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Wednesday, November 14, 2007

On Balance, Or, Running A Business-And A Government

Todays will be the first of a series of stories in which we will explore an unusual Government, the Port of Seattle. This municipal corporation is the Nation’s first to be charged with operating a port facility in the public interest; and the challenges of aligning the interests of the Port’s customers and the interests of the owners (the voters of King County, Washington) will be the focus of the conversation.

It is a complex story that describes a Government in change, a Government affected by new patterns of voting, and a Government that is involved in creating regional transportation solutions while fighting a history that has engendered considerable public distrust.

We don’t today know where the story will end, because the outcome is yet a work in progress; but we will hopefully create a conversation that revolves around what Government can or can’t do for us, and how it sometimes gets done.

We’ll start with some history, and today we’ll start to introduce the important staff and the Port Commissioners as best we can-but as I said, some of this is still a bit of a mystery.

So let’s start with that history...

Seattle is a city that is defined by its relationship with maritime commerce: the 1896 Klondike gold rush brought the city into the 20th Century, fishing and shipbuilding have waxed and waned over time, and the evolution to container shipping has had its impact.

In an effort to take control of that relationship, the local citizenry voted in 1911 to create what the Port reports was:

“...the first autonomous municipal corporation specifically tasked to develop harbor and port facilities to encourage commerce.”

The proximity of Seattle to the Pacific and the rich fishing grounds of Alaska caused the Port to open Fisherman’s Terminal in 1912 (and for my Brit friends, true cod fish and chips right off the boat that were to die for were served at the Terminal’s tavern for many years...mmmm, sooo good!). The Seaport Division began to open commercial facilities to supplement their operations in 1915; and in 1949 Seattle Tacoma International Airport (SeaTac) entered into the Port’s purview with the creation of the Aviation Division.

More recent history has seen the port open public marinas, cruise ship terminals, a grain shipping terminal (Eastern Washington is a giant farm, producing crops as diverse as wheat, onions, apples, hops, and grapes that produce some of the finest wines found anywhere), and a conference center.

Changes in the way the Port does business has also created the need to manage relationships with tenants, lessees, customers and other stakeholders in new ways; and in the newest chapter of its history the Port is proposing to embark on a reorganization that will create a new Real Estate Division for that purpose.

A fourth Division (Corporate, Professional, and Technical Services) is also proposed, and its name offers a pretty good idea of its functions.

There are at least two other histories of the Port that should be considered: the recent history and near future of the Port’s capital plan, and the highly contentious history that surrounds the Port’s relationship with the other stakeholders.

Let’s start with the easy one first: let’s follow the money.

For the purposes of this discussion, we’ll be working from the proposed 2008 Port of Seattle Budget...which, as the lawyers say, will be herein referred to as “the 2008 Budget”.

More or less $3 billion is in the capital budget for the period 2007-2012 (table III-1 of the Budget), and $619 million of that is proposed for the 2008 Budget-the Aviation Division spending just over 55% of that, the Seaport and proposed Real Estate Division each spending about 20% of the total.

A series of capital improvements are underway at the Airport that include terminal upgrades, a baggage handling system upgrade, and the construction of a third runway-which has been the source of a great deal of tension between the Port and the local residents who live in the flight path. (Issues relating to the baggage handling system pose a problem of lesser intensity.)

The Lora Lake controversy, as the troubles with the local residents have come to be known, is a topic we’ll explore further...but for now, back to the money.

The Seaport is also investing in its real estate holdings, and about $25 million is projected for container and cruise ship terminal improvements, and another $6.5 million for security and “Green Port Initiative” improvements in the upcoming year.

In a move similar to the Alameda Corridor project in Southern California, the Port of Seattle, King County, State of Washington and Burlington Northern Santa Fe Railway are involved in a process that is intended to dramatically increase the amount of freight that can transit the Pacific Northwest by train by raising the height of the railroad tunnel that bores through the granite of the Cascade Mountains at Stampede Pass; thus allowing “double-stacked” container trains to transit the mountains at that point.

Land swaps and cash payments by the various parties will create a rail right-of-way that also supplements a series of hiking trails, creating a recreational and commercial asset.

This action, far from the port’s terminals, will allow the Port to move far more cargo...and as the current capacity of the existing rail lines has nearly been reached, this is a project of great importance to the Port’s future.

The Port is allocating $103 million to this project in the 2008 Budget, and it is the largest of the Real Estate Division’s projects by far-all other spending by the Division totals $12 million. (The discussion of whether this $12 million is being invested in projects that remove jobs from Union jurisdiction is the current iteration of another long-running controversy that we will discuss further as well...but not today.)

The Port is allocating $40 million to debt service for previous Seaport improvements.

Balanced alongside those expenses are projected combined 2008 operating revenues of $476 million and expenses of $306 million; of which $42 million will be allocated to paying off the capital improvements.

The Port also has the ability to levy taxes. The King County Assessor collects those taxes based on the value of property in the County and the percentage of the “levy” on those values that voters have authorized.

Some of the expenses we discussed above will be paid from current tax levies, and some from general obligation bonds, which are funded from future income.

Income from tax collections is projected to be $78 million in the 2008 Budget (not all of 2007’s budget will be spent, so there’s also $23 million carrying over from last year)...and the question of whether the Port should be collecting property taxes while making an operating profit is also controversial...but also a discussion for another day.

