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Workers build outdoor box seating as construction continued at the Rose Bowl in Pasadena. (Raul Roa/Staff Photographer / February 7, 2013) |
What is now turning out to be a $195-million renovation of the Rose Bowl was lowballed by roughly $50 million during a rushed process to get the massive project approved by the Pasadena City Council.
Three years later, the overshot budget has forced officials to delay or indefinitely suspend parts of the plan until $30 million more in funding can be found. The blown budget has sparked an inquiry on whether to do away with the nonprofit organization appointed by the City Council to operate the stadium.
Almost from the moment the project broke ground in January 2011 it was over budget by millions, and by the end of the year, the original $152-million estimate had grown to $160.7 million. By mid-2012, the price tag had climbed to $176.9 million — four months later, roughly $184 million. And before the year was over, Pasadena taxpayers were staring at a final estimated tab of nearly $195 million.
TIMELINE: Rose Bowl renovation project
The faulty cost projection “wasn't a matter of being venal, corrupt or stupid. It was a matter of being too aggressive,” said Councilman Terry Tornek, who cast the lone vote against the project.
Still, he acknowledged that “when you look at public projects, there is almost an imperative to lowball [cost estimates] because if you are too conservative no one will let you build them.”
An independent analysis of the project made partially public last month concluded that the yawning budget gap “is not the result of cost overruns” but “deficiencies in the original project budget.” Essentially, a $200-million project was sold to the City Council — and taxpayers — as a roughly $150-million project.
For those pushing the project forward, that apparently was a good thing.
“If a $200-million project had been put forth, there would have had to have been [stadium] revenue able to support that,” Councilwoman Margaret McAustin said. “It would have been a completely different picture.”
But deals struck before Rose Bowl officials sold city leaders on the stadium renovations, combined with a lack of transparency and sense of urgency, all but ensured that the cost would be significantly undersold to get the project approved.
Seven months before the San Fernando-based construction firm Bernards delivered a cost estimate of $152 million in September 2010, representatives for the Rose Bowl Operating Co. had promised Bernards and a partnering company a nearly $7-million contract to manage the work if it was approved — providing a huge financial incentive to lowball the estimate.
Stadium officials say they were under intense pressure to get the project pushed through and ready in order to qualify for a key federal stimulus bond financing program, prompting the move to skip the competitive bidding process and go with Bernards from the get-go. At the time, the near collapse of the financial sector had made securing private construction financing next to impossible.
Councilman Victor Gordo, who serves as president of the council-appointed Rose Bowl Operating Co. board, said the financing crunch, combined with the need to have the stadium ready for the September 2012 kickoff of the UCLA season, put officials in a “very difficult situation.”
Officials sought out Bernards “for their working knowledge of the project site” from 2007 work on the stadium's locker rooms and media center that was completed under budget, according to a report by Rose Bowl General Manager Darryl Dunn. Bringing in a contractor unfamiliar with the stadium, he contended, “could seriously jeopardize the project timeline.”
Dunn also said officials were confident in the accuracy of the Bernards estimate following a third-party review by a Westlake Village firm before the City Council approved the project on Oct. 11, 2010.
But every step of the way, Bernards had a reason to undersell the costs and keep the change orders coming.
The project management contract provided an initial payment of $475,000 and promised roughly $6.5 million in additional fees pending the project's ultimate approval.
Bernards and Barton Malow have so far received $4.6 million on that contract to date, Dunn said.
Repeated attempts to reach Bernards representatives by telephone were unsuccessful, and questions were referred to other officials during a visit to the company's project site office at the Rose Bowl.
The independent analysis of the project estimate process — commissioned by the Rose Bowl Operating Co.— determined that construction documents were incomplete, forcing several change orders. It also found that carrying out construction work in several phases under contracts with multiple prime contractors, instead of one general contractor, exposed the project to financial risks.
The Pasadena city attorney's office declined to release a full version of the report prepared by Atlanta-based Heery International, citing the potential for litigation, but declined to elaborate.
Meanwhile, a report on whether the city should eliminate the Rose Bowl Operating Co. and directly manage the stadium by Pasadena City Manager Michael Beck is expected later this month, city spokesman William Boyer said.
In an interview, Beck defended the merits of the project, saying the risks of not proceeding “far outweighed the risks of proceeding, and I still believe that today.”
He also said that the city had to have UCLA and the Tournament of Roses Assn. locked into 30-year agreements in order to invest in the stadium, something that couldn't happen without the extensive renovation.
Still, Paul Little, president of the Pasadena Chamber of Commerce and a member of the Rose Bowl Operating Co. board, acknowledged that stadium officials should have reconsidered the scope of the project in early 2012, when work on press box and luxury seating increased the price tag by roughly $16 million.
