Councilmembers Pedersen, Herbold, Lewis, Strauss Sponsor Budget Amendment to Authorize Bonds for Faster Investments to Strengthen Infrastructure Connecting Communities and Keeping our Economy Moving
SEATTLE, WA – To bolster bridge safety and boost jobs as Seattle builds back better from the COVID pandemic’s economic slump, labor leaders have voiced their support for new efforts by Councilmembers Alex Pedersen, Lisa Herbold, Debora Juarez, Andrew J. Lewis, and Dan Strauss to generate $100 million in bonds to help fix Seattle’s aging bridges.
Councilmembers signed on to co-sponsor the amendment during a public Budget Committee meeting October 28, which resulted in majority support. Over the weekend, labor leaders, who have encouraged similar investments during the past year, affirmed their support for this renewed effort to expedite investments in bridge infrastructure safety:
Billy Hetherington, Political Director for Laborers Local 242, added, “We know that in this world of COVID-19, the movement of goods and services have been essential to our daily lives as we try our best to work from home and social distance from our fellow citizens. We have seen the impacts a shutdown of a major bridge can have on the lives of Seattle’s residents. The Auditor’s report calls for $34 million to $100 million to adequately fund the preservation of SDOT’s bridge infrastructure, so this amendment is needed to address the backlog faster. Fixing our roads and bridges, throughout the region, has been overlooked for decades so I am happy to see Councilmembers making a stand to show this is a priority now.”
Heather Kurtenbach, Political Director for Ironworkers Local 86, said, “Seattle’s bridges are in need of extra care and attention. Leveraging budget funds into bonds will allow the city to make a bigger and bolder investment in our bridges without delay.”
Pedro Espinoza of Pacific NW Regional Council of Carpenters said, “May 23, 2013, was a perfect example of how bridge closures can impact our lives: a span of the bridge carrying Interstate 5 over the Skagit River collapsed, severely impacting the movement of Washington State goods and services. We need more funding to fix our bridges in order to avoid events like this in the future.”
Councilmember Alex Pedersen, Chair of the Council’s Transportation Committee said, “In a city carved by waterways and ravines, we rely on bridges to support all modes of transportation that connect us and keep our economy moving. After the West Seattle bridge closure, our bridge audit confirmed many other Seattle bridges in poor condition due to age and underinvestment. To build back better after the COVID crisis, we should accelerate the fixing of our city’s aging bridges not only to improve safety but also to encourage additional living wage jobs. Issuing bonds enables us to generate the maximum resources needed to tackle a backlog of safety repairs and create construction job opportunities. Kicking the can down the road risks missing the opportunity to lock in today’s historically low interest rates and could end up costing more in the long run. With the entire City budget in our hands now, we have the flexibility to leverage a modest investment to go big on bridges for safety and jobs now.”
Councilmember Dan Strauss, as Chair of the City’s Land Use Committee and Vice Chair of the Transportation Committee said, “Our backlog in bridge repair, maintenance, and replacement will require hundreds of millions of dollars and issuing bonds will give us the immediate financial capacity to make our bridges safer and more resilient. It is imperative we invest in our infrastructure to avoid preventable emergencies that could impact the safety and health of our residents and the movement of people and goods. For this to be successful we need to identify an appropriate revenue source for the bonds, and to have a shovel-ready project list in-hand for us to get to work on. We need projects to be shovel ready, so we don’t pay interest on bonds for work that isn’t ready to begin, and we need to take advantage of historically low interest rates – so let’s get going!”
Despite support from construction labor unions and bridge safety advocates, the Council became divided over previous efforts to bond for bridges as it tried to synthesize a variety of input on how best to invest just $7 million in new revenue it created from Vehicle License Fees. Some Councilmembers said they wanted to wait until the comprehensive Fall budget process, which is occurring now. The fiscal landscape has, in fact, widened because Council has before it the entire $7 billion budget proposal from the mayor, which includes $1.6 billion in flexible General Fund dollars. The proposed 2022 budget for the Seattle Department of Transportation (SDOT) is $718 million, an increase from last year, which includes both operating and capital spending. In addition to the varied sources of funds available to leverage the bonds, the Council could also raise the Commercial Parking Tax and/or take advantage of a forthcoming revenue forecast update which is likely to show an increase in funds available.
