Waste Management Affected Service Area

You may have noticed Seattle is facing a strike affecting garbage and recycling collection in West Seattle, South Seattle, and Northwest Seattle.  This is the service area for Waste Management, which serves roughly 60% of Seattle.  Central Seattle and Northeast Seattle are not affected by the strike; they are served by CleanScapes.

You can find updates from Seattle Public Utilities here about when to put your garbage, recycling and yard wasted out if it is not picked up.

Seattle Public Utilities notes that under the terms of the City’s contract with Waste Management, Waste Management is required to continue service in the event of any disruption. Any missed collections due to labor complications must be collected later in the week, or the following week. Waste Management will not be paid for any non-service. The contract allows the City to deduct approximately $4,500 per day for services not completed the next day; any disruptions that continue for more than a week can result in fines of up to $250,000 per day.

You can view this map to see if you live in an area affected by the strike, or click on the image in this blog post.

N. 57th Street mural photo courtesy PhinneyWood.com

Such is the case for two popular murals in the north end of Seattle: the one in the Aurora Avenue underpass at North 63rd Street and the mural at North 57th Street & Phinney Avenue North, near the zoo. Each will be painted over by the Seattle Department of Transportation (SDoT) next Monday, with grudging approval by those neighborhoods’ respective community councils. Ironically, SPU mistakenly painted over the 57th Street mural in 2008, then quickly moved to restore it. Originally painted in 1994, it occupies both of the 50 feet wide and 13 feet high underpass walls and depicts a collection of really big, colorful and friendly-looking animals.

Phinney Ridge Community Council (PRCC) President Diane Duthweiler said that in response to letting her neighbors know about the City’s plan to paint over the 57th Street mural, she was happy to hear from several interested in maintaining it or painting a new one. Her smiles turned to frowns, however, when she learned about SDoT’s revised mural permit requirements. They require annual permit fees and impose fines when graffiti isn’t removed quickly enough from a mural. Reasonable enough, perhaps, but none of the neighborhood residents felt they could afford the expense or risk being fined.

Queen Anne Murals’ 2010 Aurora & Dexter underpass mural painted by Urban ArtWorks w/50 community volunteers

Rob Mattson, the Neighborhood District Coordinator for the City of Seattle, reports that Urban Artworks is one organization that seems to consistently succeed in creating and maintaining murals throughout the city. Urban Artworks’ Emily Taibleson believes that nowadays street art has more potential for being embraced by communities as mural art. She reasons that graffiti artists live in all neighborhoods and if invited to apply their work to an organized mural project, it’s more likely such murals will receive less tagging.

Could partnerships with Urban Artworks return murals to the soon-to-be-blank walls at North 57th & Phinney and at North 63rd & Aurora? I’m not sure, but Diane Duthweiler said she would share my idea with her neighborhood and discuss this partnership possibility for the North 57th Street mural at their next PRCC meeting.

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The July edition of Seattle Channel’s City Inside/Out: Council Edition is out on the Seattle Channel.  I appear with Councilmembers Burgess and Godden.

We discuss issues such as the proposed SODO arena, utility rates, the plastic bag ban, and upcoming library and seawall levies.

With assistance from my L.A. Newell Aldrich

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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Zoo Long Range Plan And Operations Agreement

Yesterday, the Council passed Resolution 30701 adopting a Long Range Plan for the Woodland Park Zoo.

The Council also passed Ordinance 115011, which revised the Operations and Management Agreement between the City of Seattle and the Woodland Park Zoological Society passed by the City Council in December 2001 (see Urban Politics #119, http://www.seattle.gov/council/licata/up_119.htm , and #118 for background http://www.seattle.gov/council/licata/up_118.htm).

The Long Range Plan includes a number of elements. The areas that have garnered the most attention include a parking garage, an events center, and a new headquarters building.

The ordinance states terms for the payment of the garage, a residential parking zone, and an alternative transportation plan. Some neighbors and community groups expressed concerns about the impact of the proposed changes, in particular how the number and type of events might impact traffic and parking in the surrounding neighborhoods.

I proposed an amendment to meet some of these concerns. It required that the Zoo Society’s required alternative transportation plan, to be developed in conjunction with King County Metro and the City’s Department of Transportation, include the following elements:

1) Implementation guidelines for the number and types of events the Zoo intends to hold during any year;

2) A complaint procedure for neighbors to address parking and transportation issues; and

3) A formal involvement of residents within four blocks of the Zoo in advising the Zoo Society on implementing the alternative transportation plan

If the alternative transportation plan did not contain these elements when it is completed, the City could implement a seasonal residential parking zone around the Zoo. The Zoo Agreement with the City states that the plan should be completed by March 1st, 2007, but the deadline for including these elements in the plan is not until July 1st, 2007.

The amendment passed by a 5-4 vote. (Those voting in favor were: Della, Licata, McIver, Rasmussen, Steinbrueck). The resolution and ordinance both passed 9-0.

Thorton Creek Watershed Oversight Council

The Council approved Resolution 30709 to create the Thornton Creek Watershed Oversight Council.

This new body would be created by Seattle Public Utilities to continue the work of the Thornton Creek Watershed Management Committee, which worked on a draft action plan for the watershed.

The City now has produced a five-year action plan for the watershed. The oversight council will assist in implementation of the action agenda, review progress, provide a forum for public engagement, and advise the Director of Seattle Public Utilities on actions outlined in the action agenda.

Some property owners along the creek requested a number of changes to the resolution to provide better accountability to nearby property owners and the public. I proposed two amendments to address their concerns:

1) The membership on the Watershed Council must include adjacent property owners, one from the south fork, one from the north fork and one from the mainstream from Lake Washington to the confluence of those forks.

2) The Watershed Council’s meetings would be open to the public to the same extent as if it were subject to the Washington Open Meetings Act.

The amendments didn’t change the fundamental operation of the council; it had planned to have open meetings and riparian owners represented. However, the new language clearly incorporated these intensions into the City Council’s resolution creating the Watershed Council, giving greater assurance that it would adhere to them.

Both my amendments and the resolution passed by a 9-0 vote.

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.

