Archive for August, 2011

Join the debate on eliminating the Free Ride Area

Friday, August 19th, 2011
Photo courtesy of King County Department of Transportation
The King County Council recently voted to pass a two-year, $20 vehicle license fee to preserve Metro bus service. Part of the deal was an agreement to phase out the downtown Seattle bus Ride Free Area, which costs the county around $2 million a year, according to online news site PubliCola. It has a debate between Real Change Executive Director Tim Harris and Downtown Seattle Association Vice President Jon Scholes (with environmentalist and SeattleScape blogger Roger Valdez) on eliminating the Free Ride Area. Do you think it should be eliminated or saved?

Why is the city fencing off the shoreline in Madison Park?

Tuesday, August 2nd, 2011
This block-long stretch on Lake Washington has been behind a fence for decades.
Those of you familiar with the Madison Park neighborhood may have noticed the odd, block-long swath of Lake Washington shoreline, one block north of the Madison Beach park, that consists simply of a grassy field cut off from the water by a high, aging and rusting cyclone fence and overgrown blackberry vines.  Have you ever wondered: “What’s up with that?”

Well, it’s something I’ve been contacting the Seattle Parks and Recreation Department over the years about, with the hope that the situation could be rectified and true public access to that valuable piece of shoreline could be restored — at least for passive uses.

In my most recent inquiry, I was informed that the aforementioned fencing was put in place as early as the 1940′s in response to neighborhood safety concerns (in a previous response years ago I was told a child may have drowned at that location).  While I am saddened by any possible human tragedy that may have happened at that location in the distant past, the City’s action of fencing off the shoreline for generations to come is surely an example of excessive response.

I was also told recently that in 2003 the neighborhood was polled about whether they would prefer to see the fence removed, and apparently there was some objection.  Well, excuse me, but Lake Washington shoreline is a precious, very finite commodity and public ownership and use of any part of that commodity is not the sole province of the nearby neighbors.  All of us 600,000+ Seattleites who do not have the privilege of living on or near the water should have the right to enjoy what little public shoreline the City owns.

What I imagine has happened is that certain nearby neighbors are fearful that removing the fence would invite more intensive use of what is now practically a “ghost park,” leading to potentially greater noise, etc.  But frankly that is not a valid enough excuse for the City to leave this park in chains.

And if anyone tries to play the safety card again, all one needs to do is to point to the mile upon mile of unimpeded and unfenced (!) Lake Washington public shoreline in the southern half of the City (much of it in a very similar condition with a riprap bulkhead).  No fences or other impediments exist along any of that stretch of shoreline, and none should exist in Madison Park.

I’m not going to let this issue lie without continuing to push for the City to do the right thing.  If you agree, please contact Acting Parks and Recreation Superintendent Christopher Williams or Mayor Mike McGinn.

Debt-ceiling fallout could doom deep bore tunnel

Monday, August 1st, 2011

On Saturday I speculated on my land use blog about what might happen to the deep bore tunnel if Congress failed to reach agreement on raising the debt ceiling. Well, now they have a deal. But even if they pass the deal (and they may not) trouble might still be ahead for the project because of problems at the federal level. Here is what I was thinking this weekend:

It seems very likely that if the federal government defaults, or even if it gets close and gets its credit score dinged, the tunnel project up for a vote could be in serious financial trouble. The fact is that the project is very dependent on federal money and borrowed money. Federal money might get cut off as the national government struggles to pay its bills without extra borrowed cash, and state and local government would face increased costs as interest rates go up when their credit ratings get downgraded because of the federal cash crunch. Anyway you slice it, the current troubles mean that even if the project comes in on budget, Seattle may get stuck with what the feds can’t pay, and the State, Port, and City share might ballon as their borrowing costs go up, pushing more risk and costs on city taxpayers. Let’s unpack this.

Tunnel supporters feel the debt limit crisis.

Photo credit:mensatic from morguefile.com

From the New York Times Q and A on what the pending debt crisis could mean for local governments:

Q. What could it mean for states and cities?

A. States, still recovering from the downturn, could be hurt in two ways. First, if the federal payments they rely on for everything from Medicaid to highway construction are interrupted, states that are still recovering from the recession could face serious cash-flow problems.

