A $6 Billion Monorail?

The cost of building the Green Line is one unknown thing. The cost of borrowing the money is another.

Are the wheels coming off America's biggest monorail commuter-train experiment? As the agency slashes at a bid proposal—the project might be losing as many as six of 19 planned stations—monorail officials say progress is being made, reminding the public that this is, after all, an excursion without a road map. But no longer on time, the planned $1.6 billion Seattle Monorail Project is being laboriously shaped from an oversized construction bid. Should no agreement be reached, the project would likely be rebid, meaning more delay. The challenge is so formidable and SMP's financial situation is so cloudy that it wouldn't be surprising to have SMP concede that the monorail can't be built and financed through a single tax source—a Seattle license-plate tax. In that case, the agency would have to go back to voters with an alternative financing plan, requiring a third monorail vote in three years.

SMP originally overshot revenue projections by 30 percent in 2003, leading to a downsizing of plans. Last month, the agency beseeched the Legislature to allow SMP to extend its debt and, presumably, collect more taxes for a longer period. In the midst of bogged-down construction negotiations with the sole bidder, SMP asked to be allowed to spread its bond retirement terms beyond the legal limit of 40 years, to a half-century or more. "The whole purpose is to give us more options and ultimately bring costs down," says SMP board member Steve Williamson.

Still, figures that surfaced during the legislative proposal reveal the potential true cost of Seattle's biggest transportation project: The tag could be at least double the advertised price. SMP has estimated it will cost $1.29 billion (in 2002 dollars; recent inflation rates suggest that figure could be $1.37 billion today) to build the Green Line, the 13.7-mile first phase of the system, from Crown Hill to West Seattle. With other capital costs added in, SMP's budget is around $1.6 billion. It can sell bonds to cover $1.5 billion of that. The bonds would be repaid by a 1.4 percent excise license-plate tax on all vehicles in the city ($140 on a $10,000 car, for example), which is already being collected. What's seldom discussed, however, is the biggest cost to taxpayers: interest on borrowing and other fees to retire the debt. (Money made from monorail operations can't be used for debt after 2020.)

Officials aren't fond of talking about interest. No one, for example, wanted taxpayers to get fixated with the actual cost of $325 million Qwest Field—close to $1 billion when you factor in debt retirement and other expenses. But according to some estimates, a 30-year monorail bond issuance, at 6 percent interest to finance $1.5 billion, will, over its lifetime, cost taxpayers more than $4 billion. A similar 40-year bond would come in at more than $5 billion, and a 50-year bond would mean $6 billion paid by taxpayers over time. "That's a worst-case scenario and assumes that no bonds are retired early," Williamson says, noting that the monorail authority plans to keep the debt term as short as possible. Still, in a 50-year sale, which SMP is seeking, city vehicle owners could pay up to more than four times what it actually costs to build the line. Monorail planners hope that, once the first leg is built, voters will then approve another five similar lines to crisscross the city. Williamson and fellow board member Cindi Laws both say it's difficult to predict costs until the bonds are offered for sale. "And it doesn't mean that the license-tab tax would last for 50 years," adds Williamson, although SMP cannot say exactly how long the tax will endure. Though there appears to be little support for a 50-year bond in Olympia, the 40-year bond seems a likely reality—and is twice the length that monorail backers were predicting would be needed when voters narrowly approved the plan in 2002.

Even at that, more cutbacks are in the works. Separate sources familiar with the bid negotiations say the original Aug. 16, 2004, design/build/operate/maintain (DBOM) proposal of approximately $1.5 billion by sole bidder Cascadia Monorail has led to discussion of the elimination or delayed construction of perhaps half a dozen monorail stations and a scaled-back train schedule.

Voters were told there could be 19 stations along the line from Crown Hill to West Seattle, although Williamson, for one, says that was never a mandate. Thus, some stops are on the chopping block. Says one source, in contact with those inside the talks: "The plan under consideration will have 13 stations, six fewer than promised." Says a second source connected to the bid talks: "They are talking to Cascadia about offing four to six stations and having fewer trains," with the notion that the stations and trains can be added later. But "if they off stations," this source says, "it will affect ridership and, therefore, operations income. Seems they are in a world of hurt."

The monorail authority and Cascadia will not discuss closed-door negotiations on a bid that insiders say came in $200 million over expected costs (see "The Track Is Clear," Nov. 3, 2004) and has since been winnowed by at least $50 million. Under bid rules, Cascadia can also begin adding costs—the increase in the prices of steel and concrete, for example, which have risen from the time of the original bid submittal more than six months ago. Conversely, the monorail is free to put the project back out for new offers. That's good news and bad for Seattle's most ambitious transportation project ever. It could open up the track for Team Monorail, the consortium that dropped out of the bidding last year and now claims it is ready to make a competitive $1.35 billion on-budget offer. But even if SMP finally breaks ground by this fall, it will be doing so a year later than planned.

The delay in reaching a bid agreement is also delaying a two-month city review of SMP's financial stability, which must be completed before the project can obtain its building and rights-of-way permits. How much longer will the bid portion of the experiment take—weeks, maybe months? "At this point," responds SMP spokesperson Natasha Jones, "no one can say."

randerson@seattleweekly.com

 
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