Denver Auditor Dennis Gallagher called the escalating cost of Denver International Airport’s hotel and transit center project “a significant budget risk” on Tuesday, and said his office will investigate what caused the latest increase.
“I am concerned that the budget for DIA’s Hotel and Transit Center apparently once again needs to be increased. A project originally budgeted at $500 million is now projected to be $598 million,” Gallagher said in a statement.
The increase of nearly 20 percent “is compounded by the potential loss of nearly $7 million in income from the hotel due to its late completion,” Gallagher said.
“We will try to identify the cause of the budget — $500 million to $544 million and now $598 million — as well as identifying any potential risks, going forward,” he said. “Future risk can only be mitigated if the cause of the budget problems can be identified and resolved.”
Gallagher noted that in his January 2012 audit of the project DIA officials had said a 10 percent overage would pose a significant budget risk.
Airport officials on Monday 5 to 10 percent. With related costs included, the project budget now ranges between $703 million and $730 million.
On Tuesday, during her annual “State of DIA” speech, airport manager Kim Day said increased competition for construction work are driving the increase.
But she said the cost increase for the 519-room Westin hotel, train station and glass-covered plaza are “within industry norms,” and that it will have no impact on other planned capital-improvement projects or the airlines that fly from the airport.
“We remain committed to transparency, financial responsibility and diligent oversight through to completion,” Day said. “Billions of dollars and our region’s competitiveness on the global stage are at stake.”
The project budget has climbed twice in 13 months. In March 2013, the Denver city council approved raising the budget to $544 million from $500 million. Airport officials attributed the increase to final price quotes and improving economic conditions that made construction more costly.
On Monday, airport spokeswoman Stacey Stegman said the cost could climb as high as $598 million.
The new estimate , such as new bridges to the terminal and a $54 million dispute with the Regional Transportation District over the train station.
Airport officials say they have ample cash reserves to cover the increase.
“Let me address the elephant in the room,” Denver Mayor Michael Hancock said before he introduced Day. “No one likes to see cost increases. We accept our accountability.”
He said his administration will remain vigilant in terms of cost and on-time delivery of the project.
“We must continue to be transformative,” he said.
During her speech to business leaders, Day also said fierce competition from airports in Asia and the Middle East could drop DIA to 18th or 19th most busy in the world in the next few years.
Moody’s Investors Service assigned the airport a negative outlook for the last three years, citing the redevelopment project as a factor.
The about its spending. In a letter last August, a committee representing the airlines warned that budget increases could jeopardize the airport’s status as a major hub for connecting flights.
DIA is a self-supporting department of city government, raising most of its revenue from airline fees, concessions and parking.
Kristen Leigh Painter: 303-954-1638, kpainter@denverpost.com or twitter.com/kristenpainter
