DAVE ROSS

Bertha has arrived — so who pays all the cost overruns?

Apr 6, 2017, 9:51 AM | Updated: 10:51 am

Amid all the joy and infrastructure-induced rapture unleashed by the dramatic arrival of Bertha the boring machine at Mercer Street, there is now the question of who pays for the overruns. And former Attorney General Rob McKenna is perfectly positioned to educate us on this because he was involved.

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McKenna issued an opinion on this when the law was passed to fund the project to replace the Alaskan Way Viaduct. McKenna told KIRO Radio’s Dave Ross that the state agreed to contribute $2.4 billion, and there would be an allowance for up to $400 million in toll revenues from the new corridor, but that any amount of cost of the project above that $2.8 billion would have to be borne by the City of Seattle.

“They would have to come up with property taxes, for example,” McKenna said. “So I was asked for an opinion about whether or not that was actually enforceable. It’s one clause in a sentence in that statute.”

McKenna and his office issued an opinion saying that while, conceptually, the state could require to put the money in, that law in and of itself didn’t accomplish that. They would need to pass a separate bill to actually force the city to come up with its share of the money.

On McKenna’s advice, apparently, Rep. Ed Orcutt (R-Kalama), has indeed proposed a separate bill that would make it quite clear that Seattle would either have to raise its sales or property tax so that property owners who benefit from the new unimpeded views of the waterfront would have to pay for this.

Is that what McKenna was asking for in that opinion?

“Well, I wasn’t asking for it, I was just saying this is what you would have to do, Legislature, if you actually wanted to force the city to put in some money to cover cost overruns,” McKenna responded. “So, yes, Representative Orcutt, is saying, OK, you need another bill, here’s another bill to do that.”

Bertha politics

So let’s talk about the politics of all this.

Ross noted that the City of Seattle is single-handedly responsible for about 42 percent of Washington state’s revenues, paying a hefty load of the property and sales taxes. He asked whether that kind of calculation enters into whether Seattle really does owe the state money, or maybe vice-versa. Maybe the state is paying Seattle what the city actually chips in.

Not so fast, McKenna said.

“Let’s start with the fact that Highway 99 is a state highway, and it’s a corridor of statewide significance,” he said. “It’s crucial for trade, for movement of goods, not to mention a lot of people who live in the Seattle area. And this is an old debate, whether or not other parts of the state subsidize big urban areas like Seattle or whether it’s the other way around. Because the fact is that we export gas tax revenue from King County, including Seattle, to fund roads in rural areas, including rural areas that Representative Orcutt represents. Their argument, of course, is ‘Well, we need those roads and those highways because how else do you get agricultural products to market,’ for example. So, the fact is, we have a state system for a reason.”

What about the Bertha contractor?

There’s another legal standpoint to all this, too. Ross believes that the city v. state debate would all be moot if the Bertha contractor paid the cost overruns, because it seems to have been that their machine caused severe delays. Ross’ rationale for that belief is that once they fixed the cutterhead and brought it up to a more reasonable specification, the machine had no problem churning through all the dirt.

At this, McKenna owned up to a bias — he was the lawyer for the state when “this project started to go off the rails.” Still, he agrees.

“I think the contractor screwed this one up and the state has some pretty solid claims,” McKenna said. “You recall the contractor blamed a steel pipe they say DOT left in the ground from a monitoring project and that that is what broke Bertha. I don’t think that’s true. I don’t think that little steel pipe could have done as much damage as they claim it did. I think they had other problems.”

RELATED: What happens next for Seattle’s waterfront

McKenna said to keep in mind that Bertha was the biggest Earth Pressure Balance Machine that had ever been built.

“I don’t know about you, Dave, but when I go to the hardware store or the mobile phone store, I never buy the first edition of a brand-new software,” McKenna said. “… And yet the contractors said they could do this. They said, ‘Look, we can build it, it can be this big, it can be the biggest one ever, it will work.’ It was a very rich contract, lots of contingency and reserves built in, and they messed it up.”

McKenna said one partner in that venture is a Spanish company that is notoriously litigious.

“And sure enough, they started fighting with the joint-venture partners and with the state right away,” McKenna said.

Sounds like McKenna has already prepared his arguments for this case.

At that, McKenna laughed: “Hey, if the state needs me to put on my old uniform and come in out of the stands, I’m ready to go.”

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Bertha has arrived — so who pays all the cost overruns?