________________________________________________________________

CONTENTS:

• Technical Difficulties
• Avoiding A Battle Of Slogans
• How Much Money Are We Talking About?
• What Is At Stake?
• Committee Meeting On Nucor
• Role Of Mayor And Council

Technical Difficulties

Unfortunately there has been two errors made in the last two UP’s sent out.

This one UP173 was sent out with a blank subject line, so recipients may not have opened it.

The former UP 172 discussing NUCOR for the first time had a system problem so that I did not receive any replies except those that were specifically addressed to my Council email address: nick.licata@seattle.gov. The problem has been fixed so if you wish to resend a reply that had bounced back I will now receive it.

Avoiding A Battle Of Slogans

There is a tendency for politicians, including myself, to rely on a slogan to describe a solution to a complex problem, rather than to provide something less flashy and less concise. The current situation with Mayor’s proposed City Light contract with the NUCOR steel plant is a good illustration. The Mayor’s press release was headlined with the caption: “Mayor saves high wage jobs”. I could have used the caption “Stop Corporate Welfare” in my previous UP on NUCOR. Both statements touch upon truths and also engage in exaggeration. In this issue of UP I’d like to explain the proposed NUCOR contract with some deeper context than a sound bite.

In my last UP #172 I explained why NUCOR was highly unlikely to close down their Seattle steel plant. In sum they have said that they would like to have two plants operating on the west coast. They own two others, so they were implying that one of them could be decommissioned. In fairness to NUCOR, they have not explicitly stated that they intend to shut down the Seattle plant if they don’t get a cost break, although that seems to be their implied position. And the Mayor’s claim to have saved these 285 jobs pretty much rests on that assumption.

To recap the current situation, NUCOR owns a plant in Utah and another in Arizona. The Arizona plant is not currently operating and when it did it never reached capacity and furthermore it never seemed to operate profitably. NUCOR bought it last year for less than a quarter of its construction costs. They currently do not have a power contract and even if they were to get one, it is most likely in need of a major structural overhaul to become fully functional. See UP #172 for more details.

When I met with representatives from NUCOR, they suggested that their Utah plant might take Seattle’s business. But they also admitted that the Utah plant is operating near capacity and their “bottleneck” is their “melt shop”. That is, without a new furnace they couldn’t do much more. That essentially knocks out the Utah plant as an immediate threat. Since two-thirds of the cost of a new steel plant is in the furnace, NUCOR would have to make an investment of at least $100 million to transfer Seattle’s work there.

I’m suggesting that NUCOR pay at most an additional $3.3 million over what they are currently offering. The details were presented in the last UP, but essentially it amounts to an additional $1 million in cash and an annual electrical rate payment that is $2.3 million higher than what they are currently paying ($50 per megawatt hour rather than their past rate of $42 per megawatt hour). Other industries meanwhile will be paying $55 per megawatt hour.

The executives at NUCOR have to decide whether it makes business sense to close the Seattle mill because of the additional $3 million and instead invest at least $100 million in Utah to build a new furnace, which would not come on line for at least a couple of years. The bottom line favors the City.

In response, NUCOR has suggested that overseas competitors are the ones that could take the business if the Seattle plant were not competitive. That argument does not hold water for two reasons. First the Seattle plant is one of the top five efficient mills in the U.S. It is most likely that foreign competitors will go after other mills first. Second, right now and in the foreseeable future, this year and next year, American mills are producing cheaper metal than foreign mills.

The threat, if there is one, of shutting down the plant and moving the work elsewhere is one that comes with costs to NUCOR, costs that are higher than agreeing to accept a reasonable offer from the City. So the Mayor’s claim to have saved jobs is a bit of stretch and is not based on crunching the numbers. It substitutes a hard analysis with a plea of “saving jobs” to justify the agreement.

How Much Money Are We Talking About

Let’s look at the amount of money involved in the three proposals on the table (Existing SCL Contact, Mayor/NUCOR, Licata/Council):

Existing – NUCOR pays the city $11.5 million in cash & pays a 2004 electrical rate of $55/KMh

NUCOR pays a 2004 electrical rate of almost $63/MWhMWh – the standard industrial rate of $55/MWh plus an additional $7+/MWh to offset the lower rate received in 2002 and 2003. The additional $7+/Mwh stays in place until Nucor has effectively paid back a total of about $13.5 million. This should take about five years. Given inflation and interest costs, an immediate cash payment of about $11.5 million would be roughly equivalent to the $13.5 million Nucor should otherwise pay.

Mayor’s & NUCOR’s Agreement-

NUCOR pays the city $9 million in cash & pays a 2004 electrical rate of $42/MWh, final rates to be decided in 2005 but NUCOR’S rate is capped at no more than $49/MWh for 2004.

The total savings from the existing contract to NUCOR ranges between $4.5 million ($2.5 in cash and $2million in rates) and $7.0 million ($2.5 in cash and $4.5 million in rates).

Licata’s Council Proposal -

NUCOR pays $10 million in cash & pays a 2004 electrical rate of $50/MWh, with 2005 rates to be decided through normal City Light process.

The total savings from the existing contract to NUCOR is almost $3.5 million ($1.5 million in cash and just under $2 million in rates).

What Is At Stake?

Given that City Light’s combined budget is over $800 million and NUCOR is the most profitable steel company in America, what is the big deal about the relatively small amount of money were negotiating about? The answer has to do with setting a precedent: that Seattle City Light will be subsidizing electrical rates for a particular company now and into the unlimited future.

Seattle City Light has always operated on a cost of service basis rather than on an ability to pay, with the exception of course for the poor and infirmed. If SCL starts subsidizing one customer, even if it is SCL’s largest customer, other industrial clients could start requesting the same type of rate discounts.

The total amount of money will still be collected; it will just be shifted to those commercial accounts not receiving the discounts. For example if NUCOR paid only $45/MWh in 2004 instead of the $55+/MWh as all other industrial do, and SCL were then to extend this discount its 6 other large industrial users, it is estimated that all other commercial rates would have to increase by 2% to pay for the subsidy.

The principle of not directly subsidizing an industrial or commercial customer would be broken and SCL would then be subject to intense lobbying for making future exemptions for whatever industry was threatening to leave unless they got a subsidy.

