“Creative financing,” he called it early on, without explaining. Maybe that should have been our clue that Joel Horn was taking another ride with taxpayer money. Unlike his attempt to plant a big publicly financed park for a billionaire on the shores of South Lake Union, or his brokering of City Hall’s giveaway of a public hospital on Beacon Hill to a big corporation, this time Horn had citywide voter approval, eminent domain, a blank check, and control. Engineer Joel, policy wonk and visionary schmoozer, confident at the levers, was clearing the track. But he would steer the Seattle Monorail Project along an increasingly rickety course, one that turned out to be so creatively—if not furtively—financed that Horn had no option but to crash, burn, and walk away. The railroad ran Joel’s way or no way—which just might be the monorail’s fate. In resigning, the project’s executive director has left it dangling off the end of a bridge to nowhere. No longer under the controlling hand of the man in charge of the public agency and its secrets, Seattle’s monorail fantasy ride has suddenly been derailed by the truth.
When Horn and his staff repeated their monorail mantra—”the project can be built within the voter-approved financial limits”—they never added that, of course, there were no limits. They did not say, plain and simple: Listen, read the fine print on the contract you inked at the polls. SMP can, without a time limit, collect a 1.4 percent excise tax on auto licenses to pay for a maximum $1.5 billion in borrowed money, but the borrowing limit “shall not apply to debt incurred to finance or refinance obligations previously issued or incurred within the Bonding Limit.” That’s money at any price, for any duration. We can borrow $1.5 billion, pay it down some, and borrow more, always staying within the ceiling but, in fact, paying additional billions to borrow. Interest and fees to build the $2.1 billion Green Line from Crown Hill to Morgan Junction, with stops downtown, would come to at least five times the construction cost—$9 billion to $12 billion in future taxpayer dollars over 50 to 70 years, ending around the time Chelsea Clinton’s granddaughter finishes her second term in the White House. It was a lifetime balloon payment for Seattleites.
Horn never pointed that out, even in the end, not even to his bosses on the executive board. But that’s what voters—slim majority or not—committed to, as Horn saw it. “We’re here today to deliver on a promise,” he told the board June 20 while presenting the proposed finance plan and construction contract with sole bidder Cascadia Monorail. He only briefly mentioned it would take “a third longer” to pay off the bonds (try two-thirds longer). Revenue had earlier been over-projected by at least 30 percent, but Horn had a mandate to come up with a financial plan, and by God, he came up with one. It was his job. He was in control. And then, on the Fourth of July, he was not. He called up each member of the executive board and said goodbye; those he couldn’t reach, he left voice mails. “I take full responsibility for both the good and the bad,” he also told his staff in an e-mail. “Right now my continued presence as Executive Director is proving to be a distraction from the real issue at hand. . . . See you on Opening Day.”
 The $11 billion magnitude of the finance plan was buried in a document called “Debt Structure Supporting Detail.” |
A few days earlier, the board had decided Horn’s financing plan was DOA. Paul Toliver, the one member with an extensive transportation background, as ex-director of the Department of Transportation for King County and of transit for Metro, said he was in “shock and awe” over the numbers. Looking like victims of a train wreck, several board members expressed a “sense of betrayal” and, in the words of Cindi Laws, “disgust as well.”
The impetus for this sense of betrayal and disgust was not immediately evident when the proposal was presented to the board last month. Horn’s detractors at OnTrack, an opposition and watchdog group, first noticed the gargantuan interest number buried in the finance proposal’s paperwork and blew the whistle, tipping off the media. It’s scary how close the deal came to approval. Had no outsider summed it up after plowing through some of the 40,000 pages of contract documents, the project would have continued moving forward. Even scarier is the fact that a year earlier, Horn and his managers sought approval to sell $1 billion worth of bonds, risking the loss of at least $100 million in financing costs if the project failed and/or committing taxpayers to today’s outrageous spending plan. At the last minute, the board wised up then, too. It decided it was better— get this—to see how much the project might actually cost first.
