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By City Councilmember Nick Licata.
With assistance from my LA Lisa Herbold.
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.
- WHO’S GOT THE CHECK BOOK?
- MERCER ARENA
The City Auditor released her first report of 2008 in response to a request that I had made to audit how the City handles pubic/private capital projects. I felt the City needed to determine whether departments are using best practices and whether departments have been able to identify risks associated with external funding sources. The City’s check book should not be seen as readily available for projects with funding that may not materialize. The Auditor’s report is titled ‘External Funding of Capital Projects.’
The Auditor points out that the City has not necessarily been following its own rules. For instance a 1999 ordinance passed prior to undertaking the McCaw Hall remodel said it was not city’s intent to use debt capacity for shortfalls and capped city contributions, which we subsequently did; further we did not follow best practices, as identified from the Govt. Finance Officers Association and Federal Office of Management and Budget.
The Auditor suggested that we should consider adopting the following best practices:
– Performing a reliability risk analysis and assessment of the funding source
– Before authorizing a project, a contingency plan should be developed to guide decision-making if anticipated funds don’t materialize.
– Get commitments for funds through letter of agreement, contract, or MOA
In reviewing the City’s practices, the audit found that City Departments are not required to do any of these 3 practices, though some do inconsistently. No clearly defined party is assigned to do any of these tasks or to have oversight to see they are done. Highest risk funding is with projects dependent on private fundraising/in-kind donations.
Rather than develop contingency plans upfront, the City’s practice has been to employ ad hoc strategies as a crises emerges. If phasing, reducing scope, or delaying project doesn’t occur then for ‘projects that have a lot of political support (pg 25)’ Council allocates more funds or allows debt-financing. Discussions about risk analysis and contingency plans are informal and not a result of policy and are not well documented. Thus we, the public and the Council, do not know what particular decisions were made in individual instances.
Individual departments get to determine whether commitments are needed to be secured in writing through a Memorandum of Understanding, letter of agreement, contract, or nothing at all. If Council and Mayor negotiate principles in agreements with external funders at the outset of a project those principles are more likely to be included. In cases when there are agreements, they are rarely reviewed by law and when they are it’s after the agreement has been negotiated (making it difficult to adjust issues afterwards.)
The Auditor identified 4 patterns in decision-making when anticipated funds do not materialize:
- Delay, Phase, or Reduce project scopes until funds are in place (audit gives 5 examples of smallish projects)
- Council responds to lobbying by allocating more funds for the project then City lets it move forward (Woodland Skateboard Park and Mt. Baker Rowing and Sailing Center)
- City officials allow the project to go forward even w/o funds in hand (McCaw Hall and Aquarium redevelopment)
- City contributes to a project owned by another and limits it’s commitment with a contract (Sculpture Park)
In order to avoid these past practices, two of the Auditor’s four findings would seem to be relevant to any future major capital projects we pursue at the Seattle Center or elsewhere. They are:
The City needs to improve their internal controls (pg 31):
Recommendation: obtain assurances for all external funding; conduct and document risk analysis; develop contingency plans; document acceptance of risk if decision to move ahead w/o; develop policy requiring legal review of assurances w/provisions for non-performance penalties; follow policy by getting independent legal advice.
Large projects have begun construction without full funding in place (pg 32):
Recommendation: establish a policy that a ‘Notice to Proceed’ be required and not be issued before obtaining secure financial commitments.
In light of this report I have proposed two limited but important amendments to the Mercer Arena Resolution # 31040 which comes before the Full Council on Tuesday February 19th. The amendments would bring the proposed remodel or replacement of the Mercer Arena by the Seattle Opera more in line with the Auditor’s recommendations.
- The Council would be given at ‘least 30 days’ to review the Construction Agreement between the Seattle Opera and the City, and also the report that includes a detailed plan for the enhancement and activation of the Mercer Street frontage at the development site, which may include arts-oriented retail development, including restaurant and/or café space. As the Resolution currently reads, the Council would receive the agreement just prior to approving it, which means that we could receive the Agreement and report without enough time for our Central Staff to review it.
- The current language in the Resolution states that the Seattle Opera has to ‘consider’ significant public benefits and/or supplementary uses for the Mercer Arena. I’m proposing that they ‘shall strive to provide’ these public benefits. At the Parks Committee Meeting stronger language saying that these benefits had to be ‘included’ was removed by the Council Members present (Rasmussen, Conlin, Drago, Burgess) and replaced with the word ‘consider.’ The representatives of the Opera who were at the Committee table informed Council members that having the proposed public benefits be less of a requirement allowed them more flexibility in building out the space since they do not have any design plans at this time.
I think that the 63 year period of this lease without any additional public input on the uses of this facility, requires that we show the public that the Council is serious about wanting to pursue the possibility of significant public benefits and/or supplementary uses for the Mercer Arena in addition to the Opera’s use. The proposed added language does not require that they be ‘included’ but it does show the public that we have made an effort to try to include them. Saying ‘considered’ is too vague I believe to measure up to the Council’s public responsibility.
I do not know if there is enough support on the Council to adopt these two amendments.