I told you so. The news keeps getting worse for tunnel supporters. Moody’s, the agency that rates creditworthiness of local government, has put Seattle and King County on their watch list. From the Seattle Times:
For anyone who thought the wrangling over the U.S. deficit and debt ceiling in the “other Washington” didn’t have much to do with this one, credit-rating agency Moody’s had a stark rejoinder Thursday: Think again.
Think again indeed. This is a land use blog. But if we had great land use in Seattle we wouldn’t need the tunnel. The fact is that if more people lived more closely together, in dense walkable neighborhoods, we could start phasing out projects like the tunnel.
And, the debate is sucking the life out of civic debate. For too long now we’ve been wringing our hands over the tunnel and the waterfront, while little has happened to make the big changes we need especially around station areas. We’ve invested billions in light rail as a region and Seattle, the largest city in the mix, still has ridiculously squat heights around station areas.
But maybe the silver lining in all the clouds around the debt crisis is the death of the tunnel project. Seattle will have to borrow money for the repair of the seawall. So will the Port and the State. Seattle is now on Moody’s watch list for a downgrade.
Moody’s warned that if there’s no budget deal and it cuts the federal government’s top-notch credit rating, the equally high ratings of King County, Seattle and Bellevue, the University of Washington and five local school districts would be placed under review for possible downgrade as well.
That at least raises the possibility that the next time the county or one of those other public entities goes to borrow money, it would have to pay a higher interest rate. All now have the highest rating of Aaa, which gives investors great confidence they will repay the debt on time and allows them to borrow money at the most attractive rates.
All of this makes me feel like Cassandra. Or maybe Mugatu from Zoolander.
And Moody’s isn’t just rattling it’s saber either. I think this is very likely to happen. The agency is now suggesting that anything short of a real solution to the crisis is going to result in a lowering of credit. It’s very likely to happen.
Reductions of the magnitude now being proposed, if adopted, would likely lead Moody’s to adopt a negative outlook on the AAA rating,” the credit rating agency said in a new report. “The chances of a significant improvement in the long-term credit profile of the government coming from deficit reductions of the magnitude proposed in either plan are not high.”
It added that “prolonged debt ceiling deliberations” have increased the odds of a downgrade
The tunnel project is already kind of hanging by a thread and there are lots of questions about where the money is coming from. If the cost of borrowing goes up, it’s hard to see how the tunnel projects cost projects won’t completely fall apart. That makes the possibility of overruns even more likely.
And sadly, while the tunnel project’s death would be a relief, it isn’t much of a silver lining. Increases in the costs of borrowing money will monkey wrench a lot of other good capital projects for transit infrastructure. But tunnel advocates need to be asked what are they going to do when there are downgrades in credit for agencies and governments on the hook for costs. Where will the extra money come from?