I hadn’t really realized how important control was to Horn until he said a strange thing the last time we talked. (He didn’t respond to my calls about this story.) That was late on the last night of June, minutes after the board had unanimously rejected his financing plan. Horn hurried along a small hallway off the public hearing room at SMP’s downtown headquarters, tailing his media aide and his legal adviser, leaving other reporters in his wake. “What happens now?” I called out to his back. “What do you do next?” He reluctantly swung around. “You’ll have to ask the board,” he said, still moving, padding backward, flashing the half-smile that shows displeasure. “They’ve decided to take over this project now.” As if they didn’t have that authority all along. He spun and disappeared into the darkness. The executive board, a panel of nine appointed and elected officers for whom oversight has always been a learning process, had finally said no, although it was a plan no one could have approved without being run out of town on a rail. Four days later, Horn and board Chair Tom Weeks announced their resignations, taking responsibility but walking away.
The Six Goals
From 2002, a newspaper advertisement touting the monorail plan and seeking input before the proposal was put to voters that year. |
“Joel is very likable, very bright,” says SMP board member Sue Secker, provost of Seattle University. “I don’t know whether to lay this at Joel’s feet or whose feet, but what happened in the organization early on from when I started working with them was a kind of culture of control. It was almost a fear of the public and the media and, because of that, a ‘carefulness’ even with the board.” The board is struggling to upright the project again, still reeling over a cost that, with interest, could have stuck taxpayers with a tab of $1 billion a mile for the 14-mile Green Line. “I mean, the first time I knew about it [the true cost], I read about it in the paper,” says Secker. “Don’t you think that’s interesting? And I’m the finance chair.” Why the failure to communicate? “Well, the answer I got [from Horn and staff chiefs] was that ‘our commitment to transparency said that we would reveal the contents of the contract and the financing at the exact same time to the City Council, to the public, and to the board.'” Hadn’t Horn or his staff ever indicated there was this financial bomb in the DBOM—the contract to design, build, operate, and maintain the project? “Well, if they did—you know what I think happened?” Secker says. “They may have thought they did. But what they did was immerse us in the trees, and no one told us to push back and look at the forest. That’s how I describe it. I don’t think it was intentional. I think it was part of this rush to get it done, the pressure of negotiating for all these months. But frankly, I think it was their job to do so, especially when I kept asking.”
Still, the finance committee—the single most important unit of executive board oversight—limped ineptly along. The whole board seemed unable to grasp what voters had authorized. There never was a sunset clause on the tax, and most importantly, money could be borrowed from a bottomless pit. But the finance committee, to a fault, relied on Horn and his staff to inform them of that. “They needed to tell us that, they needed to tell us that up front early,” Secker says with some remorse. “‘This is the only way we’re going to make it happen.’ And nobody said that to me, despite my multiple questions about how we’re going to do this. In fact, I remember the day Joel called me and told me that the thing was accomplished, they’d reached an agreement. I said, ‘Can we afford this?’ He said, ‘Well, the answer to that is yes.’ The thing he didn’t say was, ‘Sue, what it means is . . . ‘ So, you can imagine how I felt when I read the morning paper.”
But the financing plan has been only one of the many conflicts with reality since the Seattle Popular Monorail Authority was created in 2002 as a stand-alone government agency with only minimal, after-the-fact examination by outside auditors and City Hall. It wasn’t the mayor’s office, for example, but the Seattle Downtown Association that this week released conceptual images of a bulky monorail creating a walled-off effect. SDA President Kate Joncas says the design “raises serious concerns that the current plan will jeopardize the downtown pedestrian environment and well-established view corridors to the waterfront and Elliott Bay.” Let’s review, in the agency’s own words, SMP’s six adopted goals, the ones that Horn persistently claimed had been achieved, and compare them to what actually happened:
• On time: Initial segment opening 2007, full line 2009. The target date now is “late” December 2010—a way of not saying “sometime” in 2011. However, “never” has become a distinct possibility.
• Under budget: Staying within financing provided by the voter-approved plan. Costs are already 20 percent over the budgeted amount without a shovel of dirt turned. The goal itself was also dishonestly phrased. With limitless tax revenue and open-ended borrowing power, there were no real financing boundaries to stay within.
• Break-even operations by 2020: Operational tax subsidies would be replaced 100 percent by rider fares. No other major American transportation agency has succeeded without subsidies. Given its current financial condition, to achieve this goal, SMP might have to raise fares to somewhere equal to the cost of flying United. (SMP has yet to reveal any kind of future fare structure.)
• Excellent design: Enticing passengers to a rapid transit service assimilated into its settings. That was before cost-cutting led to the need for bigger elevated switching platforms, more single-rail sections, and larger support columns to serve shorter trains arriving at longer intervals at fewer stations—escalators now excluded.