A default by the federal government on its obligations would profoundly affect a lot of people and organizations. But it could affect the tunnel by affecting highway funds allocated for the project. Now, at first, you might think that federal funds are coming, off in the future. But it’s likely that the Congress is going to play this game again later on. The pressure for a two step vote, one now and one next year, makes the possibility that funds both now and and in the future for tunnel construction might get choked off. That’s a de facto overrun even if the tunnel’s costs are as predicted since the revenues won’t be.

I haven’t seen anything that maps out priorities for who gets paid first as federal dollars get scarce with a default. But it’s hard to see the federal government continuing the flow of cash to a deep bore tunnel in Seattle instead of paying for grandma’s social security. Those entitlements are a significant outlay, but so is all the money that will be borrowed by the state, port and city to pay for the tunnel and seawall replacement. Who gets paid first?

State and local governments are already feeling the pressure of decreases in revenues. But could there be a ripple effect on the tunnel created by a default and subsequent downgrade of the federal government’s credit rating? Moody’s is already reviewing local governments and considering downgrading them if the crisis unfolds with a default.

A Moody’s spokesman said such factors as dependency on federal revenues, reliance on capital markets, exposure to overall economic cycles and cash reserves played into which entities are being reviewed. Nationally, the review list includes 162 local governments, 14 housing finance programs and one university.

The story from Minnesota’s Star Tribune goes on to say:

“If the U.S. isn’t AAA credit, that threatens everything,” Schowalter said. “If the U.S., which protects and guides the states’ credit, is decreased that is going to have a ripple effect on the economy that is really profound.”

And more from the New York Times Q and A:

Some states are already feeling the effects. Maryland postponed a bond sale after it was warned that its credit rating would probably be lowered in the event of a federal downgrade. California, which typically issues short-term bonds for cash-flow reasons at this time of year, is working to arrange bank loans instead, citing the market uncertainty. Some state pension funds are worried that a default could erode the value of their investments, which are still recovering from losses during the recession.

How could this affect the tunnel? Well there is a lot of federal and borrowed money in the funding stream for the tunnel. The Washington State Department of Transportation’s website shows that

The viaduct replacement projects have $2.4 billion in committed funding from the state gas tax and federal sources. The Port of Seattle has committed $300 million to the replacement program.

The City of Seattle needs to borrow as much at $235 million to fund the seawall replacement, and the Port of Seattle seems to be leaning towards borrowing for its $300 commitment. Taken together, and not including possible state borrowing, that’s about $535 million in borrowing. Borrowing for the project could reach a billion dollars.

Currently, borrowing for local governments with good credit can be pretty low. But even small increases in interest rates for the city or the port could increase the costs by millions of dollars. A couple of percentage points might not seem like much, but when considered along with choked federal cash, increases in state costs of borrowing and perhaps even higher increases in interest rates the costs could start to multiply.

And don’t for get that the state borrows billions for lots of things, not just highways. If the state’s other borrowing costs go up from the typical 4 to 5 percent up to 6 or 7 percent it could cost the state millions in revenue it doesn’t have.

So put it together: less federal money,  and higher interest rates at the state, local, and port level means less cash and higher costs for borrowing money. That spells real trouble for the tunnel project. The federal government can’t pay it’s bills, the state doesn’t have much money, and the costs of borrowing start to climb as credit ratings get downgraded. All of this ought to heighten the worries of Seattle voters considering the tunnel. With problems with toll revenues, sketchy info on the Port’s commitment, trouble with federal money, and higher borrowing costs, all signs point to higher costs for the tax payers of the city of Seattle.

The tunnel project isn’t just unsustainable and bad for the environment, it’s a public finance Frankenstein, assembled from shaky and flaky funding sources. When the federal government defaults, credit ratings drop, toll revenues fail, there’s only one place to go for the extra cash: Seattle tax payers. This is one exit we shouldn’t take.

Note: I love debt and taxes. Nothing in this post should be construed as debt hawkishness. I am a sweet debt dove.