Here is the current title of the proposed budget amendment: “Amend and pass as amended CB 120198 to issue an additional approximate $100 million of LTGO bonds in 2022; add $100 million of LTGO bond proceeds to SDOT bridge-related CIP projects; and add $3.1 million of Transportation Fund to SDOT for debt service”
This budget amendment for bridge bonds, if incorporated by the Budget Chair into her rebalancing package or added by a majority of Councilmembers on November 12 per the budget calendar, would piggyback onto Council Bill 120198. That budget bill would authorize the Department of Finance and Administrative Services (FAS) to issue 2022 limited tax general obligation (LTGO) bonds for several projects already.
This budget amendment for bridge bonds would revise Exhibit A (Description of 2022 Projects) to CB 120198 to add approximately $103 million. While the exact list of bridges targeted for this investment is still being finalized, bridge safety improvements could include:
(1) add Bridge Seismic – Phase III: $61,000,000
(2) add Bridge Rehabilitation and Replacement – Phase II and other line item: $29,500,000
(3) add Structures Major Maintenance: $9,500,000
(1) $61 million for Bridge Seismic – Phase III (MC-TR-C008). While still relying on State and federal contributions for safety improvements and future planning, this funding could support seismic upgrades or other improvements to the Ballard Bridge ($32 million) and the Fremont Bridge ($29 million) that are no longer being funded through the Move Seattle Levy.
(2) $23.5 million for Bridge Rehabilitation and Replacement – Phase II (MC-TR-C039). This funding could support rehabilitation of the Fauntleroy Expressway ($6.7 million), Spokane Street Swing Bridge Hydraulic Overhaul ($5.1 million), Magnolia Bridge Structural Rehabilitation ($5.5 million), and University Bridge Rehabilitation ($6.2 million). These projects were identified in SDOT’s response to Section 4 of ORD 126327, which requested that SDOT provide a list of projects eligible for bond financing. In addition, $6 million for Magnolia Bridge Replacement Project (MC-TR-C083) to support a type, size, and location study for the Magnolia Bridge, the eventual replacement of which would need to be funded by other means.
(3) $9.5 million for Structures Major Maintenance (MC-TR-C112). The Council created this project in the 2021 Adopted Budget in response to the City Auditor’s 2020 report on SDOT bridge maintenance. The mayor’s proposed budget would allocate approximately $17 million for bridge maintenance, so this would boost the amount so that it’s closer to the minimum recommendation of the City Auditor.
The goal would be to tackle long-delayed projects, including bridge projects promised to voters who approved the Move Seattle Levy in 2015. In addition, Seattle would want investments to supplement, rather than replace funds, to maximize the leveraging of State and Federal dollars.
Interest rates on the most recently issued bonds were under 2.0% but, out of an abundance of caution and to be consistent with other estimates, City Council Central Staff is using an interest rate of 4.0% as a placeholder for the 20-year bonds. This bridge bond amendment would authorize up to $3.1 million of Transportation Funds to SDOT for interest-only debt service in 2022, assuming nine months of interest accruing in the issuing year. If issued at a 4.0 percent interest rate, and with repayment of principal beginning in 2023, the City would be obligated to fund approximately $7.6 million of debt service annually in future budgets for the duration of the 20-year term. Using a 2% rate, the City would be pay approximately $25 million of total interest over the life of the bonds or, with a 4% rate, the City would pay approximately $50 million of total interest over the life of the bonds.
While there is a cost of interest when issuing bonds (just as there is an interest cost when taking out a mortgage to buy a house), thanks to the time value of money, the $100 million received today to address Seattle’s immediate infrastructure needs could be worth more than $100 million trickling out over 20 years because relatively low interest rates would be locked in place for a period of 20 years. Delaying the issuance of the bonds could end up costing more if future interest rates rise. Moreover, bonding provides a large sum upfront to obtain more of what we need for our city’s infrastructure when we need it – now.
As the Seattle Times editorial board noted last week, “City Hall has a history of kicking the can down the road…The Seattle City Council ought to end this practice, and get to work on appropriately funding vital infrastructure once and for all.”
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