Officials uneasy with 40 years of Monorail debt

OLYMPIA — State Treasurer Mike Murphy said yesterday that he's uncomfortable letting the Seattle Monorail Project take on debt for more than 40 years.

The agency is looking for a longer period, in case its revenues from a car-tab tax don't grow fast enough to pay off the project's expected $1.6 billion cost earlier.

A proposed bill in the state Senate would allow monorail bonds to last as long as the Internal Revenue Service allows — 120 percent of the monorail's useful life — as determined by the monorail's governing board.

State law currently allows projects like the monorail to issue debt for no longer than 40 years, according to Murphy.

Typically, the state issues 25-year bonds so that interest charges won't pile up over a longer period of time, Murphy said. The state's second Tacoma Narrows Bridge, now under construction, will be paid off 25 or 26 years after it opens, he said.

"I am a whole lot uncomfortable with going to 120 percent of useful life. That's a pretty long time," Murphy said at a Senate Transportation Committee hearing yesterday.

But Jonathan Buchter, the monorail project's finance director, said bonds will be paid off as soon as the incoming taxes allow.

He thinks the number of years required to pay off the project will be "in the high 30s," but he wants flexibility to refinance in case it takes longer. That would reassure investors and help the agency get a better deal on bonds, he said.

Buchter said that in Eastern states, terms of 30, 40, even 50 years are normal for rail-transit lines. There's a national debate over whether to spread costs of public works so future users help pay for them, he said.

Sen. Ken Jacobsen, D-Seattle, estimated that going 40 years instead of 30 would add around $1 billion in interest costs.

Senate Transportation Committee chair Mary Margaret Haugen, D-Camano Island, said she is worried about the overall load of debt being pushed onto future generations. She said there will be changes in the monorail bill before a final vote.

The proposal, Senate Bill 5534, contains an emergency clause so that it would take effect right away. Buchter said the agency wants to sell bonds before the Federal Reserve Board raises interest rates, as expected.

Mike Lindblom: 206-515-5631 or mlindblom@seattletimes.com