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Monorail Paper Trail

E-mails Reveal Monorail Agency Overlooked Warning Signs

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Annie Marie Musselman
THEY KNEW SMP board vice-chair Kristina Hill and chair Tom Weeks.
E-mails between Seattle Monorail Project finance director Daniel Malarkey, economists at the consulting firm ECONorthwest, and state Department of Licensing officials indicate that SMP staff knew early this year--months before the agency acknowledged the problem to the public and most members of its governing board--that the monorail's finances were in trouble. By April, the agency had enough information to know beyond a doubt that revenues for June--the first month the monorail tax was levied--would likely fall far short of expectations: 50 percent less than Malarkey's short-term predictions, and a third lower than the agency's original plan. But those in the know about the monorail agency's financial troubles opted to wait until August before taking action. In May, SMP staff told just two board members--chair Tom Weeks and vice chair Kristina Hill--about the likely shortfall.

The SMP has blamed the shortfall on a number of factors. First, the agency says the data provided by the DOL included a cover sheet that said it only included vehicles that were subject to the monorail tax. The actual spreadsheet, which Malarkey used to make his revenue estimate, included, in two separate columns, both new cars and used cars moving to Seattle from out of state (which aren't taxed) and other used cars (which are). The columns were labeled with arcane language that even the DOL acknowledges was confusing; Malarkey says he could not get a clear answer from the DOL when he asked what the two columns meant. (DOL spokesperson Brad Benfield says "it would not be odd at all" for such a document, known as a fiscal impact questionnaire, to contain conflicting assumptions.) Including both columns in his estimate gave Malarkey a total tax base (the value of all taxable vehicles in Seattle) of $6 billion, which led to the inflated revenue estimates used in calculating the agency's 2003 budget. (Malarkey's original estimate, calculated in August 2002, had come in between $4.5 billion and $4.75 billion.)

E-mails between the two agencies reveal that as far back as December, the SMP was already aware of the discrepancy. In an e-mail dated December 5, Malarkey expressed incredulity at the total on the licensing agency's spreadsheet, which was nearly one-third higher than Malarkey's $4.7 billion estimate. At the time, however, Malarkey opted to do nothing. "I was like, 'Right on--we're going to Northgate!'" Malarkey jokes now. "We didn't think it was high. We thought it was good news," he adds. Malarkey then adjusted the agency's 2003 budget upward, in keeping with the DOL's higher figures.

Meanwhile, e-mails indicate that the monorail agency also had evidence of the long-term shortfall, all the way back in April. On April 8, the DOL sent out its bills for June. The June revenue estimates totaled about $2.5 million--far less than the estimates in both the monorail agency's higher short-term budget and in its long-term financial plan. In an e-mail, Malarkey expressed alarm at the lower figures, which he said seemed "off" by a substantial margin. But SMP staff still didn't go public with the lower revenues, Malarkey says, because they wanted "to wait and see what the actual collections would be." When the totals did come in, the news was hardly encouraging: June revenues were $2.2 million--even lower than predicted. Benfield says such early revenue estimates, known as prebills, "generally do come in a little higher" than actual revenues. Prebills for September and October each came in at about $2.4 million.

Another e-mail shows that the monorail agency may have miscalculated its tax base as far back as August 2002 (before the monorail was passed in November 2002), when Malarkey came up with his original $4.5 billion-$4.75 billion estimate. In a December 5 e-mail to Evans, Malarkey explained that he came up with that estimate by extrapolating from 2001 tax revenues in Sound Transit's North King County subarea--90 percent of which is in Seattle--and chopping off 10 percent. In the e-mail, Malarkey said he "cross check[ed]" the August figures in December, using data from the first eight months of 2002. Malarkey's e-mail seems to imply that his calculations included new cars, which aren't taxed by the monorail, and didn't include commercial vehicles, which are.

Malarkey says now that he did adjust for "the fact that... new cars were out and commercial vehicles were in." Monorail spokesperson Paul Bergman was unable to provide documentation of Malarkey's calculations by press time Tuesday. But monorail activist Peter Sherwin says he did his own calculations without adjusting the figures, and he came up with an identical estimate. Benfield says the information the DOL provided Malarkey in 2002--tax-collection data from Sound Transit, and a database abstract showing vehicle values, ages, and addresses--"did not break things out by new or commercial vehicles." Evans, too, says he never spoke to Malarkey about comparing the two agencies' tax bases. He says he expressed concern in April about new and out-of-state used cars, "because it appears those numbers were included in the tax base" Malarkey was using.

Sherwin says the e-mails point to two other problems with the agency's estimates: First, the December ("cross check") estimate only includes data from the first eight months of 2002, excluding the slowest car-buying months of the year--an oversight Sherwin says could have contributed to the inflated revenue predictions. Second, the estimates are based on Sound Transit North King County revenues that erroneously included some parts of South King County, ballooning the SMP's estimates further. The monorail agency says the DOL didn't tell it about Sound Transit's error, which the DOL knew about last year, until this past May. Factoring in those adjustments, Sherwin says, he came up with a tax base remarkably similar to the SMP's latest estimate ($3.7 billion). But whatever the reason for the shortfall, Sherwin says, the bottom-line issue is that instead of going public with what it knew in April, the SMP waited until August to address the problem. "They clearly knew by April, and even more by May," Sherwin says. "Why would they wait so long to intensify their investigation?"

barnett@thestranger.com

 

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