WASHINGTON — U.S. Transportation Secretary Ray LaHood has scheduled a second meeting with local officials in Virginia for Friday as he tries to break an impasse over the cost of the second phase of the Washington, D.C., Metrorail extension to Dulles International Airport.

LaHood’s mediation efforts began with a large meeting of stakeholders Wednesday. A smaller working group of 10 people will begin working Friday on a cost-cutting plan with the goal of completing it within 30 days.

Loudoun County board chairman Scott York said the Friday meeting will be “very telling whether or not the next 30 days will be fruitful or not.”

The Metropolitan Washington Airports Authority issued a statement calling the Wednesday meeting “constructive.”

“We will continue to work with the secretary and out partners to move this important project forward,” it said.

Financing for the second phase of the so-called Silver Line is to come from two Virginia counties — Fairfax and Loudoun, as well as the MWAA. The counties and the authority became embroiled in a public spat several weeks ago about whether the station at the Dulles airport should be above or below ground. It would cost an additional $300 billion underground.

The authority is managing the rail project. LaHood intervened after Loudoun County’s board began talking about pulling out of the project over the costs.

Leo Schefer, president of the Washington Airports Task Force, a group promoting the project, said the underground station proposed by the MWAA was a political symbol.

“I think it was a huge distraction. It set everybody against each other and it wasn’t the real issue,” he said.

Meanwhile, the MWAA board’s finance chairman, Robert Brown, explained the history of the cost of the project. The “planning number” for phase two of the extension was $2.5 billion, he said, then preliminary engineering began.

“The first real engineered numbers we had projected the phase-two project cost to be $3.8 billion,” Brown said.

That 52% increase in costs was not acceptable to anybody. The MWAA was able to reduce the cost to $3.5 billion, but that was still too high for county officials.

Schefer says he hopes LaHood has changed the focus of the dispute.

“The real issue was, how do we get the cost down to a fundable level, getting it down to a cost which is viable to finance without resorting to some sort of junk bonds and so forth, and without undermining the finances of the airports authority,” he said.

“MWAA is likely to borrow additional funds for this project later this year,” Brown said, “but that borrowing is likely to be interim financing (tax-exempt commercial paper). The next long-term permanent financing is not likely until 2012.”

The authority had been pinning its hopes on loans from the Transportation Infrastructure Finance and Innovation Act program. York said LaHood made it clear that federal aid would not be used to rescue the Dulles rail project.

But Schefer thinks LaHood has at least made the politics easier.

“It gives people cover to come to an agreement,” he said.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.