Slow down, Seattle council. Who will pay for tunnel's cost overruns?
Seattle Mayor Mike McGinn argues that the City Council should not commit the city to the state's deep-bore tunnel until the city is assured it won't have to pay for project overruns.
Special to The Times
The Seattle City Council is about to make a decision committing us to the deep-bore tunnel. This will have a significant impact on our future. Yet a critical question remains unanswered: who will pay for cost overruns?
Here are five reasons why we must answer this question before we pass the point of no return:
Ninety percent of megaprojects have cost overruns.
A comprehensive Oxford study concluded that 90 percent of megaprojects experienced cost overruns. The downtown bus tunnel, Sound Transit's Beacon Hill tunnel, and the Brightwater sewage tunnel all exceeded their budgets by significant amounts. These projects weren't the exception; they are the rule.
And the cost of the Brightwater tunnel continues to skyrocket. A story in the Times this week reported that the tunneling machine remains stuck underground, King County is suing the original contractor and the new contractor cannot guarantee that the project will ever be finished.
• The state promised to pay for tunnel overruns... and then broke its promise.
In January 2009, our previous mayor and Gov. Chris Gregoire highlighted the importance of each party covering its own costs. They agreed then that the state would cover all costs related to the construction of the tunnel, including cost overruns.
The state Legislature then changed the deal. It capped the state's contribution at $2.4 billion and said Seattle-area taxpayers who benefit from the tunnel would be responsible for cost overruns.
• Seattle has to pay overruns, but has no say over the project.
The tunnel is a state-controlled project, and the state maintains all decision-making authority over it. This puts Seattle in a very difficult position. The state orders us to guarantee a project for which we have no direct authority.
Seattle's lack of control over the project is already evident. Just over a month ago, after being told ad nauseam that delay is the major source of cost overruns, the state extended completion of the project by a full year.
• Cost overruns could lead to severe cuts to basic services.
If the city shoulders cost overruns, it could have a major impact on the city budget. For example, we are facing a $50 million deficit next year. It is causing us to wrestle with difficult decisions, cutting basic services that will be felt by everyone.
Now compare that to the potential of cost overruns on this project. A cost overrun of 34 percent (which is the average of cost overruns for megaprojects revealed by a recent study) would mean that Seattle could be on the hook for hundreds of millions of dollars. Even paying a portion of that would lead to severe cuts to basic services. By comparison, $2 million a year would pay for 20 new police officers; $13 million a year would fill the parks deficit; $5 million is how much we spend each year on sidewalks.
• Now is our last best chance to fix it.
The best time to raise and answer difficult questions about who will pay cost overruns is before they occur, which is now. Taking a wait-and-see approach on cost overruns is extremely risky. I have sent an agreement to City Council that will protect us. This agreement would only take effect if the state takes full responsibility for cost overruns. We need to stand together on this. If we do, then we have a good chance of protecting Seattle.Mike McGinn is the mayor of Seattle.