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Playing the numbers (continued)


BOTH LEVY, now a Worcester talk-show host, and Mihos, a wealthy Cohasset businessman who founded the Christy’s chain of convenience stores, depict themselves as outsiders. Both men were appointed to the board by Cellucci in 1998 — Levy arrived in June, Mihos in December. The board they joined had a vastly different character from its current configuration. At that time, Kerasiotes towered over the Authority, much as Robert Moses dominated development of the Greater New York area after World War II. For the first part of their respective tenures, both Mihos and Levy took what Kerasiotes told them at face value. He was, after all, the bulldog charged with keeping costs down. It wasn’t until after the real story of Kerasiotes’s tenure emerged — that he failed to disclose the true cost of the project — that things changed. "Everything given to me before wasn’t the truth," says Levy. "I started asking tough questions and demanding answers."

In April 2001, Bechtel representatives presented the board with a letter suggesting that Big Dig costs would come to $14.075 billion. When specifically asked if the costs would stay at that level, Bechtel’s representatives assured the board that they would. (When Bechtel came before the State Transportation Committee in October, it declined to make similar assurances.) Two months later, in June, Levy and Mihos became aware of a so-called Central Artery/Tunnel Project Global Settlement pool. Bills in dispute between contractors and the Central Artery project are sent to the pool. When some aspect of the Big Dig project doesn’t go according to plan, for example, and contractors need additional time and money to tunnel through a wall or make some other unanticipated change, the project manager can decline to pay for the excess amount or dispute it. The settlement pool serves as an accounting device to keep track of the disputed contracts. And given that final bills will probably be settled in multi-million-dollar court fights, the very existence of the pool, say Levy and Mihos, means that there was a possibility that Big Dig costs might run much higher than the $14 billion figure currently cited.

After learning of the pool, Levy and Mihos began asking questions about all these disputes — small and large. After all, aside from $50 million in a state fund directed at insuring the Big Dig overall and a $50 million insurance policy against problems with Bechtel, the state bears full financial liability for Big Dig cost overruns.

By June 28, all the board members — Forsberg, Mihos, and Levy — had raised questions about the Global Settlement pool. The board voted unanimously, according to its minutes, to remove control of the pool from Bechtel and give it to the Turnpike’s own lawyers: "Responsibility for oversight and negotiation of Central Artery/Tunnel Project contingency expenditures, dispute resolution processes, global settlements, and potential change orders over $100,000 [will be] transferred to a newly established review team within the Authority’s office of general council," read Mihos’s motion.

This motion was the real root of the struggle between the two board members and the governor, Mihos and Levy allege. Even before the June 28 meeting, Levy had told the Herald, among other publications, that the relationship between Bechtel and Big Dig officials made it difficult to control costs. These allegations could not have been welcome to Swift, who seeks to limit her political vulnerability. She has enough problems of her own without having to answer for the misdeeds of the real Big Dig architects, former governors Bill Weld and Paul Cellucci.

By late August, Levy and Mihos began pushing the Turnpike Authority to threaten Bechtel with termination. If Bechtel could not help keep Big Dig costs under control, they reasoned, the state would bring in a partner who could. "The only leverage we ever had with Bechtel was if you don’t shape up and shape up management and get things under control, that we would find a replacement for them," says one Authority insider. Today, Mihos cites two documents he received in September that prompted Levy and Mihos to intensify their scrutiny of the project. The documents, supplied as part of the federal audit, listed $1.2 billion in modifications of construction contracts and $467 million in modifications of design contracts as a potential problem. "When you see $1.2 billion in construction overruns and $467 million in design overruns, that’s an issue," says Mihos. "We raised it with Bechtel. We raised it with the project manager. We just want to know the truth."

AFTER CONDUCTING hearings in Winthrop and Worcester on the prospective toll increases, Levy and Mihos concluded that increasing tolls would make for an unwieldy and inequitable way to help pay the Turnpike Authority’s debts. Furthermore, because of what they felt were additional large-scale burgeoning debts, they believed the increases would merely serve the needs of public relations, creating the image of fiscal responsibility while avoiding the real remedy of facing down Bechtel.