And once this door is open it could lead to serious unintended consequences. For example, such subsidies would inevitably lead to increased rates for City Light’s remaining customers. In turn, these increased rates would push up costs for other local employers and could actually cost jobs in other key sectors. If original goal is to save jobs this would certainly be an ironic and painful outcome.

Committee Meeting On Nucor

The Energy & Environmental Policy Committee will meet on Wednesday, February 25, 2004 to discuss and possibly vote on the NUCOR legislation.

Role Of Mayor And Council

That there is even a debate about the proposed NUCOR electrical contract is because the Council is doing its job. As the legislative branch, we have the responsibility to review and approve all proposed legislation. We cannot do our job when the Mayor expects the Council to act without a serious review of his proposals.

For example, in this instance NUCOR has been negotiating with the Mayor’s staff for 6 months to come up with a proposal. It is fine if the Mayor wishes to take that long. But he should not expect nor mislead NUCOR into thinking that the Council will take less than a month to reach a decision.

Mayor’s office should set an overall agenda of issues that the various departments will work on during the year. The Council, at most can be expected to try to offer some general policy areas that they would like to see emphasized in the budget. But their charter responsibility is not to administer the departments.

Consequently the Council is at a disadvantage in trying to set an issues agenda for the various departments. In addition, the majority of the nine Council Members shifts from issue to issue, making it difficult to set an annual issues agenda that all CM’s can agree upon in advance. Identifying issues is not the purpose of the Council as a whole; rather it is more often the result of individual or groupings of CM’s.

However the Council does have an agenda, and that is to publicly review, discuss and debate the merits of legislation brought before us. We fail to do our expected tasks if we succumb to the Mayor’s intensive lobbying or prickly press releases. I believe the Council will garner the public’ s respect if we act thoughtfully and without malice, and at a pace that respects the important decisions that are placed before us.

With assistance from my L. A. Lisa Herbold on this issue

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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CONTENTS:

• Council Considers City Light Subsidy For Local Steel Mill
• History Of Steel Mill’S Reduced Rate
• Current Proposed Legislation
• The Possible Loss Of Jobs
• Cash To The City
• The Value Of Interruptible Power
• A Reasonable Approach

Council Considers City Light Subsidy For Local Steel Mill

The City Council will consider legislation proposed by the Mayor for Seattle City Light to sign new electricity service contracts between it and Nucor Steel Corporation, City Light’s largest customer. This legislation is controversial because it significantly reduces the company’s financial obligation to SCL. Councilmember Jean Godden’s Energy Committee will be briefed at its meeting this coming Friday on the proposal, with a possible vote.

To understand the new proposal it is necessary to review the history of this contract, the rationale behind the new contracts and finally the Council’s options, including one I propose.

History Of Steel Mill’S Reduced Rate

In 2001 Birmingham Steel had been hit hard by escalating power costs. They approached the City to develop “a partnership that would benefit both parties” as Birmingham’s General Manager Eddie Lehner explained in a memo written toÊ Councilmember Heidi Wills in October 2001. The steel company was having difficulty reaching an agreement with City Light to reduce its electrical bill and was seeking assistance from the City Council. After much wrangling with the Paul Schell administration, the Mayor presented a proposed electrical contract between SCL and Birmingham, much like Mayor Greg Nickels is doing now.

The final contract that was agreed upon by both the Mayor and the City Council reduced Birmingham’s electrical rates during 2002 and 2003. Instead of paying $55.40 MWh (per megawatt hour) like City Light’s other industrial customers, they would pay only $38.89 per megawatt hour. They had originally threatened to close the plant down if they did not get $35 MWh. This worked out to them saving roughly $12 million and paying back about $13.5 million over the subsequent five years, beginning this year. The additional $1.5 million roughly captured the interest costs associated with ‘paying back’ the savings over time.

In negotiating with Birmingham City Light maintained, according to the Superintendent and the Mayor, the basic principle that any new rate must not provide a direct subsidy to the company. Any short-term rate relief must be balanced against an increase in future rates that will have the effect of leaving City Light financially whole. There was a concern that the other major industrial producers could also make a similar request for lower rates.

As part of the rationale for providing these lower rates City Light obtained the right to interrupt the company’s electrical supply if the price of electricity reached a certain trigger price. Consequently a new electrical rate category was created for the steel mill. In a SCL issues brief memo that predated the agreement, SCL staff concluded that it was unlikely that the utility would ever benefit from this provision. In fact the “interruptibility” clause has never been used by City Light.

Even before the agreement was signed, SCL had financially helped the steel mill operate efficiently and keep its utility bills low. They had given the company over $1.1 million in conservation incentives in 2001. In addition during the 2000-2001 energy crisis, City Light paid Birmingham a total of $4 million to not operate the mill (which reduced their effective energy costs by almost 40%, even though their total operating hours were not significantly reduced).

One final note on Birmingham; they went bankrupt in 2003 and NUCOR bought the plant along with the ongoing rate agreement with SCL, and therefore assumed both its lower rates and its obligation to pay back those deferred savings.

Current Proposed Legislation

An ordinance submitted by Mayor Greg Nickels does a number of things. It accepts a one time immediate payment of $9 million instead of receiving the $13 million over 5 years. It continues and expands the “interruptibility” provisions that are intended to strengthen the utility’s ability to capture revenues, at a cost to SCL of at least an additional $2 million. The steel mill would pay $3 more per MWh bringing their cost to $42 per MWh for 2004 but they might adjust it up to $49 a MWh, after the year is over depending on what SCL’s 2005 rate is determined to be in late 2004. I believe this just an invitation to come back and ask the City for a third time to provide lower rates.

The Mayor’s initial press release lists three major benefits to Seattle: preservation of about 300 family-wage jobs in Seattle, an immediate payment of $9 million to City Light; and new interruptibility provisions that strengthen the utility’s ability to capture revenues. Below I look at each of these three assertions and try to determine to what extent are they public benefits or public costs.

The Possible Loss Of Jobs

The first benefit is an economic benefit to the entire community and certainly the possible loss of any jobs to Seattle is a serious concern. The NUCOR steel mill has 285 employees. But such a possible loss must take into account the probability of NUCOR closing the plant.

