Cost of terminal upgrade at Port of Los Angeles doubled over 4 years
The price tag for a major container terminal upgrade at the Port of Los Angeles has more than doubled over the last four years, caused in large part by major design changes OKd without the approval of city elected officials.
The construction budget for the 173-acre terminal development has soared to $510 million, up from the $245-million estimated cost when City Council members authorized the project in 2009, according to a new report by city budget analysts.
On Tuesday, the council is scheduled to discuss the increased outlays for the project, which is located north of the Vincent Thomas Bridge. Legal questions have been raised about whether port executives should have obtained sign-offs for the project changes years earlier from the harbor commission and council.
Councilman Joe Buscaino, who represents the harbor, warned the sharply higher costs could affect other port programs. “Mistakes were made at the highest levels ... [on] a project that had questionable price controls,” Buscaino said in a statement. “This cannot happen again.” A port spokesman agreed his agency erred in not bringing project amendments forward sooner.
The latest increase in the project’s budget has been estimated at $145 million. Lawmakers will also review an amendment to a lease agreement with TraPac, the company that will operate the container terminal, that reflects the revised improvements. Over the 30-year term of the lease, the port will receive an estimated $2.3 billion in revenue from the deal.
Port officials notified the harbor commission in 2012 that the original construction price estimate had jumped nearly 50% to $365 million. Revised figures for the latest cost increase were presented to the five-member harbor commission in September.
A spokesman for Mayor Eric Garcetti said the overruns were “unacceptable” and promised that new management at the port would require outside experts to review such large-scale projects.
He declined to say whether the recently announced departure of the port’s top executive was related to the container terminal project. Amid the newly elected mayor’s review of department managers, Geraldine Knatz disclosed in October that she was stepping down. Knatz was traveling Monday and could not be reached, said port spokesman Phillip Sanfield.
The harbor department requested a review of the TraPac project earlier this year. A draft of that report, a copy of which was obtained by The Times, concluded that the port failed to make an “optimal” deal with TraPac — one that would have forced the company to be responsible for a larger share of the improvement costs.
Fernando Campos, the city analyst who wrote the draft report, would not discuss his findings, saying he will release them in coming weeks. Harbor officials and TraPac now are discussing ways the company might contribute additional revenue to the port, Sanfield said.
Under the project plan approved in 2009, the port was to redevelop the wharves, expand the terminal’s size and construct new buildings.
But within months, TraPac and port officials changed the scope of the project, opting to install rail-mounted automated cranes instead of using cranes with rubber wheels, records show. A proposed amendment to the TraPac lease agreement reflecting the changes was received by port officials from the city’s lawyers in August 2010. A report to the commission on the project changes also was prepared. But neither was submitted for more than three years, according to the draft of Campos’ analysis.
Knatz, the top port executive at the time, was authorized to approve contracts only up to $150,000. The changes to the crane design initially were expected to add $27 million to project costs. But construction complications drove up the price by $175 million, according to harbor officials.
Former harbor commissioner Cindy Miscikowski, who left the panel in September, said top port managers originally didn’t think the changes were significant enough to require an amendment to the TraPac agreement and City Council approval. City lawyers disagreed and argued as early as 2010 that the port should secure approval from the harbor commission and elected lawmakers, she said.
City Atty. Mike Feuer’s spokesman declined to discuss the matter, saying he cannot comment on “advice given to a client.”
On Monday, Sanfield, the port spokesman, acknowledged the project and lease agreement changes should have been presented sooner to decision makers. “Measures will be put in place to make sure this does not happen again.”
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