SUBWAY COVER-UP; MTA REVEALS $62 MILLION IN OVERRUNS.

Byline: David Bloom Daily News Staff Writer Copyright 1997, Daily News

Top MTA officials have discovered at least $62 million in Hollywood subway construction overruns that lower-level staff members have hidden from board members for as long as two years, the Daily News has learned.

Chief Executive Officer Julian Burke fears the total could climb to $100 million after further investigation, and he suspects that tens of millions of dollars in overruns may be hidden in other rail projects, including the North Hollywood subway extension, said Burke aide Habib Balian.

The recent discovery by Burke, a turnaround expert brought in to save the MTA, has complicated his already-grim scenarios. He had planned to present to Metropolitan Transportation Authority board members next Thursday his strategy to get rail and other capital projects back on sound financial footing.

MTA board members were outraged when told about the overruns.

``It's absolutely unacceptable, and the board should have known about it,'' said Duarte Mayor John Fasana.

``There have been a lot of incestuous relationships that have concealed a lot of spending that should have been brought before the board,'' said Los Angeles County Supervisor Michael D. Antonovich.

Mayor Richard Richard, chairman of the MTA board, was never notified of the hidden costs, said Jaime de la Vega, his transportation deputy.

``This is another example of MTA staff hiding the ball,'' he said. ``It's impossible to make informed decisions without accurate financial information.''

The Daily News obtained a Nov. 25 draft of Burke's five scenarios for rail construction. In each scenario, no money is allocated for an East-West San Fernando Valley line or the Mid-City extension of the Metro Red Line subway.

Three of the scenarios also would kill off the agency's two other pending rail projects - the east-side Red Line subway extension and the Pasadena Blue Line light-rail extension.

Even the two scenarios that would keep those projects going in the near-term call for delays of three to six years for each, would depend on substantial additional state and federal funding, and raids on local pots of street and road improvement money.

After presenting the scenarios to the board, Burke planned to give the members time to decide which of several politically difficult choices they would be willing to make.

But in drawing up the scenarios the staff did not fully account for the hidden overruns leaving Burke, hired in August to fix the MTA's troubled finances, in a difficult position.

Balian, Burke's aide, said the MTA's CEO didn't learn of the hidden overruns until the day before Thanksgiving.

Balian said lower-level staff had included some of the overruns in their cost projections without telling Burke, but even then left out what is expected to be tens of millions of dollars in additional overruns.

``This was not given the amplification (to Burke and top staff) that it should have,'' Balian said.

But after Burke finally learned more fully of their existence last week, he held a four-hour meeting Tuesday to squeeze out all the information he could on Hollywood line overruns.

About one-third of the region's overruns resulted from a long-simmering internal dispute over the allocation of overhead costs, such as payroll and accounting, to various parts of the MTA organization, Balian said.

The rest of the Hollywood overruns are the kinds of creeping cost increases and unexpected little problems that have dogged the subway work from the start.

But the increases in charges haven't been fully acknowledged by the MTA's construction division, which never brought the overruns to the board's attention even though the board has been asked twice to increase the project spending ceiling by nearly $200 million.

The overhead dispute also affects the other MTA rail projects - the Pasadena Blue Line and the North Hollywood and east-side Red Line extensions. And they will force Burke to quickly rewrite the scenarios he has planned to give the board next week, Balian said.

Burke, in his characteristically low-key manner, warned the board's Construction Committee on Wednesday that he had found some problems in the Hollywood project's spending and was adjusting the budget, but planned to return in January with more details once he had determined the full extent of the problem.

The overruns now mean the Hollywood line will open a year from now, three months later than previously expected, according to MTA documents.

And the line is projected to cost $1.641 billion, $90 million more than the $1.551 billion now committed, the documents now show.