• Be true to its grassroots heritage: Green in both citizen support and environmental benefits. SMP consulted with tens of thousands of supporters and opponents to formulate plans, yes, but it never told them what it would truly cost. Meanwhile, another green tradition—money—was flowing out to big businesses and law firms with a vested interest to see that high-yield, high-risk funding bonds were sold at any price. The agency has spent $182 million to date on planning, salaries, consultants, attorneys, overhead, and— its one asset—land. SMP burns through $1 million a week without a track. Most of that money was borrowed from Bank of America and must be paid back by the car-tab tax. As for getting polluting, fossil-fuel-guzzling vehicles off the street, the monorail’s effective relief would be minimal and, in fact, any measurable decrease in the number and value of vehicles would imperil the agency’s already struggling license-tax revenues. The dirty little secret was: Support the monorail—buy a Hummer.
• Transparency: Accountability to the public. See the 2005 financing plan.
Connections
A few days after he was named executive director of the Seattle Monorail Authority in 2002, Joel Horn posed on Second Avenue.
(Chuck Taylor) |
Of course, why would Horn think he had to be fully accountable to anyone? This, remember, is the executive who kept the 30 percent revenue shortfall secret even from the board for several months and suffered no recriminations—in fact, was later given a salary raise to $184,000 a year. He was unaccustomed to working in an environment that was climate- controlled by public records requests and the state Open Meetings Act, and, while professing to believe in sunshine as the best disinfectant, Horn privately carped about the public’s right to know. “Joel did confide in me about that,” says Secker, the finance chair, “and I must say I do have a little sympathy for this. He said, ‘You know, this transparency thing, maybe we pushed it too far in the beginning. We couldn’t even sit as a staff, sketching out some ideas, without having a public disclosure thing come in, and it was simply an idea.’ He said, ‘You know, the mayor’s staff doesn’t have to do this. . . . ‘”
Horn was a leader of the monorail’s forerunner, the quasi-governmental Elevated Transportation Company that had to be dragged to court to produce public records—the working papers it used to formulate the ballot version of the plan—before the 2002 election. Also, a judge forced ETC to change the monorail ballot title so voters would know that a 1.4 percent motor vehicle excise tax (MVET) would be levied annually and that its revenues would fund a $1.5 billion bond sale. (Alas, the judge never asked ETC to clearly state that its financing plan could be stretched into the next millennium, but, of course, ETC members such as Weeks then were promising 25 years, max.)
During the ballot-measure campaign, Horn and other enthusiasts peddled the romantic notion of the ride in the sky. Though short on details, they knew it was the best thing for the Emerald City. Love it or leave. “It has taken on a religious, cultlike fervor,” was the way King County Executive Ron Sims, who serves on the board of light-rail-building Sound Transit, saw it at the time. “You’re not supposed to say anything. You’re not supposed to question it.” Some, such as former Port of Seattle Commissioner and OnTrack member Henry Aronson, did question it and were attacked in return. (Aronson ought to be gloating today, but says, “I do not feel vindicated by Joel Horn’s departure because nothing has changed. Those in power remain in power, conducting business as usual, embarrassing themselves and the city of Seattle before what has grown to a worldwide audience.”)
Before ETC, Horn peddled public-private partnerships behind closed doors, hooking up with billionaires and millionaires to grow their successes. In 1991, he headed a campaign to create the Commons, a 42-acre park near South Lake Union, backed by Paul Allen. He teamed with Preston Gates Ellis managing partner Gerry Johnson in hopes of getting the public to build a park that Allen could use as a centerpiece for development. The Microsoft co-founder hoped to build a neighborhood of condominiums and bioscience facilities. Voters rejected the plan not once but twice, in 1995 and 1996. Which is not to say that Horn or Allen failed. Allen has since gotten the gleeful backing of Drum Major Greg Nickels and his Seattle City Council Marching Band to force investment of potentially up to half a billion taxpayer dollars in land, infrastructure, and even a $47.5 million streetcar for the billionaire’s South Lake Union empire—this time without a public vote or, for that matter, the benefits of a big park.