“We probably should have been looking at making program adjustments earlier on, and we may have been able at that point to perhaps prioritize differently,” Little said.
Three years later, the overshot budget has forced officials to delay or indefinitely suspend parts of the plan until $30 million more in funding can be found. The blown budget has sparked an inquiry on whether to do away with the nonprofit organization appointed by the City Council to operate the stadium.
Almost from the moment the project broke ground in January 2011 it was over budget by millions, and by the end of the year, the original $152-million estimate had grown to $160.7 million. By mid-2012, the price tag had climbed to $176.9 million — four months later, roughly $184 million. And before the year was over, Pasadena taxpayers were staring at a final estimated tab of nearly $195 million.
TIMELINE: Rose Bowl renovation project
The faulty cost projection “wasn't a matter of being venal, corrupt or stupid. It was a matter of being too aggressive,” said Councilman Terry Tornek, who cast the lone vote against the project.
Still, he acknowledged that “when you look at public projects, there is almost an imperative to lowball [cost estimates] because if you are too conservative no one will let you build them.”
An independent analysis of the project made partially public last month concluded that the yawning budget gap “is not the result of cost overruns” but “deficiencies in the original project budget.” Essentially, a $200-million project was sold to the City Council — and taxpayers — as a roughly $150-million project.
For those pushing the project forward, that apparently was a good thing.
“If a $200-million project had been put forth, there would have had to have been [stadium] revenue able to support that,” Councilwoman Margaret McAustin said. “It would have been a completely different picture.”
But deals struck before Rose Bowl officials sold city leaders on the stadium renovations, combined with a lack of transparency and sense of urgency, all but ensured that the cost would be significantly undersold to get the project approved.
Seven months before the San Fernando-based construction firm Bernards delivered a cost estimate of $152 million in September 2010, representatives for the Rose Bowl Operating Co. had promised Bernards and a partnering company a nearly $7-million contract to manage the work if it was approved — providing a huge financial incentive to lowball the estimate.
Stadium officials say they were under intense pressure to get the project pushed through and ready in order to qualify for a key federal stimulus bond financing program, prompting the move to skip the competitive bidding process and go with Bernards from the get-go. At the time, the near collapse of the financial sector had made securing private construction financing next to impossible.
Councilman Victor Gordo, who serves as president of the council-appointed Rose Bowl Operating Co. board, said the financing crunch, combined with the need to have the stadium ready for the September 2012 kickoff of the UCLA season, put officials in a “very difficult situation.”
Officials sought out Bernards “for their working knowledge of the project site” from 2007 work on the stadium's locker rooms and media center that was completed under budget, according to a report by Rose Bowl General Manager Darryl Dunn. Bringing in a contractor unfamiliar with the stadium, he contended, “could seriously jeopardize the project timeline.”
Dunn also said officials were confident in the accuracy of the Bernards estimate following a third-party review by a Westlake Village firm before the City Council approved the project on Oct. 11, 2010.
But every step of the way, Bernards had a reason to undersell the costs and keep the change orders coming.
The project management contract provided an initial payment of $475,000 and promised roughly $6.5 million in additional fees pending the project's ultimate approval.
Bernards and Barton Malow have so far received $4.6 million on that contract to date, Dunn said.
Repeated attempts to reach Bernards representatives by telephone were unsuccessful, and questions were referred to other officials during a visit to the company's project site office at the Rose Bowl.
The independent analysis of the project estimate process — commissioned by the Rose Bowl Operating Co.— determined that construction documents were incomplete, forcing several change orders. It also found that carrying out construction work in several phases under contracts with multiple prime contractors, instead of one general contractor, exposed the project to financial risks.
The Pasadena city attorney's office declined to release a full version of the report prepared by Atlanta-based Heery International, citing the potential for litigation, but declined to elaborate.
Meanwhile, a report on whether the city should eliminate the Rose Bowl Operating Co. and directly manage the stadium by Pasadena City Manager Michael Beck is expected later this month, city spokesman William Boyer said.
In an interview, Beck defended the merits of the project, saying the risks of not proceeding “far outweighed the risks of proceeding, and I still believe that today.”
He also said that the city had to have UCLA and the Tournament of Roses Assn. locked into 30-year agreements in order to invest in the stadium, something that couldn't happen without the extensive renovation.
Still, Paul Little, president of the Pasadena Chamber of Commerce and a member of the Rose Bowl Operating Co. board, acknowledged that stadium officials should have reconsidered the scope of the project in early 2012, when work on press box and luxury seating increased the price tag by roughly $16 million.
“We probably should have been looking at making program adjustments earlier on, and we may have been able at that point to perhaps prioritize differently,” Little said.
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Follow Joe Piasecki on Twitter: @JoePiasecki.
