AltBrothers

“[I]s there a sinister plot at play for the city to engineer the cancellation of the project so that it can steal the motor vehicle excise tax to start paying for roads that it otherwise cannot afford?”

Infrastructure Journal
24th October 2005
www.ijonline.com

By Angus Leslie Melville

If you want a groundbreaking project to go ahead, then one of the
most important ingredients in the recipe has to be political
goodwill. And that is precisely where one of the US’s most
interesting transport projects on the table right now falls down -
writes Angus Leslie Melville.

The focus of the international transport industry is turned squarely
on the US and expectations are high for project finance as well as
numerous bond-financed design/build projects.

Seattle monorail is one of the few projects that you can pick out
from the line-up of usual suspects where it is conspicuously failing
to make it off the drawing board despite strong local support.

And the one thing that is acting as the biggest stumbling block is a
fundamental lack of support from the mayor’s office.

It has already passed four public votes – each one with increasing
majorities in its favour. It has a fully approved environmental
impact study, the land has been acquired and right-of-way secured.
So that’s all green light – go.

Now add into the equation that there is real need for an
alternative, separate transport system to deal with mounting
congestion problems.

The need to finance the alternative transport system is made all the
more important with a petrol tax referendum in November that will
most likely see the repeal of tax on fuel. And the city has no other
source of funding other than `gas tax’ for transport improvement
projects in the city.

You would imagine the metropolitan authority would be backing the
project to the hilt, and you would think there would be serious
concern over the cloud this puts on future large infrastructure
projects in Seattle and Washington. After all, with Cascadia
Monorail Company lined up to construct the 14-mile DBOM Green Line
to enhance travel between downtown Seattle and its surrounding
communities, the city has the opportunity for a near-term
groundbreaking on one of the most exciting projects in the market
today.

Led by Fluor, this consortium of more than 20 urban mass transit
firms includes Hitachi, Mitsui, Alcatel, HDR Engineering, Howard S.
Wright Construction, Hoffman Construction, RCI Construction Group,
Atkinson Construction, as well as other Seattle and Washington state
contractors and consultants.

That’s a lot of private sector goodwill – which is not being matched
by the public sector.

On the financial side, there is in place a revenue stream that is
dedicated to the monorail project from the motor vehicle excise tax,
which – to go elsewhere – would require a change to legislation.

To improve its chances of one day providing a new public transport
system in Seattle, the agency responsible for the project has
shortened the route, thereby bringing the price down.

But the crunch date for the project is 8 November when yet another
ballot is being staged. If it passes again, it is going to leave the
mayor in an awkward position as it is the only major transport
project likely to go ahead in the near future – especially if the
gas tax is repealed as well.

The project is financeable – the markets have said that they will
sell the bonds as they can sell against he guaranteed index revenue
stream which cannot be retired by legislation until the debt has
been paid off. The debt is non-recourse so in addition to a major
transportation improvement the city also accrues the benefits of
sales taxes, increased property values and the improved ability to
attract and maintain businesses without incurring any of the risk of
having to pay back the debt.

One of the issues that seems to be holding up the project and
causing the mayor’s office headaches is the tenor of deals. Word
coming from the city’s administration is that 30-40 year debt is too
long and the mayor does not want to burden the tax payer 30 years
down the line.

This – while it outwardly appears to be a noble gesture – is not the
way other cities view financing their transport projects these days.
And when you compare these tenors with the 99-year concession for
Chicago Skybridge, the length of the Seattle project rather pales
into insignificance.

Most US cities and states have recognised their cash shortfall and
are either paying long-term through tax-exempt bonds or longer
concessions.

The project is ready to go, the contract is fully negotiated. All
that has to be done is to renegotiate the contract to take into
account the shortening of the alignment.
If it fails the vote in November it is dead. But if it passes, it
will be ready to move forward in January.

You will travel a long way before you find a transport project in
the US that has more going for it than Seattle Monorail – but it
needs the political will to get behind it. And if they need a case
study of an urban transport system where project finance has worked
to stiffen their resolve – all they need do is look north to the
Richmond-Airport-Vancouver.

There appears no rational reason why the city would not support this
project.
Are we missing something? Or is there a sinister plot at play for
the city to engineer the cancellation of the project so that it can
steal the motor vehicle excise tax to start paying for roads that it
otherwise cannot afford?

Angus Leslie Melville
Editor
Infrastructure Journal