Monorail costs tighten up
In the Seattle monorail's first new finance proposal since a public-relations fiasco in late June, an adviser says he can shave eight years...
Seattle Times staff reporter
In the Seattle monorail's first new finance proposal since a public-relations fiasco in late June, an adviser says he can shave eight years off an earlier 50-year tax plan. "An acceptable, defensible finance plan is within reach," Kevin Phelps told the Seattle Monorail Project (SMP) board last night.
However, his scenario sticks with SMP's controversial prediction that car-tab taxes will grow an average 6.1 percent annually through 2030 — a figure disputed by one local expert and skeptical interest groups.
Board members praised the findings but have not decided yet whether to accept them.
"There's no question Mr. Phelps' report to us is promising. There's also no question we still have judgments to make," said board member Sue Secker.
The agency has not yet released any new cash-flow charts; Phelps did not provide a new sticker price for what has been a $2.1 billion project. Instead, he's been examining individual pieces for the last six weeks.
Smarter borrowing strategies would pay off the project in the year 2045 instead of 2053 in an earlier plan and would reduce total payments to $7 billion instead of $11 billion, Phelps said.
On June 29, public outcry forced the board to reject 50-year financing using some high-interest "junk bonds." Chairman Tom Weeks and Executive Director Joel Horn resigned.
Scrimping for savings
Financial adviser Kevin Phelps suggests the Seattle Monorail Project consider these ideas to reduce debt:
To cut borrowing costs Spread out construction-bond sales into six batches, instead of starting with a huge $1 billion sale next year
Don't borrow money to create a contingency fund unless the cash is actually needed
Lease the trains instead of buying them, to avoid high up-front costs
To cut spending
Sell off surplus landnext to the stations to generate $25 million, once SMP is done using those to store construction equipment
Relax seismic standardsso the tracks survive the worst probable earthquake in 500 years, instead of a 2,500-year standard, to save up to $63 million
Renegotiate Seattle Center compensation of up to $950,000 a year for the right to operate trains on Center grounds
Make the city payfor sidewalks and other station-area improvements, with a projected $11 million in city sales-tax proceeds from monorail supplies
Source: Kevin Phelps; monorail contract documents.
"Bringing it under 40 years puts us within the realm of reasonableness," board member Cleve Stockmeyer said.
Monorail-tax figures have been a hot political issue for two years, after the total "tax base" of cars in Seattle turned out to be one-third less than the SMP expected. Later, the agency insisted robust growth would close the gap.
The 6.1-percent figure comes from Portland-based ECONorthwest, which believes population and car prices will rise.
Local economist Dick Conway, who publishes tax forecasts for Sound Transit, predicts only a 4.4 percent growth rate.
State Treasurer Mike Murphy has wondered how many additional cars can squeeze into Seattle. Skeptics see a conundrum in relying on more drivers to fund a rail-transit alternative.
But to Phelps, the higher figure looks more reasonable. He said aging baby boomers will drive more, and the city's young adult population should grow, not stagnate, as Conway predicts.
SMP is under pressure to issue a new finance plan by next week, in hopes of averting a Sept. 15 deadline set by Mayor Greg Nickels to propose a ballot measure to either raise taxes or shorten the Ballard-to-West-Seattle line.
After meeting with Phelps yesterday, Deputy Mayor Tim Ceis said "the situation hasn't changed," and the mayor awaits a full plan next week.
"His arguments about the younger population growing make sense," Ceis said of Phelps. "His arguments about the buying power of older citizens in the future are debatable."
Ceis raised doubts about a proposal to save money by relaxing tough earthquake-resistance standards. He noted that a half-century ago, planners of the Alaskan Way Viaduct said it met high standards, but it's in poor shape now.
Phelps, a former Sound Transit board finance chairman from Tacoma, rooted for a monorail groundbreaking last night to scattered applause. Henry Aronson, founder of the critics' watchdog group OnTrack, said if SMP were serious, it would hire world-class economists, instead of what he called a local politician, to sort out the differing tax forecasts.
Mike Lindblom: 206-515-5631 or firstname.lastname@example.org
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