“This is an opportunity to make lemonade out of lemons,” said Councilmember Bob Ferguson, chair of the Council’s Capital Budget Committee. “This unique partnership allows the county to have a larger facility than was part of the original bond measure and, most importantly, legal assurance that county taxpayers will not be on the hook for possible cost overruns.” The legislation also commits funding from Harborview to allow the County Auditor to provide independent Project oversight.

In 2000, County voters approved $191 million in bond funding to support facility improvements at Harborview, which is owned by King County and operated by the University of Washington. The project includes expansion of the hospital’s critical care capacity, the construction of new facilities, and a seismic upgrade. Management of the project was performed by the University of Washington. Turner Construction was selected to be the General Contractor and Construction Manager for the original project but costs ran higher than originally agreed. In April, the Council reallocated $15 million in Harborview bond construction funds to continue construction of the Inpatient Expansion Building (IEB) at Harborview.

The council action today approves leases and funding agreements for an alternative financing, design and construction program outside of the voter-approved bond program. The plan approved today calls for a 14-story building, located on the southeast corner of Ninth Avenue and Jefferson Street that will include services such as the King County Medical Examiner, research laboratories, dry labs, clinical services, and the County’s Involuntary Treatment Act Courtroom. The building will also include retail space and five floors of underground parking.

“When this project came before the council six months ago, the options before us were bad or worse,” said Council Chair Larry Phillips. “I am pleased that we've found a solution that will meet the county's original objectives for expanding office and medical space for Harborview within the budget of the bond measure approved by King County voters. This agreement includes appropriate safeguards for the project and shifts risk away from King County and Harborview and onto the developer and the building contractor."

Construction of the building will be directed by developer Wright-Runstad who will manage building contractor Turner Construction. The construction costs are funded through an innovative lease/lease back financing method. Under this method, the County leases the land to NJB Properties, a non-profit agency that will issue tax-exempt bonds to finance the building project. NJB Properties then will lease the completed building back to the County, using the County’s lease payments as revenue to pay off the bond debt. When the bond debt is paid off after approximately 26 years, King County takes ownership of the building from NJB Properties.

“We were handed a problem and now have a solution: one that protects taxpayers, expedites construction, and fulfills the promises King County made to voters when they approved the Harborview bond issue,” said Councilmember Dow Constantine, chair of the Council’s Operating Budget Committee. “The Council has also added independent oversight and insisted on Harborview maintaining a cash reserve fund to further protect the public.”

“As the voice of the voters, the Council is in a precarious position,” said Councilmember Jane Hague, a member of the Capital Budget Committee. “We must ensure that all projects voted for under the Harborview bond project are completed on time and within budget.”

Because of the overruns on the IEB, Councilmember Ferguson insisted on—and the Harborview Board of Trustees agreed to—a legally binding funding agreement that commits Harborview to make lease payments of $13.6 million per year throughout the term of the lease, to maintain unrestricted cash reserves equivalent to two years of lease payments, and to provide up to $100,000 to assist in funding independent project oversight managed by the County Auditor. “Given the Project’s checkered past, it was imperative to include independent oversight to protect the wallets of taxpayers,” Ferguson said.