Horn, too, was campaign treasurer and later an operative for former Mayor Paul Schell while he was also on the tab at Wright Runstad & Co., the city’s most politically connected builder. In 1998, working behind the scenes, Horn helped put together the lease of Pacific Medical Center’s publicly owned historic hospital building on Beacon Hill, working both sides of his gig—getting Schell’s approval to lease the building to Wright Runstad, who would then develop it into a headquarters for online retailer Amazon.com. Among the cast of usual private/public suspects was Preston Gates’ Gerry Johnson, who just happened to be PacMed’s attorney and a big Schell backer, and Deputy Mayor Maud Daudon, a former PacMed board member who helped smooth the way at City Hall.
Familiar Names
From there, Horn leaped to the ETC and was picked by the board as the Seattle Popular Monorail Authority’s executive director in November 2002. He was named four days before the final vote was tallied (the project was approved by a margin of 877 out of 189,000 votes cast), and familiar names almost immediately resurfaced. Within days, Horn, with interim board approval, brought aboard Preston Gates along with Foster Pepper Shefelman as the monorail’s outside legal counsel. (A Perkins Coie attorney objected to the lack of an open bid, but Horn said state law didn’t require it.) He also picked Seattle Northwest Securities Association—Maud Daudon, managing director of investment banking—as the agency’s financial adviser. Daudon’s firm went on to become a major player behind the failed plan presented by Horn and SMP Finance Director Jonathan Buchter, a Cleveland attorney with little experience in such a project. The day after the $11 billion financial turd hit the fan last month, Daudon gutted it out with Buchter, Horn, and other advisers and potential investors at an SMP press conference to salvage some credibility. A nervy Daudon insisted there was nothing unusual about the financial plan except that the “monorail tax ends when the bonds are paid off. In contrast, taxes used to pay the total cost of other transportation projects, including roads, typically continue forever.” Fifty, 75, 100 years, heck, that’s not forever. Buchter, referring to media reports on the plan, complained, “Misleading financial figures are confusing the public about the cost of constructing the monorail.” Hear, hear! But their comments were topped by Horn’s temerity: “We need an open and candid discussion about the monorail, and we need to be using the right numbers when comparing it with other transportation projects in the region,” Horn said. Besides a lack of openness even with his own board, Horn’s monorail at that moment was running newspaper ads to publicly sell the
financial plan—using the wrong numbers.
With cancellation of the borrow- pay-down-borrow-more financing proposal, SMP has now stepped off into thin air. “I had always thought,” says Dick Falkenbury, the cab-driving Father of the Monorail, “that SMP would bring in someone like Jim Ellis, a wheeler-dealer who could do million-dollar deals with a handshake. That never happened—that kind of experience wasn’t there.” He was hoping that an ad hoc committee of experts that board members recently talked about appointing would include Ellis or other legendary public-works geniuses of Seattle—maybe even him, Falkenbury said, modestly offering to get back in the game.But the board ultimately decided to appoint itself as the ad hoc committee, dooming any chance of a dramatic infusion of vision.
Though an attempt last year to stop the project was overwhelmingly turned down at the polls, public support is slipping— 52 percent of respondents to a Seattle Times poll published Sunday, July 10, favored canceling the project. “The monorail promised to shut down the plan if it couldn’t do it as promised,” says critic Aronson. “And, at this point, they can’t.” Says monorail supporter Peter Sherwin, who has always advocated more fiscal responsibility by SMP: “It’s the revenue, stupid, it’s not the monorail.” Whatever the final solution, there should be a fully vetted decision rather than just a tempestuous cancellation of Seattle’s elevated dream, Sherwin says.
The Seattle Monorail Project board has essentially two alternatives to aborting the project: asking voters to approve another, higher tax-revenue plan, or carving the project down in length, scale, and design. The latter could require another vote, too.
This week, board members were still reviewing options and sifting through hundreds of comments they heard over three recent nights of community meetings. At the first meeting, in Ballard, an announcement by acting board Chair Kristina Hill that Horn and Weeks had resigned drew the first applause. But it was Jo Moore, a Crown Hill resident, who seemed to have summed it up for everyone. Moore, who said she has two friends on the monorail board, noted she had once supported the project. But over time, too much changed—larger and unsightly elements were proposed, designs were weakened, escalators canceled. And, of course, there was that “poor fiscal management,” she said. But “worst of all,” there was “the secrecy and the arrogance of the monorail board and staff in response to concerns of the neighborhoods or in response to any group that did not fully agree with them. The time has come: Give us what we voted on and at the advertised price. Or stop the bleeding, pay what we owe, and stop this current folly.” Applause, cheers, even a few elderly fists in the air. Someone else, it seemed, was taking control.
