DALLAS — Cost overruns at the overdue South Terminal at Denver International Airport pose "significant budget risk," according to City Auditor Dennis Gallagher, who said his office would investigate the project's rising price tag of more than $700 million.
Originally budgeted at $500 million, the South Terminal, which includes a 519-room Westin Hotel and a rail station for a commuter line to downtown Denver, is now expected to cost $598 million.
In March 2013, the Denver City Council approved raising the budget to $544 million from $500 million. Related costs are expected to drive the total to more than $703 million, according to recent estimates.
The hotel was originally expected to be delivered this year. That has been pushed back to 2015, and the Regional Transportation District commuter rail line is not expected until 2016.
The so-called South Terminal Redevelopment Program (STRP) also includes an extension of the automated train that serves DIA's three concourses, and an expansion of the baggage system.
Denver issued $736 million of subordinate-lien revenue bonds for the South Terminal in July 2013. The bonds were rated A2 by Moody's Investors Service, A-plus by Standard & Poor's, and A by Fitch Ratings.
Moody's maintained a negative outlook, citing construction risk and analysts opinion that "the plan includes major elements that are not core airport revenue producing projects."
In a "state of the airport" speech April 29, Denver aviation director Kim Day attributed the overruns to higher construction costs in a rebounding economy.
"Our risk assessment projections indicate that the program could increase 5% to 10%," Day said. "This is within the industry norm for projects of this size and complexity, but still, not what we wanted to hear.
"Fortunately, our exceptional financial strength enables us to absorb the projected increase," Day added, "with no major impact on our financial performance metrics, our airlines, other capital projects or our operations."