Updated with more background, detail, and piping hot donuts.

The Seattle City Council has just posted a draft agreement that seeks to indemnify the city if anything goes wrong with the state's deep-bore tunnel project and stipulates that the state—not Seattle taxpayers—must pay for cost overruns. The contract is a hybrid of language drafted by the mayor's office and new (arguably dubious) language inserted by the council. Here are some of the highlights.

Portions about cost overruns:

By entering into this Agreement, the CITY is not waiving its position that the CITY and/or its citizens and property owners cannot be held responsible for any or all cost overruns related to the portions of the PROJECT for which the STATE is responsible.

Each PARTY shall provide the funding and resources necessary to fulfill the responsibility of that PARTY as established in this Agreement.

The STATE shall provide necessary funding for all PROJECT costs as referenced in this Agreement without reimbursement from the City of Seattle, except for the CITY cost responsibilities established in this Agreement

Next is a provision that would ensure the state fulfill its obligations to rebuild the waterfront (after tearing down the Alaskan Way Viaduct), even if it runs over budget on the tunnel:

The PARTIES agree that the PROGRAM will not be complete until the elements in Exhibit D are completed.

Another provision—this one is interesting—says that if a tunnel isn't chosen after the impact studies are complete, then the city can back out:

The PARTIES understand that environmental review of the proposed PROJECT is underway at the date of this Agreement and agree that if an alternative other than the Proposed Bored Tunnel is selected, this Agreement may be terminated pursuant to the provisions of Section 28 of this Agreement.

But these provisions are not the final word on the city's protection from liability. This draft memorandum of agreement includes language in an earlier draft by Mayor Mike McGinn and some new language form the council. But the council also removed a key protection for the city. McGinn had stipulated that state cannot begin the project until the legislature decides who will pay for cost overruns.

In addition, the council added something unusual. This statement assumes that the project simply won't have any cost overruns:

WHEREAS, the PARTIES are entering into this Agreement on the assumption that the PROGRAM can and will be completed at or below the current WSDOT PROGRAM budget.

Really, city council? You're walking into a tunneling megaproject with that assumption? And you went out of your way to add that language?

It's not clear how binding this memorandum—again, still in draft form—is for the state. In a document outlining the need for the for the contract, the council writes, "Without the agreements, the State could potentially proceed with the project, provide no explicit protections to the City and avoid all significant City regulations." But it also notes, "The City’s regulatory authority is all derived from the State and could thus be pre-empted."

What the council seems to be saying (they are all in a meeting now so I can't ask them personally) is that this contract is our best chance to cover our asses. But if "regulatory authority is all derived from the State and could thus be pre-empted," then it leaves open the question about where money will come if there are overruns. The legislature has been clear about absolving any obligation to pay overruns. State law, as has been repeated to death, says Seattle property owners must pay and overruns and that state spending is capped $2.8 billion. Can the state ignore this contract—the city's regulatory authority—and, if costs do exceed estimates, impose those costs on property owners on the waterfront? Or could the legislature shift the burden to the City, the corporate entity, pre-empting the city's contract?

UPDATE: Mayor McGinn adds this statement:

The City Council's proposed agreement with the state does not answer the question of who will pay cost overruns, nor does it protect Seattle. The state rejected language requiring it to pay cost overruns and rejected a provision that the agreement would not take effect until the state legislature agreed to pay cost overruns.

At most, the proposed agreement states that Seattle does not want to pay cost overruns. But proceeding with the agreement while state law says the opposite leaves Seattle at risk for paying cost overruns.