Towns Pay the Price When Government Ventures Fail : Technology: List of abandoned mega-projects grows. For places like Iuka, Miss., the impact is profound.

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The industrial complex 20 miles out in the piney woods north of Iuka looks like one of the New Age factories springing up in the Sun Belt.

On one side of the highway, a sprawling gray-and-white administration building sits in the middle of a freshly paved parking lot with spaces for 500 cars. Across the road, guards in crisp uniforms stand at gates leading to a high-security production area. Painted signs direct visitors and job-seekers to security and personnel offices still housed in temporary quarters.

Landscapers have yet to install shrubbery, and winter has interrupted work on Route 25, which is being widened to four lanes between Iuka and the site on Yellow Creek.

But the vans that now come and go are moving people out, not in.

With work 80% complete, the government is walking away from this $1.5-billion installation because the budget-cutter's ax has fallen on NASA's plans to build more-powerful booster rockets for the space shuttle.

About 1,000 construction workers have been let go, and a similar number of rocket engineers, secretaries and officials of the National Aeronautics and Space Administration will follow.

In Iuka, where residents had looked for the project to bring prosperity, the disillusionment is profound.

On the day Congress killed the project, "this was like a ghost town," said Harold Fulton, longtime owner of the local Piggly-Wiggly market. "Everybody just stayed at home. This was a despondent community."

For Fulton and his wife, Janet--who had just modernized their store--and all the other longtime residents of this community of 3,200 people, NASA's pullout evoked a strong sense of deja vu : This was the second time they had experienced a governmental change of heart.

Iuka's experience is an example of a phenomenon that is occurring across the nation with increasing--and some say alarming--frequency: The government launches an ambitious, expensive, high-tech project. Then, in the face of rising costs, technical difficulties or shifts in political currents, it walks away--leaving billions of wasted taxpayer dollars in its wake.

The effects on some of the communities chosen to host such mega-projects can be devastating.

With expectations that Iuka would become a boom town, for instance, state and local taxpayers ponied up for improved schools, hospitals, sewers and roads. But when the NASA project failed, the community wound up instead facing an additional economic pinch replete with unemployment and rising crime.

The increasing inability to see ambitious projects through to completion is worrisome to many. The danger, say analysts in business and government, is that the United States will become unwilling to take on the challenging, groundbreaking, government-sponsored projects that have been its hallmark for decades.

It may be that the day of U.S. mega-projects--such as the space shuttle, the superconducting super collider and the Hubble Space Telescope--is already past and nations must share the risk in great technologies, said Rep. George E. Brown Jr. (D-Colton), chairman of the House Science, Space and Technology Committee.

In the future, multibillion-dollar science and engineering endeavors may be carried out "through international consortia or treaties," he said.

To be sure, Iuka's experience is extreme. Only a few years before the space agency arrived, the Tennessee Valley Authority left Iuka after spending $1.2 billion on a nuclear power plant on the very same site now being vacated by the rocket people.

About the same time the TVA dropped the half-finished nuclear plant, work was completed on the Tennessee-Tombigbee Waterway, which joins the Tennessee River near the site. That ended jobs for hundreds more workers.

To the disappointment of Iuka residents, it quickly became obvious that the waterway--which forms a shortcut from the Tennessee River to the Gulf of Mexico--had not attracted the new industry they had dreamed about.

Unemployment shot to nearly 30%, and the area suffered a veritable crime wave.

"All of a sudden Tishamingo County had one of the highest arson rates in the United States," said Harold Luminek, an insurance agent in Iuka, "and you couldn't keep a Silverado pickup because somebody would steal it right out from under you."

The TVA's massive reactor-containment structure still stands amid the empty rocket-fabrication buildings. So does an incomplete cooling tower, rising like some Mississippi Stonehenge.

Altogether, calculates Iuka Mayor David Nichols, the TVA and NASA investment in the 1,200-acre site beside the little-used waterway amounts to about $2.5 million per acre. For that reason, he and others had a hard time believing that the nearly finished rocket project would be killed.

"We kept thinking that prudent people would eventually prevail in Washington," Nichols said. "It was hard to imagine even the federal government wasting that kind of money."

The Iuka experience is particularly notable because the town was left with two government lemons--three if you count the Army Corps of Engineers' Tennessee-Tombigbee project. But the projects abandoned here are peanuts compared to other high-tech ventures that have been ditched.

On the same day the plug was pulled on the advanced solid-rocket project, Congress also axed the Energy Department's super collider--upon which $2 billion had already been spent.

As much as anything, the laboratory near rural Waxahachie, Tex., was a victim of cost overruns. The estimated tab had soared from $2 billion to $11 billion, setting off alarm bells in congressional offices all over Capitol Hill.

