Urban Politics #196: Tunnel Report or Sales Job?


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By City Councilmember Nick Licata.

Urban Politics (UP) blends my insights and information on current public policy developments and personal experiences with the intent of helping citizens shape Seattle’s future.

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Tunnel Report Or Sales Job?

One reporter commented to me after the City Council’s Monday Morning Briefing Meeting, “Were you all drinking Kool-Aid?”

The reference was to the general acceptance of a report that was intended to outline areas to be studied on the economic viability of building a tunnel to replace the Alaskan Way Viaduct (AWV). Instead the consultant presented conclusions of another study which had not been reviewed by the Council and whose methodology largely rested on some dubious assumptions.

When public officials get briefed on how we should spend over a billion dollars I would expect some solid information and the presenters should expect some rigorous questions. When neither happens, then the public is shortchanged and projects move forward without being fully vetted.

Consider how the City is adopting the tunnel option for replacing the AWV. According to the Washington State Dept of Transportation a rebuild will cost a billion dollars less and can be built in a year less. It is conceivable that the cost difference might be closer to two billion once the digging begins. The shorter rebuild time means less disruption to downtown businesses and a loss of sales tax revenue to the city.

The City Council has previously voted to make the tunnel option our preferred choice on an 8 to 1 (Licata) vote. The rational is that a tunnel will open up the waterfront to allow for more tourist, shopper and general pedestrian activity. That activity will generate more tax revenue than continuing to have a huge Viaduct structure across the street from the waterfront. A tunnel will also open up more development along the waterfront and therefore increase tax revenue.

These are reasonable assumptions and they were echoed by the economic benefit scoping report written by Property Counselors, entitled “Discussion Paper – Framework for Addressing Economic Benefits of Viaduct Replacement”. In urban planners’ lingo, “scoping” generally is equivalent to defining a public policy problem and the parameters of the inquiring to solve it. It is not meant to resolve the problem.

That is where I had a problem with the presentation and why I felt it failed to meet our City’s needs for framing a cost-benefit analysis for choosing the tunnel option over the rebuild option. His report sited three critical financial conclusions, which were repeated in the media the following day.

1. The enhanced value of a tunnel over a rebuild is worth between $700 million and $1 billion.

2. A tunnel will result in additional new visitor spending worth between $500 million and $1 billion

3. A tunnel will result in increased property values between $300 million and $1 billion

So the economic activity generated by a tunnel exceeds that of a rebuild anywhere from $1.5 billion to $3 billion over a 25-year period for this region. Those are not tax dollars but economic activity. For instance Seattle receives about .85% of the 8.8% sales tax, so we receive about 1% of the total sales activity. Seattle’s share of property tax is 31% of the property rates assessed on Seattle property, which comes out to far less than .5% of the total increased property values.

A quick review of the material presented makes each of these conclusions appear to be more wishful than certain.

Comments on the First Conclusion:

The first conclusion is based on the waterfront receiving 20 to 30 million visits a year. That number seems very high. The number of overnight tourists visiting Seattle & King County is about 9 million a year. The number of people driving into downtown is about 200,000 a day, most of whom are workers. And just over 30,000 people live downtown.

The 20 to 30 million visits represents each time a person goes down to the waterfront. On the low side that translates into 55,000 people each and every day of the year visiting the waterfront. That seems high, but it could be checked with a pedestrian count. None was conducted or at least shared with the Council.

Instead the consultant relied on a very brief report by the Berk Associates, which counted the number of Ferry passengers (11 million), the number of Pike Place Market visitors (9 million), and the number of baseball fans visiting Safeco Field (3 million). A high school student could have added those numbers together and drawn similar conclusions. The City should expect more. At a minimum some type of survey work should have been conducted to determine how many of those millions of people actually visit the waterfront.

Additionally a value of $2 per visit was then applied to each of the projected waterfront visits. The $2 value, by the way, was based on a national survey of people visiting public parks asking them to place an economic value on their experience – note not how much they spent.

Comments on the Second Conclusion:

The Berk report’s conclusion that the additional visitor spending due to not having the Viaduct across from the waterfront will result in additional new visitor spending over the next 25 years between $500 million and $1 billion is based on multiplying the number of visitors by $633. That is the amount of new economic activity generated state wide from each overnight visitor.

The number of new visitors to the waterfront is assumed to be a modest 1% increase in the 9 million visitors to the Seattle-King County region, which seems reasonable. But the benefit should be measured locally not state wide since we are comparing expected increased revenue to increased taxes to cover the tunnel project. Consequently the more immediate Seattle-King County economic benefit should be used since the State has already contributed $2 billion and the additional billion(s) will have to be generated locally through a Regional Transportation Ballot Measure. Consequently the local economic benefit is not $633 but $425 according to the Berk report, which reduces the projected $500 million to $1 billion in new visitor spending over 25 years by a third.

Comments on the Second Conclusion:

The Berk report provides no evidence to reach its conclusion that a tunnel will result in increased property values between $300 million and $1 billion. They may in fact increase by that amount, but what assumptions are being used? The Berk report simply provides a table with low and high estimates for the increased values for three categories of property: 1) adjacent to the present Viaduct, 2) neighborhood properties, not defined, and 3) other downtown properties.

How much effort would it take to actually count the number of vacant lots, the number of properties that could be redeveloped along the new waterfront views to be provided? None of that survey work was done or at least shared with the Council. It is possible to at least pencil out the highest development potential for each available property and then apply a tax rate to those properties to obtain an estimate on the additional revenue that could be expected. Again, there was no evidence that this was done.

The Berk report did mention, and the consultant’s briefing to the Council did not, was that the tunnel would take 50% longer to pay for itself than the rebuild option.

It is hard to imagine how a full tunnel option would not generate more economic activity than a rebuild of the Viaduct. However, what has not been determined in any serious manner is how much additional tax revenue would be generated from removing the Viaduct from the waterfront. I was hoping to see such a study, and that was not provided.

Meanwhile the state legislature has set the clock ticking for the City to make up its mind on which option it will build. When they passed the gas tax which directed $2 billion to go to replacing the Viaduct they inserted language which said that “if a regional transportation plan has not been adopted by January 2007, the legislature intends to reprioritize *” the funding for other projects, such as Rt 520 across Lake Washington.

I believe we need to secure the additional $2 billion for a tunnel by the end of 2006, or we should just rebuild the Viaduct. Otherwise, I fear that if we begin the tunnel without those funds, we will start digging and do a change order to make the tunnel smaller. The result will be more traffic on the waterfront and through downtown. The result could be more traffic congestion through our Central Business District.

For those who point to the successful removal of San Francisco’s Embarcadero Viaduct, the Berk report offers a note of caution. The two cities are different in their street grids. It concludes that “compared to San Francisco, Seattle’s street grid offers few parallel routes and has significantly less capacity to absorb displaced Viaduct trips.

Our civic debate should not be focused on whether to build a tunnel or not, it should be focused on what we can afford and what will work for Seattle’s Central Business District. That is my objective and one that should be taken seriously by all interested parties.

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