Seattle Popular Monorail Authority
The Securities Building
3rd & Stewart
1904 3rd Avenue, Suite 105
Seattle, WA 98101-1126
Re: Our “City Council First” Plan For Public Hearings For The Seattle Monorail Project
Dear Mr. Weeks:
We are troubled and disappointed by your letter of March 18, 2005, responding to our letter of March 15. We continue to believe that our position is sound and deserves the full attention of your Board and the City Council. Your decision to convene public hearings on July 5 brings new urgency to these issues.
The Municipal League remains a strong proponent of mass transit. We respect the voters’ decision to proceed with the Monorail project. Our goal is to assure that the final review and approval of the Monorail project by your Board and the City Council is transparent and judicious. To underscore our commitment to full disclosure, we are planning a public forum to address the state of Monorail finances. We will keep you posted on the time and date. We hope that you, your Board, your Financial Director and other staff members will attend and participate. Please do not let our previous position on the proposed project prevent you from engaging in an open, public discourse about the financial policies and future feasibility of the Monorail project.
The City Council must be allowed to complete its public hearings about the project’s financial viability before the SMP concludes its public hearings about the DBOM contract. Our “City Council first” plan springs from the Transit Way Agreement between the City and SMP. The Transit Way Agreement specifically states that the Seattle Monorail Authority and its contractors are barred from beginning construction within the City’s rights-of-way unless and until the City issues Project Construction Permits to the SMP. Project Construction Permits will not be issued until after the City Council has approved the financial viability of the Monorail project. Section 3.1.1, Approvals Required Prior to Construction, Transit Way Agreement, City Ordinance 121517 (July 6, 2004). Hence, the SMP and its contractors cannot use the City’s rights-of-way for construction until after the City Council acts.
We urge SMP to immediately deliver its formal SMP financial submittal to the City Council and to make the financial submittal available to the public. As you know, SMP’s Transit Way Agreement with the City anticipates that SMP will make full disclosure to the City Council through the specified “SMP financial submittal”. Section 3.1.1, Approvals Required Prior to Construction, of the Transit Way Agreement, City Ordinance 121517 (July 6, 2004). The Transit Way Agreement requires the financial submittal to include:
a list, explanation, and schedule of SMP's anticipated revenues and costs for construction and operations; SMP's plan for financing construction and operations, including the schedule for debt issuance, projected debt terms, and interest rate assumptions; a copy of the then-most-current draft or final version of SMP's annual financial report required by RCW 43.09.230; a copy of the then-most-current version of all financial statements drafted since the last annual financial report required by RCW 43.09.230; all materials submitted to rating agencies and/or potential credit enhancers, including a synopsis of major oral presentations made; SMP's Request for Proposals to Design, Build, Operate, Maintain the Green Line; copies of all reports by rating agencies; the finalized Design Build Equip Contract (DBEC) and Operations and Maintenance Contract (OMC) that the SMP Executive Director recommends to the SMP Board for approval (or the approved contracts if the SMP Board has approved them) that are not proprietary or otherwise required by law to remain confidential; and any other financial materials considered by SMP in its financial planning.
The SMP can now deliver its formal financial submittal to the City Council and to the public. Delivering the required financial submittal to the City Council and to the public is vital before you begin your public hearings on July 5. There are two equally important reasons for this. First, the SMP’s financial submittal will start the City Council’s self imposed sixty (60) day clock for an up or down vote on the project’s financial viability and on issuing Project Construction Permits. Section 7, City Council Resolution 30693 (June 28, 2004). Second, the public needs the disclosures now, so that the SMP hearings will be meaningful. We urge you to post this information on the SMP website as soon as possible.
The public and the City Council are just now beginning to learn about the Monorail’s final scope, design, cost and financial plan. Hence, it is prudent for SMP to defer completion of its hearings and the execution of the construction contract until after the City Council votes.
SMP has shown great patience in working through its negotiations with the Cascadia team, delaying the start of construction for many months beyond your expected start date. Another sixty (60) days, to allow the City Council to act, will not materially delay the project and will assure adequate public scrutiny. Seattle citizens—who will be paying for the project—deserve at least as much patience as you have given to the Cascadia team.
The City Council’s sixty (60) day clock will start once SMP makes its formal financial submittal. Once the financial submittal is delivered, the City’s independent financial consultant will then have thirty (30) days to submit its report to the City Council. Section 7, City Council Resolution 30693 (June 28, 2004). The City Council will vote within thirty (30) days after receiving the consultant’s report.
At its public hearings, SMP should be prepared to answer the five (5) questions that the City Council asked its financial consultant to answer:
1. Are SMP's financial resources adequate to complete construction of the entire Monorail Transit System and operate the entire Monorail Transit System for five years after the entire Monorail Transit System is open for revenue service, without creating undue financial risks after those five years, including maintenance and replacement of capital stock?
2. Does the SMP's $1.5 billion cap (in 2002 dollars) on debt allow SMP to issue sufficient debt based upon the 1.4 percent motor vehicle excise tax and its projected yields?
3. Are SMP's financial resources adequate to cover costs in addition to the costs for the DBEC (Design, Build, Equip Contract) and OMC (Operate and Maintain Contract)?
4. Has SMP provided sufficient protections and reserves to pay unanticipated costs and to address unanticipated risks?
5. After performing sensitivity analyses of key assumptions, what are the key areas of risk that affect the feasibility of the construction and operation of the Monorail Transit System?
Section 6, City Council Resolution 30693 (June 28, 2004).
As to the City Council’s second question, regarding projected tax yields, who will certify that SMP’s tax revenue projection is reasonable? SMP will need this reasonableness certification to issue bonds. The certification is tough to get. Reasonableness certifications have been the focus of much litigation.
We are especially interested to learn what bond ratings SMP’s proposed bond proposal has received from bond rating agencies. The bond rating information is crucial to determine the interest rates that will be charged for your bonds.
We urge SMP to refrain from prematurely executing the DBOM contract and from immediately issuing short term debt instruments as a bridge financing for publicly funded SMP capital investments. The review process by the City Council must be completed before the SMP moves forward with construction and financing. To do otherwise would circumvent the public review process.
In the coming months, we look forward to working with you and the SMP to achieve a careful and public review of the project.
Very truly yours,
/s/
Robert S. Klein
Acting Chair, Ballot Issues Committee and Member of the Board of Trustees of the Municipal League of King County
/s/
Bruce Carter
Member of the Board of Trustees of the Municipal League of King County
RSK:kjg
cc: Mayor Greg Nickels
Members of the Seattle City Council
Members of the Board of Directors of the Seattle Popular Monorail Project
State Senator Ken Jacobsen
State Treasurer Michael Murphy
State Auditor Brian Sonntag
Seattle Times
Seattle Post-Intelligencer
Seattle Weekly
The Stranger
RSK
rd132602.009 4/14/05