The threat that NUCOR would shift work to one of their other two west coast steel mills has been raised. They have one in Utah and another in Arizona. The Utah plant is operating at full capacity so it is unlikely expand production without significant and costly new plant investments.

The Arizona plant on the other hand was closed as of the end of last year. NUCOR has said they may need only two plants so the assumption is that they could close the Seattle plant and reopen the Arizona one. However that plant has a troubled past, and never operated at full capacity due to its inability to obtain a long-term power contract. In fact its prior owner, North Star, could not operate the plant at a profit. So North Star closed the plant and sold it to NUCOR for $35 million, although the plant was built in 1996 for about $175 million.

Daniel DiMicco, NUCOR’s CEO, noted in Metal American Market (March 26, 2003) that the Arizona’s plant is not of the latest design and hadn’t worked successfully at that location. In other words there is no comparison between Seattle’s plant, which is one of the most efficient steel mills in the nation and the Arizona one. Our central staff concluded that the Arizona facility does not appear to be a viable option in the short-run, and definitely not without some plant upgrades and a new power contract. In sum, NUCOR does not have the leverage they imply with this plant.

Cash To The City

Part of the attraction of the Mayor’s proposal is for the City to receive a significant amount of cash upfront, however the $9 million lump-sum payment is equivalent to the $13 million paid out over roughly 4 years, if one assumes s over a 14% rate of discount. City Light’s costs of borrowing is at most 5%. At that rate, an $11+ million lump-sum payment is equivalent to the $13 million paid over time. However, given that City Light faces the risk of NUCOR ceasing operation and receiving no further payments over time, a discount rate somewhat higher than the 5% can be justified in economic terms but going to over 14% fails the straight face test.

The Value Of Interruptible Power

Electricity service would still be interruptible, but the energy price trigger would be reduced from $55 to $49 per megawatt-hour. If City Light were to interrupt service, the utility would realize more revenue because it would no longer be required to share its gains with NUCOR.

However, it is unlikely that this value amounts to the approximate $6/MWh ‘discount’ NUCOR would receive if they paid only $49/MWh in 2004 vs. $55/MWh which other industrial users would be paying. Given that it is possible that their rate might be less than $49/MWh when they lobby the City during the next rate setting process the gap would be even greater.

An initial analysis suggests that a ‘discount’ of $2/MWh would probably better reflect the actual economic benefits to City Light. When combined with a potential rate reduction in 2005 of an additional $2/MWh – $3/MWh which City Light might be considering, this implies a long-term energy rate for NUCOR of roughly $50/MWh. (A base of 55/Mwh minus a reduction of 3/Mwh plus the ‘discount’ of $2/MWh SCL’s right to interrupt NUCOR’s energy flow.)

A Reasonable Approach

After reviewing the material, I believe a reasonable approach recognizes NUCOR’s value as a major employer and balances it against their contractual obligation to pay back the discounted rates they have been receiving. When I do the numbers I conclude that they should make a single payment of $10 million to the City rather than $9 million. This figure is based on a 10% discount rate, which takes into account both the City’s costs of borrowing and the risk factor of the steel plant shutting down.

They should also pay a rate of no less than $50/MWh for 2004. Since the City Light Rate Advisory Committee will be reviewing and making recommendations for all 2005 City Light rates, NUCOR and other industrial users’ rates may be subject to a reduction at that time.

This approach avoids a direct subsidy to a particular company, which was one of the key principles identified by City Light and the Council when the previous agreement was established. And it maintains the City Light’s commercial/industrial rates being charged on a cost-of-service analysis, not on an ‘ability-to-pay’ basis.Ê

* This a short but technical explanation on why the $50/MWh is a fair rate. Our central staff suggest that a ‘discount’ of $2/MWh would probably better reflect the actual economic benefits to City Light of having the right to interrupt the company’s electrical supply. When that $2 discount is combined with an expected City Light rate reduction in 2005 of an additional $3/MWh, a net of $50/MWh is reached after being deducted from the $55/MWh that NUCOR would be expected to pay.

Assisted by Legislative Assistant Lisa Herbold on this issue.

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.

________________________________________________________________

CONTENTS:

• Council Resolution On SLU
• Transportation Improvements
• Community Involvement
• Economic Development

Council Resolution On SLU

After much discussion the Council acted last Monday (June 9th) and passed Resolution 30610 affirming the City’s commitment to revitalize South Lake Union (SLU). I believe that the Council worked collaboratively to support a healthier environment for SLU.

Some critiques have characterized this resolution as providing a cart blanch for the Vulcan Corporation which owns more than 40 acres in this area. I disagree with that characterization. The City makes no financial commitment to any projects through this resolution.

Furthermore, as part of that process I made a number of amendments to the Resolution to accomplish the objectives listed below.

1. Transportation funding for the Mercer Corridor should be subject to further review of configurations, impacts, costs and alternatives

2. Continue to assess transportation impacts of development projects

3. Continue support for the Comp Plan goals and policies developed through the SLU Neigh Plan, including a concern to keep SLU a mixed-use neighborhood.

4. Ensure proper public involvement that includes community members & councils, residents, businesses owners & managers, and developers

Transportation Improvements

The Mayor’s proposal for transportation improvements in South Lake Union includes an expansion of Mercer Street from a one-way configuration to a two-way configuration. This is may conflict with the Neighborhood Plan proposal and subsequent Comp Plan policy, because this plan would require significant right of way acquisition from private property owners, including a likely need to re-purchase 2-3 properties sold to Vulcan Northwest just 3 years ago.

The neighborhood plan process rejected a similar proposal after a transportation consultant studied the proposal and found that it would not alleviate the Mercer Mess, in other words it would neither decrease travel time, nor would it increase road capacity for vehicles.

Ignoring and thus upsetting residents, property owners, and employers by promoting a new plan for expanding Mercer Street without consulting them will make it more likely that solving the congestion on Mercer St. will be delayed through various lawsuits.

