When Peter Sherwin, the author of the second monorail initiative and a major supporter of the successful 2002 monorail campaign, turns into one of the Seattle Monorail Project's most outspoken watchdogs, you know the agency is facing more than just a minor blip in its budget.

Indeed, as monorail revenues continued last week to come in well below the agency's earlier forecasts, monorail diehards have been among the agency's harshest critics, lashing out at the SMP for failing to predict long- and short-term monthly revenue shortfalls ranging from about a third to nearly half of what the agency had projected. (The monorail agency, charged with building a $1.7 billion, 14-mile monorail line, took in about $2 million a month in June and July--half of the $4.2 million-per-month prediction used in the agency's 2003 budget, and just two-thirds of what the agency predicted in its original financial plan.) "They should have known about this earlier," Sherwin says.

Two major errors explain the revenue shortfall. First, the monorail agency's finance director, Daniel Malarkey, inaccurately interpreted a spreadsheet that showed the city of Seattle's total tax base (the value of all taxable cars in Seattle) at $6 billion. The spreadsheet, provided by the state Department of Licensing, included both "renewals" (used cars, which are taxed by the SMP) and, in a separate column that the SMP contends was confusingly worded, new cars and used cars moving to Seattle from out of state (which are not taxed). Malarkey used both columns in calculating his revenue predictions--a tax base fully 33 percent higher than earlier estimates. That led to the short-term shortfall of nearly 50 percent.

Second, even the monorail's long-term tax base assumption was about 20 percent higher than what the SMP now says is the actual base; that shortfall still hasn't been fully accounted for.

Cindi Laws, a member of the monorail's governing board, acknowledges that there have been "times where I've said, 'Why didn't Malarkey raise that issue?'" Still, none of the agency's supporters were ready to call for Malarkey's resignation. Laws says she's "very glad" that the SMP has hired an outside firm to analyze the monorail's tax base. But that firm, ECONorthwest, is closely associated with Malarkey, who served as its managing director from 1992 to 1999--a rather ham-handed move for an agency that currently needs, more than anything, the appearance of fair play.

What happens now? At last week's SMP finance committee meeting, agency head Joel Horn laid out several possible solutions to the long-term revenue shortfall. Most involve steps that would have to be taken by the DOL. Two suggestions--collecting the monorail tax on used cars that come to Seattle from out of state, and requiring Seattle residents to register their cars where they live (rather than out of town)--would require changes in state law. (The DOL contends that the law authorizing the monorail tax--which says cars should be taxed upon "relicensing"--doesn't allow it to tax used cars from out of state.)

In the meantime, the SMP's primary plan appears to be what agency spokesperson Paul Bergman calls "prudent planning"--in other words, cutting costs. Laws predicts the agency may have to start axing "big-ticket items," such as mitigation and the monorail's 19 stations, to make up for the shortfall. Instead of buying land to build stations out of the street, Laws says, the agency might consider putting them in the public right-of-way. "If we don't buy a lot of property, we save a lot of money," Laws says. The disadvantage, she adds, is that "[stations are] big and bulky." Obtrusive stations were a major issue during the monorail campaign, when the monorail agency said it would do everything possible to ensure that stations, particularly downtown, were tucked into private property and out of the public right-of-way.