This story was originally published Friday, March 30, on SCC Insight.
Two weeks ago, the Seattle Times published an article claiming that SDOT’s estimate of annual operating costs are as much as $8 million too low — and that SDOT hid that information from the City Council when it was debating the budget of the $177 million streetcar project last fall. In response, Mayor Durkan announced that she would hire an outside consultant to do an independent review of the project to be completed by June. At the March 20 meeting of the Sustainability and Transportation Committee, SDOT Interim Director Goran Sparrman and City Budget Director Ben Noble informed the committee that the investigation would be run by Noble’s office, and it would likely take 2-3 weeks to hire a consultant. What that means: the independent review hasn’t even started yet, but the City Budget Office has already found enough information to warrant halting the project and potentially incurring other costs for on stopped contracts in progress.
Deputy Mayor Mike Fong sent a letter to the City Council today with an update on the situation.
- "At the same time, Mayor Durkian instructed an intial assessment of all costs related to the project during the scoping of this independent review. This initial effort hs revealed further troubling information about the project's financial status. In addition to the concerns raised about the accuracy of estimated operating costs, new information from SDOT has revelaed that the project is facing a potential capital shortfall of more than $23 million. This is driven by a variety of factors, including increased design expenditures, escalating construction costs, and errors in estimating the full cost of the streetcar vehicles, which would bring the estimated costs to more than $200 million."
According to Fong, the independent review will begin next week, but their preliminary financial review has already discovered an additional capital shortfall of more than $23 million — bringing the total capital cost of the project to over $200 million. Fong also notes that the Mayor’s Office is working with the City Attorney to investigate the project’s management.
- "Working with the City Attorney's Office, we are also initiating an independsent investigation of the project's management to date. We need to understand how the project evolved to the point including timelines and availability of information about escalating operational and capital costs, information flow, and, the validity of information provided to federal officials. This investigation should be completed within the next 60-90 days."
The streetcar project is relying on a $75 million federal transportation grant, which may be in jeopardy if SDOT provided false, misleading, or incomplete information to the U.S. Department of Transportation. The grant may also be in jeopardy if the Mayor’s “hold” on the project pushes it out too far and the feds decide to withdraw the grant.
The Council has been hardly unanimous in its support for the project, with Herbold, Sawant, and former Council member Kirstan Harris-Talley arguing against it — suggesting that it might have more value as an economic development project for the businesses along its path than as a transportation project, and that investing in buses might be a better choice given the rapid pace of growth in Seattle. O’Brien and Johnson have been strong proponents, however; at last week’s committee meeting, Johnson came to SDOT’s defense in arguing that the $8 million discrepancy in operating cost estimates could simply be due to ongoing negotiations between SDOT and Metro on an operating agreement. The internal Metro memo at the heart of that debate suggests otherwise: that (from Metro’s point of view) SDOT was consistently underestimating costs of the new streetcar, refusing to hear feedback that contradicted its own projections, and also failing to staff the First Hill streetcar operations consistent with the higher-than-expected mechanical failure rate of the existing fleet of streetcars.
This is not the first time SDOT has been accused of flawed financial planning for a new project — and of withholding information from the Council. Two years ago, the Council was debating a similar situation with the Pronto bike share system, which had overrun costs, missed revenues, and quietly transferred money between budget line-items to hide the deficit without informing the Council. And similarly, Johnson came to SDOT’s and Pronto’s defense.
In her press release this afternoon, Durkan said:
- The City of Seattle has a critical obligation to spend taxpayer dollars wisely and an equal obligation to transparency,” said Mayor Durkan. “There are too many questions about the true costs of this project and the risks to taxpayers, which is why we must put the brakes on this project.”
There’s an interesting nuance here: Durkan isn’t saying that she is holding the project because it costs too much. Rather, she says that she’s holding the project because the city no longer knows how much it will cost.
Herbold issued a statement this afternoon praising the Mayor’s decision. From her statement:
- "This step is necessary to ensure that the independent review ordered by the Mayor is meaningful. Had work proceeded as scheduled-especially in awarding a construction contract- it would be more difficult to integrate the results of the independent review, or delay or stop the project. I had begun working on legislation to cease spending until after the review was complete; with the Mayor’s executive order, it appears that won’t be necessary.”
Even O’Brien, chair of the Council’s Sustainability and Transportation Committee, lined up behind the decision to halt the project:
- “I have serious concerns about the recent revelations regarding anticipated operating and capital costs for the Center City Connector, and I agree with Mayor Durkan that work on this project should be halted immediately,” said Councilmember and Transportation Committee Chair Mike O’Brien (District 6). “I appreciate the Mayor’s commitment to a transparent process that thoroughly vets this project and I commit to only allowing this project to proceed if there is compelling evidence that it makes financial sense to move forward.”
Bagshaw, whose district includes downtown and who has generally been supportive of the Center City streetcar project in the past, also threw her support behind the mayor:
- “The public and City deserve clarity and transparency regarding the City’s spending on all public projects,” said Councilmember Sally Bagshaw (District 7). “As Chair of the Finance Committee I support the Mayor in her efforts to understand the full financial implications of the Center City Connector Streetcar. My objectives are to spend our tax payer money wisely and construct projects that work for all, moving people and creating connections.”
No word from Johnson this evening. I have an inquiry in to him, and will update this post if I hear back from him.
Aside: the one project associated with the Center City Streetcar project that Durkan didn’t halt was the replacement of “seismically vulnerable water mains.” Sounds like a smart decision.