(Just for the record, the Port anticipates employing a bit over 1700 “FTEs” in the Budget.)

That’s hardly a complete picture of the Budget, but it gives us place to begin the discussion.

Let us now return to the Lora Lake controversy.

Rather than reciting the history of the project myself, I’m going to invite a surprise guest: Port of Seattle Commissioner Lloyd Hara (who was kind enough to answer my questions last night even though he was throwing a party at the time...thanks, Commissioner!), who sent the following description of the problems in an email from August 22nd of this year that presents an excellent example of how it can be very tough for an elected official to balance the competing interests of a variety of stakeholders:

“I came into office believing the great Third Runway disputes were finally settled - but this smoldering legacy erupted into a political firestorm when time came to demolish the Lora Lake Apartments.

The Commission (3-2, I voted with the majority) decided to demolish the units, per our year 2000 agreement with the City of Burien and King County. King County Housing Authority filed suit and got a stay to block demolition. It's now a no win situation, where any outcome could end up in lawsuits brought by King County or Burien. We are reviewing our options.

Background: In 1999, under FAA mandate to clear all residential units in the Runway Protection Zone, the Port purchased Lora Lake Apartments. As Third Runway litigation delayed construction, the Port found itself holding usable property that could be occupied in the interim.

We could have had these units managed privately (underlined in original) for market rate rents, and then demolished without controversy, but all parties felt it would serve the greater social good to have KCHA manage them as public housing.

Housing advocates questioned the wisdom of operating public housing so close to the airport, but the Port, City of Burien and KCHA signed an agreement for the Housing Authority to operate them. All parties agreed they would be vacated (underlined in original) and demolished at the end of this five year term (later extended to seven).

With demolition deadlines approaching, KCHA orchestrated a political campaign and mobilized interest groups to agitate for preserving Lora Lake. (KCHA informed us of their new posture only when vacate notices went to tenants in March of 2007.) This left everyone scrambling for last-minute solutions.

When the Commission learned of KCHA's intent to breach the agreement, we decided to honor Burien's wishes on the matter. Burien then chose to proceed with demolition, and we concurred. Then, as time ran short and political pressure mounted, two Commissioners up for re-election switched their position and opposed demolition. I came under pressure to join this faction.

I have worked hard to restore public trust and improve the Port's public accountability, and my personal trust was on the line with Burien. I weighed all the facts, and decided that it was very important to keep our agreements. We have similar agreements with other cities around SeaTac, and dishonoring the Burien agreement would invite other lawsuits on all sides. [See Tay Yoshitani's op-ed.]

Criticize my vote if you will, but I have built a career upon trust and do not feel that this issue merits breaking that trust. I am also disappointed in KCHA's breach of faith, housing activists theatrical string-pulling ("lamentations" and lock-ins), and my colleagues enthusiasm for political football.

I look forward to working our way through this mess, and it may be possible to preserve some housing in the process.”

(to the extent possible, emphasis is presented as in the original email)

To close out today’s conversation, a few words about the changing of the players:

Recent events, which are numerous and “spicy” enough to warrant their own story (perhaps even two), have created a feeling that change is warranted at the Port. Alec Fisken and Lloyd Hara’s elections to the Port Commission were the first of those changes.

The Port’s former CEO, Mic Dinsmore, has recently “left the building”, and he was replaced by the abovementioned Tay Yoshitani.

Our final topic for tonight’s story is related to the changes in how we vote.

Two of the five Port Commissioners stood for election this November 6th, but because many voters now use absentee ballots (voting by mail) the results of those elections are not yet known.

Two of the candidates are considered reformists, two are not (these are non-partisan positions); and the results are so close as of this writing that a mandatory recount is entirely possible.

At this point, today’s summary:

Seattle’s residents, conscious of their maritime tradition, took it upon themselves to own their own Port...and that Port has evolved to include an Airport, to be involved in freight mobility on a regional level, and to engage in real estate development.

There are major capital improvement projects underway funded by operating profits and tax collection.

There are so many contentious issues to be resolved that we aren’t even bothering to list them all today, but they are of sufficient severity that the Port has a new CEO-and of the five Commissioners one’s a reform Commissioner, and the two Commissioner’s elections that were held this year are currently too close to call.

And we saw an example of an elected official facing a series of bad choices that took a tough vote-and then took the time to explain why.

Next time: we introduce more of the stakeholders...which will inevitably lead to more discussion of controversy...and, if we’re lucky, some discussion of compromise and progress.


Donvila said...

Sound interesting already. I'll be watching for the next post.

fake consultant said...

there is lots of "spice", but the trick with this series will be to present the meat of the thing without getting too sensational about it.

fish Lake said...

Tales of Civil and Civic Servants go on and on
The whole emphasis seems to be not to draw attention to your self and your boss in order to stay out of the limelight and out of trouble
Its all about putting time in - not what is accomplished in any manner

fake consultant said...

in this case, there's a lot of that-but there are also new tensions as a reform movement attempts to take hold.

it's also been suggested that the commission is becoming less of a place to go and hide and more of a place to set oneself up for an "electoral promotion"..but to do that you have to, by definition, be a public figure that can garner voter attention.