By the end of March, fewer than 1,000 of the 2,250 construction workers, scientists and engineers who were on the project last fall will be left. By summer there will be only 500, disposing of computer equipment, closing out laboratories and securing the 14 miles of 14-foot-diameter tunnel that had already been excavated for the huge atom smasher.

The Mississippi and Texas projects join a long, old and growing list of technological lemons, false starts and reversals that have cost taxpayers tens of billions of dollars since the beginning of the Cold War.

"This is certainly not a new phenomenon," said Norman R. Augustine, chairman of Martin-Marietta Corp., "but it is getting worse."

For example:

* The Air Force and the old Atomic Energy Commission invested more than $1 billion in a nuclear airplane project before it was canceled by President John F. Kennedy in 1961. Pushing for a separate military space program, the Air Force put another $1.7 billion into its own Manned Orbiting Laboratory before dropping it. Similarly, it dropped plans for a space glider it called Dynasoar.

* The Transportation Department spent nearly $1 billion on design and development of a supersonic transport plane before the congressional purse snapped shut.

* In the 1960s, the National Science Foundation undertook to drill a hole through the Earth's outer crust, but called it quits with the estimated cost soaring toward $100 million.

* After spending $3.5 billion, the Energy Department dumped construction of an Ohio plant where it proposed to use centrifuges to enrich uranium. Plunging uranium prices and new technology overtook the venture when it was but a third completed. The department spent another $1.7 billion on its proposed Clinch River Breeder Reactor--and an estimated $7 billion-plus on breeder technology--before Congress concluded it was economically unjustified and environmentally hazardous.

* In the aftermath of the Middle East oil embargo and huge increases in oil prices in the 1970s, the government-backed Synfuels Corp. spent several billion dollars on a variety of sophisticated schemes to increase the use of coal. The massively unsuccessful undertaking was killed by the George Bush Administration as the United States again succumbed to the appeal of cheap imported oil.

* Killed by degrees, President Ronald Reagan's much ballyhooed and ridiculed "Star Wars" strategic defense initiative soaked up about $30 billion over a decade.

Reasons for the waste go on and on: underestimated costs, overestimated results, unexpected difficulties, poor management, political uncertainty.

Too often, said Robert M. White, president of the National Academy of Engineering, fragile and flawed designs emerge when officials faced with shrinking budgets take shortcuts.

"The space station is a good example. You come up with a design and it is approved by Congress. Then you find that the money you need is not going to be available, and you design to fit budget, and then you budget to fit design."

Redesigned three times in 12 years, the space station so far has cost $9 billion.

Conceived during the heyday of the Cold War space race with the Soviet Union, the station is now expected to cost $30 billion to build and operate for a decade. Ironically, it may survive only because Russia is joining the United States, Canada, Japan and the European Space Agency in the effort.

Congressional opponents will make their bid to kill the project for good this year, having come within a single House vote in 1993.

But Sen. Barbara A. Mikulski (D-Md.), who chairs the subcommittee handling NASA appropriations, said the super collider cancellation "served as a wake-up call" for contractors and government officials involved in aerospace projects.

After years of debate, the mission of the space station is coming into focus and it has public support in spite of its troubled history, she said.

Martin-Marietta's Augustine blames the space station dilemma and similar experiences on three fundamental problems: a year-by-year budgeting process that creates delays and rising costs, excessive reviews and investigations "that turn every little problem into a big issue," and a national "aversion to risk."

"We have reached a point," he said, "where the objective is to prevent anything from going wrong, rather than making things go right. The rewards are not for accomplishment, but for avoiding a hearing, a headline or an investigation. We have taken away much of the incentive for accomplishment."

It is a very different atmosphere from that of 33 years ago, when Kennedy called for the United States to send men to the moon.

Warning of the heavy costs and obstacles in the project, Kennedy asked for a firm commitment.

"If we are able to go only half way, or reduce our sights in the face of difficulty, in my judgment it would be better not to go at all," he said.

"There is no sense in agreeing, or desiring, that the United States take an affirmative position in outer space unless we are prepared to do the work and bear the burdens to make it successful. If we are not, we should decide today."

What has been decided these days, Rep. Brown said, is that wherever possible, high-tech projects should be "reduced in size, cost and duration." Objectives will be attacked in steps rather than leaps. Partners will be sought to share the risk.

"This is not a good time for good, long-range policy-making," he said. "Most members of Congress have no recollection of why we got started on many long-range projects. We have no institutional basis for planning beyond the next two years. It's a defect, but it's a defect that most democracies have."

Meanwhile, back in Iuka, plans have been announced for Thiokol Corp. to manufacture rocket nozzles at the abandoned NASA complex. About 850 engineers and technicians are to be at work there within two years.

The town's residents took the news, announced in December, with understandable skepticism.

"If I had to bet my lunch money," said Luminek, the local insurance agent, "I would bet that they will be gone in three to five years."

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