Still, the toll increase is called for under a 1997 Big Dig bond-financing plan. Two Wall Street rating agencies have downgraded the Turnpike Authority’s bond rating in the wake of the board’s vote against raising tolls (the third board member, Forsberg, who first used the word "circus" to describe the situation to the Herald, voted in favor of the increase). In their defense, Mihos and Levy contend that the 1997 bond agreement and the 1954 Turnpike Authority enabling agreement give the board the leeway to devise alternate financing methods.

On November 26, therefore, they sent a memo to the rating agencies detailing the actions they took to do just that — such as increasing the rates for commercial vehicles on the Pike, eliminating special discounts for businesses, and putting off nonessential maintenance of roads owned by the Authority. "Even if you had everybody pay them, they can’t make enough money through tolls," says Levy. "You’ll have tolls 15 bucks each way if you’re going to pay for the project through tolls. If they don’t start talking other revenues other than tolls, this won’t get funded. The problem is it’s a $15 billion project and climbing, and they have been in denial since the very first day." Says Mihos, "Our point is, why should we create classes of citizens, classes of commuters?"

Jim Borghesani, the governor’s spokesman, rejects the pair’s arguments. "This whole thing is about paying bills, the way you said you were going to pay them for four years, and it’s about two board members who decided seemingly on a whim that they weren’t going to pay bills the way the Turnpike said they would pay them for four years," he says.

Borghesani remains steadfast in discounting the gadfly role played by the two board members. At the same time, he concedes that the state would like to forge a cost-cutting agreement with Bechtel — which seems to give credence to some of the complaints about the agency raised by Levy and Mihos. If so, Borghesani isn’t giving them any credit. In fact, he blames them for ruining any chance of a deal: "Levy and Mihos, through their incompetence, drove Bechtel away from that agreement."

Outside the governor’s office, however, Mihos and Levy have their defenders. "They’re not all bad here," says Senator Robert Havern of Arlington, chair of the Senate Transportation Committee. "What they’re trying to accomplish — trying to hold Bechtel responsible for what they’re doing — there’s nothing wrong with." Senator Robert Hedlund of Weymouth, Havern’s Republican counterpart on the committee, concurs. "I applaud Levy and Mihos’s attempts to bring some accountability to Bechtel," he says. "The Swift-Mihos situation is just a symptom of a broader disease, a funding plan that I don’t believe works."

Put into this context, Swift’s expostulations about fiscal responsibility seem hard to take seriously. While one could argue that the state has more to lose by unseating Bechtel now, the governor’s team isn’t making that point. Right now, her people are simply trying to vilify Levy and Mihos, a tactic that seems fraught with political danger. Although she may win points for following the "letter of the law," by strenuously pushing for the tolls Swift can only alienate the central part of the state (Levy’s base) and the North Shore. And Mihos, for his part, is a major Republican giver. Both Republican and Democratic political analysts note that with the scrutiny surrounding Massport and state-budget woes, Swift had enough on her plate without prompting a governance crisis that she may not win with an allegedly independent board. "It makes no sense," says Democratic strategist Mary Anne Marsh.

But perhaps Swift is operating on a simple political principle: get rid of the troublemakers. An examination of the minutes of the Turnpike Authority’s last several meetings reveals Levy raising questions about every aspect of Big Dig costs. For Swift, it may be best to stifle these questions. Yet even this strategy carries risk. The next major formal update of Big Dig costs, done in compliance with federal audit requirements, is due next October — just in time for Swift’s general election against a Democratic opponent. If that audit shows a major cost overrun, Swift might not want to know about it until election time. Perhaps she can get out of the pickle by expressing populist shock at the new Big Dig price tag. Perhaps not. But that’s a big gamble for an ambitious politician to take.

While it may be a political gamble for the governor, it’s a financial one for the rest of us. She bets her governorship. We bet our financial futures. Those are pretty high stakes.

Seth Gitell can be reached at sgitell[a]phx.com

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Issue Date: December 6 - 13, 2001

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