Monday, June 7, 2010

Fwd: [Urban Politics] WHO PAYS FOR TUNNEL COST OVERRUNS? Urban Politics #294 - 6-7-2010

Hmmm, I agree with Nick Licata.
Mark that one down on your calendar.

Have a great day,
Mike Baker

Sent from my iPhone

Urban Politics #294, 6-7-2010

By City Councilmember Nick Licata


The question that has dominated the discussion of the deep bore tunnel replacement for the Alaskan Way Viaduct has been: who will pay for any cost overruns? The answer is the State with regards to the contract for the tunnel. The reason is that the contractor that wins the design-build contract for the tunnel will be signing a contract with the State of Washington, not the City of Seattle. The contract will oblige WSDOT to cover risks associated with the tunnel.  The City of Seattle will not be contractually obligated to cover cost overruns for the tunnel.

Think about it for a moment, the contractor could care less who pays the bill, as long as they get paid. They are not going to sign a contract in which this is left in doubt. Since the City is not a party to the contract, there would be no legal standing for either WSDOT or the contractor to look to the city to cover any of the bill spelled out in the contract.

That said, what does the $2.8 billion cap that the State legislature set on the entire tunnel project mean? The cap is real in the sense that the Governor cannot spend more state money than the legislature has approved. So let's assume that the $1.96 billion tunnel goes over budget; the State is on the hook, not the contractor. The state could pay them and still be under the $2.8 billion cap. However, what happens to the other parts of the overall tunnel project?

The most important project element for Seattle is taking down the current Viaduct to free up the waterfront to pedestrians. The State funding toward viaduct removal and rebuilding Alaskan Way is $290 million, but the State could use this money to cover any additional tunnel costs. The City could argue that the State was still obligated to do the project, but if the money isn't there, the State Legislature would have to approve funding, which would put Seattle in a weak position. This problem could be solved by the State and the City agreeing in advance to put aside the money for the waterfront, thus creating a separate locked box for it.

Another major part of the tunnel project, to be tackled after the tunnel is completed, is to reconnect Thomas, Harrison and Republican streets across Aurora Avenue, to "reconnect" the street grid between Queen Anne and South Lake Union. It is a critical engineering task, necessary to avoid congestion problems on Mercer and facilitate access to the tunnel. The same approach of separate funding should be undertaken with this project as with the waterfront; in a worst case scenario, this is the portion of the tunnel project that could be sacrificed - it would be the most difficult one to convince the State Legislature to fund if this money is used for the tunnel.

Seattle and the State are negotiating agreements to allow the tunnel and related projects to proceed. Hopefully they will protect funds for the waterfront and reconnecting the grid. We will need to see what is included before knowing how well or whether this is addressed.


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Peter said...

I saw some people getting signatures at my college today to reinstate the two thirds requirement to raise taxes in the legislature and it go me thinking: how would this law affect the county and the arena people brock was reporting about`s abilty to get the user fees for an new arena. I didn`t sign it because i didn`t know for sure. Any thoughts?

Mr Baker said...

The 2/3 tax vote applies to the legislature. The PFD vote (if that happens) applies to the county. The votes would happen at the same time, and the 2/3 vote would not take effect until after both things are voted on.

The budget shortfall for the state budget for 2011-2012 is estimated to be short 4 billion dollars.

Peter said...

about nicastro's effort, do you think someone would make an effort like that without interested ownership groups? it just dosen't make any sense to me for someone to say "let's make an effort to build and arena" without people lined up to actually invest in the arena. one good point you made is that nicastro works in PR. there is no way we could get user fees to cover all of an arena, and even if we could there has to be someone to actually buy the teams. everyone seems so down on brock's announcment, but it makes alot of sense. we should wait and see before casting any judgment. it went like 2 years with the media reporting nothing about any efforts at all and suddenly this pops up. if the media would report every little rumor, even one without any teeth to it, it seems like everything would be reported over the last two years. after all, there were countless rumors the media never reported about an potential arena. it just seems to me that if something is actually reported in the media than there is almost always something to it. the last time the media reported on anything it was the ballmer plan and that turned out to be true.

Mr Baker said...

The Sprint Center in Kansas City proves your point. It is without an anchor tenant that fills the entire building on a regular basis.
They will likely see the NHL very soon, but, you are right.

If you could get an NBA franchise and an NHL franchise at the same time then building an arena would be the easy part. That was the B2 proposal, they just did not have teams, or land, but having teams would attract the arena money.

The more I think about it the more it makes sense for the east side.

Peter said...

"The more I think about it the more it makes sense for the east side."

so are we talking renton or tukwila? how much stock do you put in the idea that microsoft could refuse an arena in bellevue/redmond?

Peter said...

When BR is talking about "potential ownership groups swirling around.", do you think he means seattle ownership groups? do you think this a reference to brock's announcement? it just seems like there is so much information going around and i don't know what to believe. we've been let down so many times and i just want some progress, for one of these reports to be true. i do think it has passed the point of being a "rumor" when it was reported on ESPN radio.

Peter said...

If the two thirds initiative would even effect user fees at an arena, then i`m glad i didn`t sign the petition. That goes way too far imo. It should only apply to state general fund money. About BR`s comments on SC, i think we may need a group like SOS in the near future, especially if all these arena reports are true and you are right that an proposal for user fees ends up in the state. We cannot fail if we go back to the state again imo. It would be a death blow to efforts for an new team. Maybe update SOS and call it bring em` back or something.

Peter said...

i totally agree with BR's assessment that getting an team back will be a "long-haul" approach. i think we were short-sighted to get our hopes up for a quick return. you can count on one hand the times when a city lost a team via relocation and got a team back 1 or 2 years later. charlotte's the only one that comes to mind. as with any relocation, getting a team back is a process. i've said all along that i thought it would be closer to 2013 than before. it's just something we're gonna have to work out. charlotte had the luck of having a arena plan for an new arena w/ an ownership group set up before the hornets moved. also the NBA needed 30 teams, so expansion was a possibility. now with the economy the way it is, expansion isn't possible.

Peter said...

If i recall right, user fees were mentioned alot by people interviews on tv and letters to the papers when the team was here. I remember reading mutltiple letters in the paper where people advocated that the players and fans should pay for it. I still Remember an king 5 piece from when the team was here where more than one person said that too. I have ran across many posts online where CVD argues for the "people who use the arena the most should pay for it" alot of the narritive back then seems like it would fit right in with the idea of user fees. Why don`t you think this solution was presented when the team was actually here? Given all what people say, you are right i think when you say user fees are the "path of least resistance".

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