For this reason I amended the resolution to include the following recital: “WHEREAS, the Council reaffirms its support of Comprehensive Plan policies relating to transportation and South Lake Union, specifically: P13: Encourage Mercer/Valley improvements that support development of South Lake Union Park, city-owned parcels and other adjacent properties; P14: Favor a set of improvements that are reasonably fundable and that do not require excessive new right-of-way; and P15 Explore transportation improvements that would link South Lake Union and Lower Queen Anne.”

The City has paid for numerous transportation studies for this area. Two of these studies have come to the same conclusions that widening Mercer Street from a one-way 4 lane configuration to a two-way 8 lane configuration does very little to decrease travel times or increase road capacity.

The general public thinks that the Council is contemplating a $75-95 million dollar investment to “fix the Mercer mess.” Yet, for instance, the April 2003 South Lake Union Transportation Study by Parsons Brinkerhoff study shows that under the Mayor’s proposed two-way Mercer plan the travel time almost doubles from the Seattle Center to I-5 in comparison to just continuing the existing configuration. We need to know what we are going to get for this proposed $75 million expenditure.

We need to review the Parsons Brinkerhoff study and share its findings with the public. To that end I had the Resolution include a whereas that said the City would review this report ” and preliminary engineering data, and will continue to do further review of possible configurations, and costs and benefits, and will work with the community as various options are explored for the Mercer Corridor.”

In conjunction with recognizing the need to review relevant studies, I also added language that changes the direction that the Council is giving to the Executive in negotiating a Regional Transit Package. The original resolution gave the Mayor the go ahead to pursue funding in the Regional Transit Package that would only implement the Mayor’s proposed Mercer Expansion project. What if after review of the studies and further consultation with the community we decide that the Mercer Expansion is not a wise use of public money?

In answering that question I inserted language that said as we advocate for transportation funding for the Mercer Corridor we could also advocate for “alternatives (subject to further review of configurations, impacts, costs and alternatives) in the regional transportation funding package.”

This last amendment may be one of the most important ones for the future of the revitalization of South Lake Union. It allows the Mayor to include funding in negotiating a Regional Transportation Package for an alternative to the current proposed two-way Mercer proposal if it is shown to be more cost-effective. The City should have the flexibility to use funds for other South Lake Union transportation needs if the Mercer Expansion delivers too little in the way of actual transit related improvements.

Lastly I amended the resolution to say that the Council supports “Continuing the work identified in the scope attached to Ordinance 120767 to create a new methodology for characterizing transportation system performance and assessing impacts of development projects.” This refers to a long-term project by DCLU to study and identify a way to access transportation impact fees to fairly spread the costs of transportation improvements to the immediate beneficiaries.

Community Involvement

We mustn’t throw out the old, while bringing in the new. SLU has a neighborhood plan; we can make changes to it, but let’s do it collaboratively with broad involvement from community stakeholders. In the resolution we specifically mentioned the following stakeholders: “a broad group of community members, including residents, businesses, social service agencies, neighborhood planning stewardship group, community councils, and property owners, managers and developers.”

The Council has said that it will ensure “proper public involvement” to create an overall neighborhood character that is livable, attractive, economically robust, and a regional model of economic revitalization. In the past the City involved the neighborhood in creating a neighborhood plan. As we make changes to it due to receiving new unanticipated funding initiatives, let’s get the input of the people we’ve asked to plan as well as other interested groups.

It is important for both branches of government, the Council and the Executive, to be accountable in meeting this expectation and that we follow this model before we propose new spending on SLU public capital projects.

To let the public know that the City recognizes the objectives that have been identified in the past, the Resolution stated that there would be “Continuing support for the following Comprehensive Plan goals and policies for South Lake Union Neighborhood Character developed through the South Lake Union Neighborhood Plan:

a. A mixed use neighborhood with an emphasis on small business and light industry.

b. Strategies that promote diversity of building types and inherent qualities of neighborhood sub-areas through development of design guidelines.

c. Vehicular access and adequate parking to serve area businesses.

d. Housing that does not conflict with the business character of the neighborhood.

e. Support the placement of social service facilities based on citywide siting policies.

f. Encourage development of incentives that encourage preservation, reuse and rehabilitation of historically significant structures in the neighborhood.

These are the issues that people tell me that they are worried about as we redevelop South Lake Union. With this language the Council is saying that our policy in the future development of SLU will strive to preserve the historic character of the neighborhood.

Economic Development

As we attract new and vibrant industries to Seattle, we must recognize and reduce the financial risk the City may face. This cautious approach should also be applied to making land use changes and public investments in SLU in order to attract the biotech industry.

Undue financial risks are not good for economic revitalization and can actually hurt long-term goals for the health of our community. I want to continue a fiscal policy of diversified infrastructure investment in all of Seattle’s neighborhoods while we pursue making Seattle an attractive locale for the biotech industry. As we pursue new industries let’s not do it at the expense of our traditional businesses in other neighborhoods.

Attracting more jobs and hopefully more housing to SLU, we lead us to need a new City Light substation at some point.

I had a concern that we may move too quickly to build a new City Light substation specialized to the specific needs of the biotech industry. In my discussions with City Light staff it appears that they are taking a reasonable step-by-step approach to meeting the new power demand needs of SLU.

Nevertheless, the Council must remain vigilant and make sure that we “build as we grow.” We want to meet the capacity needs of new City Light customers without creating “ghost facilities” if the customers do not end up needing to use the power. We also want to ensure that we do not burden the ratepayers with the debt associated with a new substation. Rates will increase for all ratepayers if we build a substation with debt and a sufficient number of new ratepayers are not added to pay off the debt. To that end I added language to the Resolution that said we should minimize “the City’s financial risk and disruption to the community”.

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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Should The SCL Superintendent Be Reconfirmed?

To rework an old Italian politician’s declaration that “Caesar’s wife must be above suspicion”, in Seattle today citizens, residents and ratepayers are declaring that “City Light’s Superintendent must be above suspicion.” Caesar divorced Pompeia shortly there after; Gary Zarker’s marriage to City Light is similarly on the rocks.

However, the case before the City Council is not as simple as catching an intruder in one’s home at night. Rather it is a tale somewhat like Kurosawa’s movie Rashomon, although in this case with only two very different versions on how a tragedy occurred.

