Denver International Airport’s marquee terminal renovation is headed for a severe budget crunch that threatens to leave core components of the project — including new upper-level security screening areas — unfinished or significantly curtailed, according to emails obtained exclusively by The Denver Post.
Construction resumed on the first phase of the Great Hall project in March under a new team of contractors following DIA’s decision last year to boot its original project partners on the troubled project. But just $170 million of the project’s $770 million budget remains for later phases, including the security checkpoints’ relocation and the reconfiguration of some airlines’ check-in areas.
That figure was cited in an email sent this summer by Jason Chu, a United Airlines representative who wrote on behalf of DIA’s major airlines, responding to airport cost-cutting ideas. When The Post requested Chu’s email and others under the Colorado Open Records Act, DIA blacked out the amount of project money remaining and most project-related details. The Post later obtained an unredacted version of Chu’s email through sources with access to it.
Pressed this week, airport officials confirmed that the $170 million projection is current and said they are still in the process of deciding what to cut.
The money that’s left is just a quarter of the $720 million that DIA and its new contractors estimate it would take to complete the remaining phases under the project’s wildly over-budget original design.
DIA’s leaders said earlier this year that some changes and reductions in scope would be necessary — and the pandemic has added new considerations. But the email revealed that money was running significantly shorter than CEO Kim Day and other officials have previously acknowledged publicly.
“It hasn’t been until recently that we’ve really been able to drill down to the 170 number,” Cristal DeHerrera, DIA’s chief of staff, told The Post on Tuesday. “Do we wish it were more? Yeah, I wish it was more. But it’s not, and (we) have to deal with that reality.”
The Great Hall project was launched three years ago to improve security screening, modernize the massive 1990s-era building and accommodate millions more passengers each year. After the project ran aground, DIA this summer sought feedback on potential reductions from its largest carriers — United, Southwest and Frontier — which are helping to pay for the project through their airport fees.
Chu, who works in United’s corporate real estate office, wrote to DIA and project officials on June 24 to convey the major airlines’ response to proposals floated by DIA to rein in the project’s costs, as outlined to them in a meeting the prior week. The group pushed back on several elements, with Chu writing that the airlines foresaw, in the potential plan, the likelihood for “confusing and potentially restricted passenger flows,” cramped quarters and an “overall diminished passenger experience.”
His email suggests a choice between reconfiguring and expanding check-in areas for all airlines, as the carriers want, and building at least one of two planned security screening areas on the north end of the upper level, replacing some ticket counters. Instead of bringing in more modern screening equipment, as DIA had planned, Chu expressed concern that that new checkpoint might reuse “old technology.”
DIA has faced pressure from Denver City Council members to follow through on the security relocation plans because of the vulnerability of the two existing main-floor checkpoints, which sit on Level 5 beneath open upper-level balconies in the tented atrium. The email suggests, however, that some main-floor screening is likely to remain.
The airlines, long skeptical of the security plans, even urged DIA to “address Security as a separate project” and, for the time being, to install “fortification” above the existing screening areas to save money.
Otherwise, the plan risks shortchanging some airlines that have smaller footprints at DIA — starting with Frontier — by leaving them at old, against-the-wall ticketing counters. Only Southwest and United are guaranteed to get spacious, modular check-in areas dominated by self-service kiosks because their zones are part of the funded Phase 1 work.
The extent of the project shortfall was unsettling to City Councilman Kevin Flynn, who chairs the business and aviation committee and has pressed DIA to focus on the project’s core components. But he said Tuesday that he would be loath to support more money for the project, preferring to refocus project spending as much as possible.
“For me, this project was made essential because of the security concerns about having both north and south areas so openly exposed from Level 6,” he said. “That’s something that has to be 100% relocated. … We can’t finish this project without completing the No. 1 priority in the mission, which was securing the passenger screening areas.”
Sticking to $770 million limit
The project has long faced financial questions from the council. On Tuesday, DeHerrera said DIA remains committed to Day’s promise to keep costs within the confines of the original $650 million project budget, plus a $120 million contingency fund that provided an extra cushion for unforeseen costs, changes and mandates.
DeHerrera says August is likely to be a key month for discussions with the airlines. Both sides have made their “really strong preferences” clear, she said, declining to identify specifics.
“I wouldn’t say that they’re in conflict with each other,” DeHerrera said. “It’s all about the mix. … We want to make sure we’re enhancing security. We want to make sure we’re being thoughtful about airline growth. Even though we’re going through COVID, COVID will be over at some point, and they’re going to need to grow — and how do we build the terminal that supports that?”
That said, the coronavirus pandemic has brought new financial uncertainty by halting years of fast-growing passenger traffic at the nation’s fifth-busiest airport, a self-supporting city enterprise that’s normally flush with cash. The pandemic also has prompted discussions about how the terminal project should account for passengers’ changing behavior and expectations, DeHerrera said.
The Post initially hit a roadblock as it sought details on the status of the project via a public records request for emails exchanged in late June.
DIA based its extensive redactions of project-related details from emails and related documents on CORA provisions that allow the withholding of deliberations about pending decisions as well as confidential commercial and financial information. But the redactions went so far as to include Chu’s opinions and comments, even though he’s not an airport employee or consultant.
Attempts to discuss details about the talks with Chu and other airline representatives, whom DIA has asked to keep them confidential, were not successful.
The revelation that so little money remains for the project comes a week after DIA confirmed its chief financial officer, Gisela Shanahan — who had deep involvement with the Great Hall project — will leave that job Aug. 10. She told The Post that she felt comfortable leaving because the airport has solid overall financial plans and that she intends to spend more time with her family.
Day, who has overseen the airport since 2008, has marshaled several big projects, often attracting controversy.
Less than a year after construction began on the Great Hall project in mid-2018 it was already running behind schedule and over budget. DIA officials battled with Great Hall Partners, which had a long-term public-private partnership agreement, for months over questions about weak existing floor concrete, the airport’s many design directives and the contractors’ own claims before Day and Mayor Michael Hancock terminated the international consortium’s contract in August 2019.
Breakup payments factor into dwindling funding
The lengthy breakup process reaped nearly $184 million in termination payments for Great Hall Partners, led by Madrid-based Ferrovial Airports.
DIA says it counted about $139 million against the project budget because that sum covered the fired contractors’ actual costs, but it drew on its reserves for the remaining $45 million, which was considered nonproject costs. Most of that was for contractually required compensation of Great Hall Partners’ equity investors for their expected returns over the life of the 34-year partnership agreement.
DIA retook control of the project and put the kibosh on the plan to have a private partner oversee expanded food and retail concessions in the terminal for decades to come, a component designed as a revenue generator.
The City Council approved new design, management and construction contracts totaling $331 million for the restarted work in February — including up to $195 million for Phase 1’s lead contractor, Hensel Phelps. The estimate that $170 million remains takes into account that spending.
Despite the pandemic, DIA’s expansion continues. In a separate project, the airport is spending about $2 billion on its three concourses to add 39 new gates requested by the airlines and to upgrade the existing facilities.
That work has gone more smoothly, and DIA has sought in recent months to portray the Great Hall project as getting back on track. In early July, it launched a long-promised online dashboard that shows the restarted chugging along on nearly all measures, including hitting its first milestone weeks early.
The first phase is expected to be done in late 2021, about the time the entire project should have been finished under the original schedule. Michael Sheehan, DIA’s senior vice president for special projects, said Tuesday that sometime in 2023 is now looking like a good bet — depending on how much of the project the airport can afford.
Source: Read Full Article