(This post is part of a series.)
For a couple years now I’ve been obsessed, on and off, with the fate of the Alaskan Way Viaduct: its history (Seattle’s first major urban highway), its present (a seismically unstable eyesore that cuts off development options on Seattle’s downtown waterfront), and its future (still a conundrum—the city and the state want to replace it with a $4 billion tunnel, but nobody can figure out how to pay for it).
It seems to me that there are two separate issues concerning the future of the Viaduct. The first is this: in fiscally straitened times, is it even possible to raise $4 billion to pay to replace 2.2 miles of highway? And the second is, even if it were financially possible, would replacing the viaduct with a tunnel really be a good idea?
I have no special insight into either question, and I’ll leave the second question to a subsequent post, or posts. But it’s seemed to me that the answer to the first is, quite likely, no. That is, it’s going to be really, really tough to raise enough money to pay to replace the Viaduct.
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Even if the project stays on budget (which highway megaprojects rarely do), $4 billion is a lot of money. The federal government might contribute a little bit; the project might pick up a couple of hundred million from a land improvement district (collecting taxes from landowners who’d benefit from removing the existing structure); the state’s already dedicated $177 million from a recent gas tax hike; the Port of Seattle might add a little more; and tolling users of the new might pay for $100 million in construction costs, on the outside.
Now, you’d think that, with a hundred million here and a hundred million there, you’d pretty soon be talking about real money. But you’d be wrong. Even with all these funding sources, someone’s going to have to come up with well over $3 billion.
Tunnel proponents tend to remain publicly hopeful that most of that $3+ billion will come from the state or a Puget Sound regional transportation district. I’ve argued before that that’s a mirage—the main way that the state or region would pay for the viaduct is by raising Seattle residents’ taxes. Folks outside of Seattle—who rarely drive on the Viaduct or even through downtown—are going to be reluctant to pay for a project they never see. (Like salmon, taxes for transportation tend to return to the places where they were spawned.)
So when Seattle Viaduct boosters say that someone else is going to pay for the tunnel, what they really mean is that someone else is going to take blame for raising Seattleites’ taxes.
Of course, I could be mistaken. The state senate is making noise about raising gas taxes by 15 cents per gallon in order to contribute $2 billion more to the Viaduct—a prospect that I think is unlikely to pass, but which would wind up giving considerably more to the Viaduct than Seattle residents pay in gas taxes (a fact that I’m sure will not remain unnoticed by legislators from other parts of the state).
But let’s say, just for fun, that four-fifths of the unaccounted-for funding—roughly $2.7 billion—will have to come from Seattle taxpayers. And let’s say that those taxes will go to pay off 30 year bonds, at today’s high-quality municipal bond interest rates (4.7%).
I did a little playing with the numbers over the last few days. Factoring in the costs of issuing the bonds, and assuming that the nominal amout of tax collected will rise gradually over 30 years, it looks as though, once all of the bonds had been issued, city residents would have to pay at least $150 million per year to finance the construction debt.
To put this in perspective: $150 million is about three-quarters of all property taxes (pdf link, see page 31 for exact figures) Seattle expects to collect for its general revenue fund in 2005. And it’s about $25 million more than local taxpayers’ contribution to the city’s public schools.
On a per capita basis, the story is just as grim. An annual payout of $150 million amounts to about $270 per person—or nearly $1,100 for a family of four. And that’s just the first year—payments would continue for 30 years, though the per-capita share would likely decline with inflation and population growth.
[Geek note: When I was playing with the numbers I structured Viaduct tax collections so that they’d rise by 2% per year in nominal dollars—meaning that they probably fall in inflation adjusted dollars. But there seem to be lots of ways of structuring a debt repayment schedule: you could increase the payments faster than inflation, meaning that payments would be smaller in the early years; you could start them out high and reduce them over time; you could shorten or lengthen the term of payment, etc., etc. Which schedule the Viaduct would choose would depend on a lot of factors that I’m not qualified to judge. But the bottom line is this: my family’s per-capita share of Viaduct construction costs would probably be at least $1,000 per year, once all the bonds had been issued. Also note that the municipal bond interest rate that I used is much lower than what’s assumed in this study (big pdf) of how tolls could finance the SR-520 floating bridge, so this is probably a low estimate.]
We could, of course, turn to the reconstructed Viaduct’s drivers to help pay for the costs. That would only be fair—the people who benefit most directly from the Viaduct are the drivers themselves. But transportation planners have already concluded that tolls on the new tunnel could finance less than $100 million in construction costs. And if you did expect tolls to finance the full $4 billion for the Viaduct, drivers would have to pay about $6.50 for a one way trip (again, with tolls maintained over 30 years to pay off the construction costs.)
To me, these exhorbitant figures make me wonder: is there anyone in city government who’s seriously looking into whether rebuilding the Viaduct is worth the cost?
UPDATE: Some typos fixed—though I’m sure there are more. Thanks to folks who emailed me about them.