On one hand we have a story told by the Mayor, a number of city employees and some environmentalists, in which our City Light was a well-run ship and that its captain was the victim of the perfect storm – one which lasted a couple years. It is a story of innocence adrift in a sea of Enron dragons. It could have happened to any of us!

The other tale is one of a captain absent from the bridge, watching some other Mariners on the tube with the ship’s owner, all the while ignoring the investors’ hesitant concerns telegraphed to him from shore about the weather reports of approaching storms.

The problem is that in either case, there has been a significant loss of confidence in SCL. The decision to confirm or not reconfirm Superintendent Gary Zarker is one of the most important decisions this City Council will have to make in years.

The SCL Superintendent should be up for reconfirmation every four years. We, the Council, did not exercise that authority in the past and we should have. But we are doing so now because SCL’s management has come under severe criticism particularly because City Light has encumbered a huge debt and had Standard & Poor’s lower its bond rating three times within a 22 month period. These conditions significantly contributed to a 58% rate hike over the past three years.

On a national comparison, SCL’s recent financial performance ranks up there with Global Crossing and AOL Time Warner in that all three managed to lose more than one year’s revenue in a 12 month period. It should also be noted that other utilities were also negatively affected by the energy crisis of 2000-2001. Private companies that leaped into the deregulated world, that the Federal Government was pushing, have lost 85% of their market value. However, SCL did see the highest rate increases among all the public utilities in the northwest.

Seattle City Light is the crown jewel of our municipal government. Its budget is actually bigger than our general city government’s. It’s the third largest public utility in the nation. And as a public utility it serves the public interest not private investors. We, the Council and Mayor, represent the public’s interest and must act accordingly, even if it is a tough decision.

I have reached the inescapable conclusion that our Superintendent did not instill public confidence because of his lack of responsiveness to timely and repeated requests for dealing with the energy crises. This may be due to a heavy dependence on a top management lacking the experience needed to manage one of the largest and most complex public utilities in the nation.

Let me briefly illustrate my points.

The Council asked the Superintendent for a strategic resources assessment on how SCL would deal with the growing energy crisis. We did this two times, first in late 1999 and then again in late 2000. A strategic resources assessment looks at what are our current resources and which ones will we need in the future.

In a November 1999 Council Resolution the Council specifically directed the Utility to address a number of issues. City Light provided a 2000 Strategic Resources Assessment but a memo to SCL from the Council’s Energy Committee stated that it “did not include the thorough analysis of risk policies that had been requested.”

In October of 2000 the Council reaffirmed its interest in a strategic resources analysis by amending the rate legislation to present to the Council by March 31, 2001 a detailed assessment of whether its current financial policies are adequate to manage the risks associated with the current resource portfolio as well as other planned acquisitions. City Light responded six months late and the detailed analysis of risk management was still lacking.

In essence we never got a straight forward detailed answer. This was particularly important with regards to the sale of the Centralia coal plant. The Council made the decision 2 years before it was finally sold. The Council was aware of the risks when we made the decision to sell it in May of 1998. The Council requested that City Light look at their risk management policies as part of their 1999 work plan, because of the planned sale of Centralia.

We knew there was going to be a hole to be filed. SCL did not provide us a strategic review of how the energy was to be replaced. The level of analysis they did provide did not approach a strategic plan as requested.

With regards to risk management, the Superintendent has up to today not responded to the strong recommendation made by Deloitte-Touche that SCL should have loss limits as they are trading on the energy market.

That recommendation was made in August of 2000 and in November 2000 it was rejected by the Superintendent in writing: “At present we do not believe formal position limits are necessary. The RMC (Risk Management Committee) reviews both volumetric and price position limits routinely and makes decisions based on current and expected conditions.” Although last week Superintendent Zarker said he not recall rejecting loss limits at that time and now says it is something that could be considered with the Council.

I find it disturbing that SCL did not have loss limits in place for the year that SCL was trading in the energy market before the Deloitte-Touche report. In addition, the quality of the risk manual that guides that trading was considered inadequate by the Vantage Consulting report that was conducted through the City Auditor and released last year.

Lastly there is the issue of having top management at SCL falling short in the experience that we would expect of a utility of this size. The Vantage Report concluded that, “There is an obvious and critical lack of senior utility managers at SCL with in-dept electrical utility experience.” In particular it noted that the senior management lacked experience outside of City Light and that contributed to City Light’s problems in dealing with the energy market.

SCL contracted with EES to look at this problem and they have issued a report this week. I have reviewed the report and note that when the EES Report looked at the four top management positions, City Light’s upper management is more in-grown, less certified and less experienced than the other public utilities surveyed. City Light is one of the largest utilities in the nation, we can do better than having less than average management. Below I’ve summarized their findings.

Let me make clear that Superintendent Zarker has contributed much to SCL. With his strong background in budgeting; he was able to significantly reduce the number of City Light employees while maintaining a high level of service. And I believe that he has established a good working relationship with many the unions within City Light. And he has been an articulate spokesman for our region in opposing deregulation of the electric energy world.

But while these are qualities that I admire, they are not sufficient to overcome the general lack of confidence that I feel and one that I believe is shared by some others on the Council and in the general public.

I believe it is time to start securing a reasonable timeline for a transition to new leadership. And I expect that the Mayor, SCL and the Council will work together to see that happen in an orderly and timely manner.

Comments On The EES Consulting Report Reviewing SCL

Q. Did the Superintendent provide the senior management expertise that SCL needs to operate effectively in these times?

A. The Vantage Report concluded that, “There is an obvious and critical lack of senior utility managers at SCL with in-depth electrical utility experience.” In particular it noted that the senior management lacked experience outside of City Light and that contributed to City Light’s problems in dealing with the energy market.

In response SCL hired the EES Consultants to conduct a management review. This review was released this week. Interestingly, a visit to the EES Consulting website does not reveal any Management Review projects that they have conducted in the past. The general conclusion of the report could be seen as an argument for why the Superintendent should be reconfirmed.

But when I went through a second time and actually analyzed the data within the report, the conclusions could have been much harsher. In particular when the EES Report looked at the four top management positions, SCL came up noticeably short on experience in comparison to other public utilities. Let me illustrate.

