manager (Pic | City of Norfolk)

In an attempt to ensure that the original cost estimates were realistic, the City contracted through Public Financial Management, the City’s financial and investment advisors, to have HNTB, a nationally recognized transit and rail infrastructure consulting firm, perform an independent capital and operating and maintenance cost review. HNTB was to determine the reasonableness of the assumptions used to project the Norfolk line costs, the comparability with other starter line projects, and to perform a risk analysis.

HNTB concluded the methodology used by HRT to prepare costs was professionally acceptable; the assumptions were reasonable; but, several factors could affect the costs, such as utility relocations, road and street modifications, delivery schedules, change orders and delay claims.

We believed we further were protected by the Federal Transit Administration (FTA), the federal agency responsible for overseeing the project, as they, too, contracted with an independent consultant to review HRT’s project management throughout the project.

While mindful of the inherent risks now vetted independently by HRT, HNTB and by FTA, the City Administration shared with the City Council and the public the $232 million budget figures we believed to have been unanimously established to be credible.

It is important to recognize there were two amendments to the light rail budget. Once the project was approved by FTA, the Commonwealth of Virginia, and the HRT, preconstruction review by all agencies determined that certain upgrades, such as the quality of crossing safety equipment, and other changes, such as improving the aesthetics of the maintenance building to blend in to the Norfolk State University campus, were appropriate.

Those enhancements increased the budget, in December, 2008, from $232 million to $288 million. I specifically told HRT that the budget submitted to the City Council must be accurate and comprehensive. Further, I indicated we must ensure this adjustment included sufficient contingency funding to complete this project, along with a realistically achievable completion date because additional adjustments would be unacceptable to the City.

What Went Wrong and What Did the City Do About It?

Internal records confirm numerous dates and occurrences when City staff diligently questioned HRT and attempted to obtain reliable information as construction progressed.

As late as October 2, 2009, I was advised by HRT they were within the $288 million budget. At a status meeting, Assistant City Manager Stanley Stein expressed concern to HRT over decisions they were making to go forward with awarding contracts for work that depended on completion of preparatory work by private utilities. In effect, HRT was starting the clock on contracts without assurance the contractors could start work. HRT assured City staff they were adequately managing the project and that they were staying within the budget.

During the week of October 23, 2009, I informally heard there would be a change in HRT management at the Vice President level because of additional budget increases of as much as $25-30 million. I immediately notified Mayor Fraim of the rumor. The City Council was informed there was a problem with the light rail budget and the extent of the problem was yet unknown.

HRT assured us they were preparing a full presentation. Beyond advising City Council there was a problem, we were dependent on HRT to provide specific data. The Mayor concurred that a full presentation should await the needed information from HRT and their consultant AECOM.

During the entire month of November, City staff tried to get accurate and complete information from HRT. The City was given estimates as low as $9 million to $15 million to $40 million, depending on who you talked to at HRT. HRT and the City’s Board member indicated any increases were within additional funds that would be available from the state and federal governments.

Even as HRT began to share information, it was impossible to discern what the numbers represented and how they were derived. The additional funding sources they proposed were conflicting and, in some cases, non-existent.

Over the Thanksgiving holiday weekend, on Friday, November 27, 2009, I met with Phillip Shucet to discuss contracting with him to assist the City of Norfolk to determine where we stood – once and for all – with construction of light rail.

On November 30, 2009, when no definitive information was forthcoming from HRT and the former President and CEO declined to come to Norfolk to meet with me, I demanded he make himself available and drove to his HRT Hampton headquarters with Assistant City Manager Stanley Stein and City Attorney Bernard Pishko to demand and to secure what information we could. HRT told us they did not feel they had sufficient information and they had contracted for AECOM consultants to provide them a complete report. They claimed it was the release of the AECOM report that would give the City the information we were seeking.

By December 2, 2009, Mr. Shucet’s services had been engaged to advise the City specifically on the completeness of the HRT-directed analysis, how to limit any additional cost and extended time to complete the light rail project, and to resolve pending change orders and claims submitted by contractors.

Finally, with more detailed information and with some assurance of accuracy and sound reasoning, on December 22, 2009, the City Council was provided with the second amendment bringing the budget estimate to $338 million.

Construction management can be challenging. We expect it and we prepare for it. But always we are dependent on the good faith of our partners and the soundness of the information they provide. In this case, twice we reached out to independent consultants to verify the information we were receiving. We gave credence to oversight by the HRT Board and by FTA, which required us to partner with HRT.

Never did the City Administration shy away from or fail to disclose information we had determined to be reasonably credible. And, throughout the process, we consistently sought and recommended actions to protect the interests of our City and our residents.

It is entirely appropriate that The Pilot report on our work, but as evidenced in Friday’s article and headlines, it is not appropriate to cast aspersions on the character of public officials without any evidence of wrong doing.

I and my staff consistently have been professional, honest and forthright in our communications with the City Council, the public and the media. It has been difficult to work with an agency that is independent of the City and primarily focused on building and operating the transit project with insufficient regard to costs. So why do we choose this work? Because at the end of the day, the Region will have a successful light rail system that is vital to the future health of Hampton Roads; and, at a cost per mile, while admittedly higher than originally anticipated, still lower than any other city.