Governor hopefuls: Seattle not on hook for tunnel cost overruns
While the $2 billion Highway 99 tunnel carries financial risks, the odds of those translating into a direct tax on city residents seem low.
Seattle Times transportation reporter
Seattle tunnel referendum
Vote-by-mail by Aug. 16
REFERENDUM 1 asks voters about part of a City Council ordinance, passed in February, that enacted agreements with the state Department of Transportation about schedules, design, utility work and environmental effects. Voters are asked if the section of the ordinance should be approved or rejected.
Approved: The council is free to give DOT notice to proceed with the construction phase of the agreements, in time for groundbreaking this fall.
Rejected: The council would need to pass a new ordinance to proceed with the agreements.
THE STATE HIGHWAY 99 PROJECT, including a $2 billion tunnel, requires $3.1 billion from these sources:
State gas tax: $1.71 billion
Other state funds: $210 million
Federal grants: $468 million
Local funds: $7 million
Tolls: $400 million
Port of Seattle: $300 million
Source: Washington State Department of Transportation, May 2011 update
As Seattle residents mail in their votes on the Highway 99 tunnel, the leading candidates for governor say they wouldn't stick the city with cost overruns.
For two years, Mayor Mike McGinn and other tunnel opponents have complained about a state law saying excess costs would be borne by "property owners in the Seattle area who benefit." McGinn in February vetoed city-state tunnel agreements, saying he wanted "to protect Seattle from the unacceptable risks" of cost overruns.
The City Council voted to override that veto and the agreements became the subject of Referendum 1, on the Aug. 16 Seattle ballot, which asks voters to approve or reject part of an ordinance, concerning how the pro-tunnel City Council makes agreements with the state for right-of-way, utilities, liability and design.
The election is widely seen as the public's lone advisory vote on a deep-bored tunnel, and cost overruns have been central to the debate since before McGinn took office.
While the $2 billion tunnel carries financial risks, the odds of those translating into a direct tax on city residents seem low.
Not just one but a series of debacles must happen to cause an unplanned hit on Seattle taxpayers.
A cost crisis presumes machine failure, claims that reach beyond the contingency fund of $105 million, perhaps a breakdown of the surety system and depletion of other money.
And if that does happen, state lawmakers would have to agree to shift the costs to Seattle, unprecedented for a state highway project.
Gov. Chris Gregoire, City Attorney Pete Holmes and state Attorney General Rob McKenna each has said the Legislature's overruns clause is so vague as to be unenforceable.
But anti-tunnel attorney Gary Manca says future lawmakers would interpret an "approved" vote on Referendum 1 as Seattle residents' consent to absorb cost overruns.
The governor can veto any attempt to make Seattle liable for those costs, and Gregoire has said she would. But she will retire after next year — leaving a successor to clean up any mess.
The front-runners in the race to succeed her, Congressman Jay Inslee, D-Poulsbo, and McKenna, R-Bellevue, said Friday they agree the project is a statewide commitment.
McKenna gave this statement:
"I don't believe the people of Seattle alone should be saddled with cost overruns on a project of statewide significance, any more than the people of Spokane should be saddled with extra costs on the [Highway] 395 north-south corridor, or Eastsiders with 520. These costs should be borne by the cities involved and statewide, on statewide projects."
Inslee weighed in:
"I agree with the bipartisan consensus that any tunnel overruns will be borne by the state. It is a state road funded by state gas-tax money and the costs are the responsibility of the state."
Esther Handy, manager of the anti-tunnel campaign Protect Seattle Now, dismisses any notion that Seattle can relax about the Legislature's overruns clause.
"If they had the votes and the will to have a different policy intent, they would have already OK'd that, because it would have shut Seattle up," she said.
The campaign sued last week to obtain the latest financial plan the state Department of Transportation (DOT) submitted to the federal government. The Seattle Times filed a formal public-records request for that information July 29.
Fall digging planned
The tunnel is part of the state's $3.1 billion replacement for the aging Alaskan Way Viaduct. The DOT already signed construction deals to begin digging this fall, and the tunnel is supposed to open by late 2015.
In megaprojects, overruns tend to happen in the latter stages. Ron Paananen, Highway 99 program administrator, says he's already survived a major danger, the risk of unaffordable bids, in making the construction deal with Spanish firm Dragados.
But the bottom line can still change after a contract award — for instance, if builders demand payment for undisclosed ground conditions. The DOT's defensive precautions include soil samples from more than 100 sites. Or a machine can become stuck, as happened at the nearby Brightwater sewer tunnel, where $206 million in costs are in dispute.
At a world-record 57.4 feet in diameter, the tunnel pushes the limits of technology. The route begins in weak fill soil and passes beneath the old Alaskan Way Viaduct and Pioneer Square before reaching abrasive, watery glacial soil. It must be removed without undermining office towers above.
The contract contains incentives to pay builders if they avoid delays. The proposed drilling machine design will enable cutting parts to be changed from inside the machine, safer and quicker than external work, under extreme pressure.
Tunnelers are required to provide a $500 million surety bond to pay another team to finish the tunnel if Dragados fails.
The firm, known for its successful M30 highway tunnel in Madrid, will be watched here by tunnelers worldwide.
Payments will be made gradually during the four-year project. So if the job dead-ends, the state won't surrender all its money.
Extra safety margin
The tunnel's budget cushion of $105 million is what's left after DOT increased the contract value to $1.4 billion last year, to keep bidders aboard.
But Paananen now says, "The project still has about $300 million in risk reserves, in various places." To get there, he includes $100 million worth of performance incentives, plus contingency for street work, and potential savings in Sodo, where spans are being built ahead of schedule.
The state agreed to the so-called "locked box" demanded by Seattle City Councilmember Nick Licata: If tunneling money runs dry, DOT won't shortchange funding to build a new, landscaped waterfront street, or to reconnect streets near Seattle Center.
On the revenue side, state Treasurer Jim McIntire said there is ample money from gasoline taxes and federal grants to pay off the tunnel, despite recent declines in fuel consumption.
Budget shortages do threaten lower-profile projects around the state, leaders have said. Gregoire is exploring a 2012 ballot measure for more money. DOT Secretary Paula Hammond has said any severe tunnel overruns would likely be covered by those funds. Failing all that, might lawmakers punish Seattle for a state management failure?
In a video called "This Isn't Funny," the anti-tunnel campaign reprises a clip showing four lawmakers laughing and answering "yes" when asked if Seattle remains on the hook for cost overruns. Others have said the clause was merely to prevent costly requests by Seattle groups that would add to the overall expense of the project.
Mike Lindblom: 206-515-5631 or firstname.lastname@example.org
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