Superintendent/General Manager – Their survey showed that the qualifications for other comparable personnel in this position included on average 25 years of electric utility related work. Zarker has 8 years. Many have graduate or legal degrees; Zarker has an undergraduate degree in liberal arts. Most have some utility-related experience outside of the utility where they are currently employed (Zarker has zero), and this outside experience accounts on average, for half of their total work experience.

Deputy Superintendent of Generation – The EES survey revealed that slightly more than half of the personnel in comparable positions have some utility-related experience outside where they are employed. City Light’s Generation Deputy has none. Most have graduate degrees and half are licensed engineers. City Light’s Generation Deputy is not a licensed engineer and has a bachelor degree in electrical engineering with some management training.

Deputy Superintendent of Power Management – Most personnel in comparable positions have graduate degrees and more than half are licensed engineers. City Lights’ Power Superintendent has an undergraduate degree in management and is not a licensed engineer.

Deputy Superintendent for Distribution – Most personnel in comparable positions have over 25 years of electric utility-related experience. City Light’s Distribution Superintendent has 6 years. Slightly less than half have some utility-related experience outside of their current utility. City Light’s Distribution Superintendent has none.

The most obvious conclusion is that City Light’s upper management is more in-grown, less certified and less experienced than other public utilities. Although the EES Report does not mention the relative size of the other 14 public utilities that are compared to City Light, it is probably accurate to say that City Light is one of the three largest if not the largest public utility in the survey in terms of number of employees and energy generated

Given this information one can only conclude that the Superintendent has not met the prevailing standard to staff SCL with the experience needed to manage one of the largest and most complex public utilities in the nation. This in fact was a need recognized by Zarker when he was first confirmed in 1994 and wrote to the City Council, “I am never going to be an industry expert, but I do expect to help the people in this organization to develop…”

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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CONTENTS:

• Alaskan Way Viaduct Update
• Revised Options
• Funding For Environmental Impact Statement (Eis)
• Funding For Project
• My Analysis

Alaskan Way Viaduct Update

This edition of Urban Politics is an update on the Alaskan Way Viaduct. I’ll first give an update on events since August, then provide my perspective at the end.

In September, I organized a meeting with state Department of Transportation Secretary Doug McDonald and two engineers from Imbsen & Associates, a California firm specializing in bridge retrofitting. At the meeting, Dr. Roy Imbsen stated that a retrofit would be viable as an interim solution, and could be used for as long as 25 years, until adequate funding was gathered for a more expensive project. He estimated this could be done for under $500 million, and could be done gradually, as money became available, and used in the areas most in need.

In the November General Election, Referendum 51, the state-wide transportation measure, failed, receiving only 38.4 % of the vote. It received 47% King County, 37.5% in Pierce County, and 39.7% is Snohomish County. These are the three counties that are authorized to conduct a regional ballot measure later this year on transportation financing in the Puget Sound area.

Revised Options

Mayor Nickels and State DOT are now proposing four revised options for replacing the viaduct., which were presented at the Viaduct Leadership Group meeting (members are listed at http://www.wsdot.wa.gov/Projects/Viaduct/leadership.htm ) and by Mayor Nickels in a press conference.

The options are similar to earlier versions, plus a new “surface” option. They range in estimated cost from $2.4 to $4.7 billion, with alternatives for further reductions. These are lower than the earlier range of $2.7 to $11.6 billion. Brief descriptions are listed below.

The cost ranges were developed using a 10 to 90% probability of covering project costs.

Each option includes:

· re-using the Battery Street tunnel;
· replacing most, but no longer all, of the seawall;
· a 30 foot wide promenade along Alaskan Way;

and no longer includes work planned at:

· Spokane Street;
· and Mercer Street in South Lake Union.

Tunnel

The tunnel estimate is reduced from a range of $10.1 to $11.6 billion, to $3.9 to $4.7 billion. This includes a temporary aerial structure, and includes re-connecting Mercer and Roy Streets over Aurora in the South Lake Union area (this discrete element is estimated at $290 million). The DOT identified a range from $100 million to $1.7 billion in further potential cost reductions. $4-5 billion was cut by removing the planned tunnel through lower Queen Anne and Belltown.

Aerial

The aerial estimate is reduced from a range of $5.7 to $6.4 billion from $2.7 to $3.3 billion, with potential cost reductions from $100 to $675 million. This option would provide a structure wider than the current viaduct, with for example, shoulder space.

Rebuild

The rebuild estimate is reduced from $3.2 to $3.5 billion to $2.4 to $2.9 billion, with options to reduce costs from $100 to $450 billion. This option would replace the current viaduct as it is, and includes retrofitting the currently existing viaduct from the Battery Street tunnel to Pike Street.

Surface

At-Grade/Surface: This is a new option for a surface roadway to replace the viaduct, and is still being developed. It could involve, for example, six lanes traveling at 30 m.p.h. Part of the rationale for this option is in case the viaduct becomes unstable or otherwise unusable, immediate action would be needed.

Some elements of the options can be mixed and matched. The City DOT will be developing cost estimates to re-connect other streets in South Lake Union.

Funding For Environmental Impact Statement (EIS)

The DOT estimates a $20 million cost to complete the Environmental Impact Statement (EIS). Where the entire amount will come from is unclear. $1.2 million in state money is still available, and the City provided an additional $5 million. This will only be enough to fund the study through late Spring.

Other possible funding sources include the Puget Sound Regional Council and Federal money, but with the recent results of the federal elections, the expected $2.5 million may be reduced. The City will be lobbying the State Legislature for additional funds.

Funding For Project

A number of potential sources were listed in the Leadership Group presentation, from federal funding to the regional transportation ballot measure, Port of Seattle, tolls, a City of Seattle Local Improvement District, City Sales Tax Credit, and City utility money (i.e. Seattle Public Utilities, City Light). No specific figures were given.

My Analysis

My position is that we need to solve the immediate problem, which is the danger to public safety and transportation from a damaged viaduct. Further, we need to base viaduct work on what we can realistically afford.

I believe Referendum 51 served as a reality check for the $11 billion tunnel option. I am pleased to see it has been eliminated. This is a step in the right direction and toward common sense.

