Los Angeles Firm Wins $2.95B NYC Jail Project

A contractor based in Los Angeles has been awarded the most lucrative municipal project in New York City this year—a $2.95B deal to build one of four NYC prisons to replace the notoriously overcrowded and increasingly deadly Rikers Island detention center.

Tutor Perini was selected by the city’s Department of Design and Construction to build in Brooklyn the first of four new prisons that will be part of what NYC is calling its Borough-Based Jails System.

Tutor Perini is well-known to NYC construction officials: the Los Angeles-based firm designed the AirTrain that was supposed to be built at La Guardia Airport before Gov. Kathy Hochul decided to scrap the project—with a price tag that ballooned to $2.4B—in favor of new bus routes that drop air travelers off at subway stations in Queens.

New prisons that will allow the city to close Rikers also will be constructed in Manhattan, the Bronx and Queens.

NYC has been aiming to replace Rikers for decades. Nineteen inmates were killed in violent incidents at the jail in 2022, the largest number of fatalities in 25 years.

Design work on the six-year contract will begin in June. NYC initially wanted to close Rikers in 2027, but the contract with Tutor Perini runs until 2029, a delay the NYC Mayor’s Office attributes to the current environment for new construction as interest rates rise.

“This contract reflects realities facing the construction industry,” the mayor’s spokesperson told Bloomberg.

In a 2022 earnings statement, Tutor Perini CEO Ronald Tutor said the company lost a record $11B in potential new work in the past year, including the La Guardia rail link, ConstructionDive reported.

Tutor Perini lost a major project when Accelerate Maryland Partners, an economic development agency, canceled a contract to add an express lane to the Capital Beltway encircling Washington DC.

In its 2022 earnings statement, Tutor Perini reported a loss of $210M, a swing of more than $300M from its 2021 net income of $91.9M. The firm is expected to book an $84M loss on its George Washington Bridge Bus Station project in its Q1 statement.

The bus station project has been mired in a legal dispute for the past two years. New York City Regional Center LLC, a real investment firm that financed the project, sued the Port Authority of New York and New Jersey—which owns the GWB bus terminal—of upending the planned bankruptcy sale of a retail leasehold and wiping out a $72M loan from foreign investors.

Funding to redevelop the bus station came through the EB-5 Immigrant investor program, which provides green cards to foreigners who invest $500,000 in certain qualified U.S. businesses.

The development consortium, George Washington Bridge Bus Station Development Venture LLC, filed for Chapter 11 in 2019 amid cost overruns that were the subject of dispute with the contractor—Tutor Perini.