I am glad to see that retrofitting, which I have urged be given serious consideration, has been incorporated as an element of the rebuild option. I did not believe it had been given adequate consideration.

It is good to see the planners have developed an option in line with the rationale for the project, namely a potential emergency. However, I would like to see a complete retrofit explored as a separate option. We need to face the possibility that even the $2.4 billion alternative may prove too expensive, given fiscal reality. The three counties that can approve a regional transportation measure all voted “no” on R-51, so passage of any regional measure is by no means assured. Without passage of a regional measure, retrofitting could be the only viable option, short of tearing the viaduct down.

We need to be very careful with using any city utility money. While replacement of the viaduct would require utility relocation work, any work needs to be done so that it does not soak ratepayers by paying for anything beyond the necessities for the utilities.

There are other large projects in the pipeline, in particular Highway 520, which is also vulnerable to earthquakes, according to state engineers. It won’t be cheap, and we need to keep this in mind in considering the viaduct.

It is also unclear whether the work previously included in the Viaduct project for solving the long-standing “Mercer Mess” and for Spokane Street has been completely eliminated, or just re-classified as a separate project. So it’s not entirely clear how much has actually been reduced from the options, or whether it’s just in another City plan.

Earlier editions of UP dealt with a resolution passed by the City Council in support of a tunnel replacement option, and a panel on the viaduct I sponsored in August.

http://www.seattle.gov/council/licata/up_136.htm

http://www.seattle.gov/council/licata/up_137.htm

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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Part I – See UP # 130

Introduction
How The CDF Originated
What The Paper Trail Reveals
What FTA Says About The CDF

Part II

Timing Of This Legislation
Impact On Our Utilities
My Amendments
Conclusion

Timing Of This Legislation

ST plans on beginning construction in early 2004. Construction should take about three and a half years. The entire 14 mile route will not be under construction at the same time. ST will operate in segments of approximately a quarter mile. However they have begun acquiring properties along the route and in particular MLK to make way for their future work. About 300 businesses, mostly small minority owned ones, will be impacted by the work along the entire route. About 65 have been identified as having to move. The remainder will try to stay open during construction but most will likely suffer a loss in revenue.

ST argues that they need the CDF to begin immediately so that these businesses may begin to tap into the fund for revenue relief and assistance in relocating. ST acknowledges that federal funds pay for some of the moving costs but on some “re-establishment” activities federal dollars are limited to $10,000 per business. In addition there are no federal dollars available for recovering loss business revenue during construction. Consequently ST states that the CDF is providing “supplemental” mitigation. That is mitigation above what the Federal government will provide.

However, the ST funds derived from local taxes face the same limitation that City funds would face, so if our City dollars will be used to address this problem, so can ST’s dollars.

Since construction is a year and a half away and the number of businesses that have to move before then would most likely be those impacted during the first year of construction, the amount of funds available for “re-establishing” them would certainly be less than the full amount ($21.5 million) set aside in the CDF for the “Supplemental Mitigation Account”. ST has not presented any detailed figures on how much needs to be provided in assistance to the first wave of businesses impacted. Instead the entire construction impact on all 300 businesses are presented as a single one time, immediate need.

In addition, the other half of the CDF is earmarked for a “Community Development Account” to be used for real estate development and community improvement projects. The Operating Plan, which has not been completed, will define the geographic boundaries.

Certainly the expenditure of mitigation and development funds should be planned before actual construction begins. But why should the City commit to spending $42 million now rather than taking it up during our normal budget period in the fall?

I strongly suspect the answer is that the motivation to pass this legislation now is to favorably influence the FTA’s current review of ST and more importantly to influence Congress, which has yet to decide on whether to provide the pending $500 million Full Funding Grant Agreement (FFGA). ST boosters need to show that local politicians, and thereby the general population, are still strongly behind ST’s light rail project despite its route being cut in half and it’s projected ridership reduced by two-thirds.

Impact On Our Utilities

Public utility rates should not be subsidizing ST. City Light is already in debt to the tune of $1.7 billion, why are we adding to that debt at this time?

Those on fixed incomes will suffer as will our industries. Recently when the Mayor toured a neighborhood, one of the seniors commented that her utility bill already takes up most of her social security check. By contributing the additional $17.5 million in City Light funds to the CDF, her rates will certainly go even higher.

Local businesses will also be impacted. The CEO of a local shipyard wrote to the Council last week that in consideration of the enormous rate increases last year this idea (of funding the CDF) is untenable.

Unfortunately a City Light ratepayer’s advisory group was not convened to review this proposal, which will most likely result in a rate increase.

My Amendments

At Friday’s Transportation Committee meeting I proposed four amendments. Two of them were accepted with some modification. These were to allow the City Council, with a two-third majority, to decline to accept a revised ST financial plan if they did not receive their FFGA money and also to halt payments to the CDF if ST was not meeting its construction schedule in a timely manner.

My other two amendments were defeated two to one (McIver, Conlin vs. Licata). The first would have eliminated the city’s utility contribution of $21.5 million to the CDF. The second would have stricken the City’s contribution to the CDF that was not generated by the sales tax rebate. The rationale for each is documented above. I do not believe that there is support on the Council for either amendment.

Conclusion

The basic purposes of the CDF to provide legitimate mitigation to those businesses negatively impacted by the ST construction and to provide additional funds for economic development in a low income community, are good objectives which deserve to be funded. However the legislative history is clear that the City wanted ST to finance the CDF and the FTA mandated that it should be part of ST’s mitigation package.

If the City ends up funding the CDF, then I believe we will be in a situation where we will be putting dollars into one of our pockets by way of taking it out of the other. We will be helping businesses that are in need of assistance by taking dollars away from other city residents and businesses that also need our assistance.

The only fair solution is that any agency which imposes hardships on a community (as in this case with ST) should be responsible for paying the mitigation of those hardships. Otherwise, we end up in a situation where the City is diverting our limited revenue away from ongoing city services to subsidize a projects that have their own revenue stream for that express purpose. ST has its own taxing authority. It should use it to finance the CDF, otherwise I fear that ST will continue to go down the path of taping the treasuries of other governments to balance their own budget.