WCIT's response to Panel One's report titled, "Lost Opportunities: The Budget for the Seattle Meeting of the World Trade Organization"

This is the second and final section of the report of the citizen's panel convened by the Seattle City Council's Accountability and Review Committee to look at the decision to host the WTO Ministerial Conference. Part one was delivered to the Committee on June 29, 2000.

I. Introduction

Panel Charter

The Seattle City Council established the World Trade Organization Accountability Review Committee (WTO ARC) to create a documented account of the events of the 1999 World Trade Organization (WTO) Ministerial, evaluate the "lessons learned" and recommend possible legislation or policy changes to the City Council. Three citizen panels, corresponding to the three main areas of inquiry, were established to direct the review and interpret documentary and testimonial evidence collected by the WTO ARC staff.

The formal charge to Panel One, WTO Invitation Panel, from the Committee was to examine Seattle's decision to host the WTO Ministerial. The Panel was asked to review informal and formal contacts by officials of the City and other agencies to determine what lobbying, negotiations and briefings took place and what agreements were reached. The Panel was also asked to explore the following issues:

1. The date when the possibility of hosting the WTO Ministerial meeting was first known to City officials, the identity of persons involved in those contacts, and the nature of their contacts.
2. The identities of all City, county, state and federal employees, and others who participated in the decision to seek to have the City of Seattle serve as host city for the WTO Ministerial meeting.
3. The participants, dates, places and duration of all meetings involved in seeking to become host city.
4. The roles played by city, county, state and federal officials, and private individuals and organizations, and any contacts with non-U.S. nationals that preceded the decision for Seattle to host the WTO.
5. The criteria, judgments, and bases used in making the decision to host the WTO.
6. Details of any budgets, estimates, spreadsheets, or predictions about the costs or fiscal impacts of hosting the WTO meeting, and how those costs would be borne.
7. The questions or deliberations about fiscal or legal responsibility for the WTO Ministerial meeting, the results of those deliberations, and the nature of any assurances made by any city, state, or federal officials about financial responsibility or the possibility of reimbursement.
8. The texts of all correspondence, agreements and communication between city officials or employees and the Seattle Host Organization (SHO), the WTO, and any county, state or federal agency, including Congress, the Department of State and the White House.

In the course of conducting interviews and reviewing documents provided by staff, the Panel identified several key issues around which to focus their recommendations:

• The timing and nature of the City of Seattle's commitment to expend City resources in hosting this conference;
• Budget assumptions made at the time the commitment was made;
• The process through which the City of Seattle made the commitment;
• The identities of individuals and organizations making financial commitments to host the WTO.

II. Findings

The evolution of the World Trade Organization Ministerial budget from December of 1998 to December of 1999 is outlined below:

Evolution of the budget for the 1999 WTO Ministerial.

[WCIT Comment: This table appears to be misleading as it does not reflect the budgeting process by the Seattle Police Department (e.g., reference below that by March, 1999 SPD had estimated costs for security of $3 to $4 million). Shouldn't there be some attempt to show what budgeting went on during the interim months between December, 1998 and the conference date (e.g. July 1999 and September 1999)? Also, SHO in fact raised cash and in kind donations of $7.2 million. It should also be noted that SHO relieved the City of security expenses of $782,000 (including the $320,000 cash payment made.) WCIT Rebuttal letter dated 8/21/00 at pages 8-9.) Substitute this table for the following one:

As preparation for the conference got underway, planners failed to define the real costs and sources of income. Each organization had different reasons for not completing a responsible financial analysis of the event. At the same time, the fragmentation of the planning and budgeting responsibility made it easier for organizations to avoid responsibility for the status of the overall project.

Three factors explain the failure of public officials to confront the security costs for the event:

1. The World Trade Organization Ministerial was an unknown event in terms of size and logistics. Its real complexity was revealed slowly in late 1998 and continued to evolve well into the latter part early of 1999.
2. As the size of the event became clearer, those who should have been sounding alarms had an interest in minimizing looming problems. Among other examples, the Seattle Police Department never definitively warned city officials that its resources were inadequate to cope with the threatened protests. The mayor's office avoided confronting the event's growing claim on taxpayer resources. Federal officials failed to vigorously express their concerns over the confused planning process.
3. Officials were advised that there had been civil disturbances in 1998 in Geneva arising from opposition in Europe to the WTO but underestimated the extent to which the city would be the subject of demonstrations in Seattle in opposition to the conference. Officials did not heed the historic references of opposition to the WTO (civil disturbance) and related security costs.

A review of the organizations involved and their role in the process follows.

The Seattle Host Organization/Washington Council on
International Trade

The bid process

During the previous months of negotiations, it had become clear to the individuals working on the bid that neither the World Trade Organization, nor the U.S. State Department, had a reliable list of what would be required to host the conference. Requests for meeting and office space had changed significantly in the course of discussions with the WTO and the State Department. By the time the bid was prepared, WCIT, and officials from the Seattle/King County Convention and Visitors Bureau, reported that they were not working with a reliable list of requirements.

As it turned out, both the federal agencies involved and World Trade Organization had been underestimating the requirements for hosting the conference, and SHO the Washington Council on International Trade had overestimated SHO's it's ability to raise money. It (through the SHO )ultimately raised roughly $7.2 million in cash and in-kind contributions towards half of its original $9.2 million target. (See WCIT Rebuttal, page 7)

Clearly the process as administered by the federal government did not lead to a clear and definitive allocation among itself, the private sector and the local governments as to the responsibility for the expenses that would be incurred in connection the conference. SHO was never in doubt about the nature of its responsibilities, however, and budgeted for them.

Accounts from those involved in the bid process suggest that WCIT was willing to forgo placing any financial limits on its commitment because it felt that doing so would make its bid less attractive. But the failure to require a clear projection of the requirements meant that WCIT and all its partners in conference planning were exposed to a good deal of risk.

Security planning

The record In preparing the bid in December of 1998, the WCIT was effectively budgeting not only for itself and the convention center, but also for the City of Seattle. Individuals working on trying to sell Seattle to the selection committee came up with an estimate of $1.5 million for security costs. Documents indicates that the $1.5 million figure in the December 1998 letter suggest that the amount was based on city security costs for the APEC meetings, held in 1993. [WCIT Comment: The December letter by its terms indicates that this amount would be" passed through" to the various agencies. There is no evidence that this letter was intended as an attempt to budget for the City. WCIT, SHC and SHO could only make estimates for fundraising efforts. They could not and did not purport to make estimates for the City. Whether the City and the SPD should have been making their own estimates is another matter but it is unfair to draw the conclusion that the letter was an attempt to discharge any responsibility for the City or the SPD.)

WCIT SHO has had maintained the position determined that security issues were the city's responsibility, but that it should attempt to reimburse the taxpayer costs. It is not clear whether the $1.5 million was intended to be the cap on the amount of the reimbursement, or whether SHO's WCIT's open-ended financial commitment might have extended to covering higher security costs. WCIT maintains that the commitment was a commitment made to the federal government and not one made to the City and that it was a commitment to raise a fixed amount and was not an open-ended commitment. (See WCIT Rebuttal, page 10) In any case, the city never asked SHO WCIT for any additional support.

There is no evidence of any city involvement in the development of that $1.5 million estimate. Instead, it seems to have been part of the overall "rough estimate" calculation that went into the December 16, 1998 bid.

The budget part of the bid process was not done with a great deal of detailed care, in part because the requirements were vague, and in part because it was only a bid, and no one felt confident at the time that Seattle would be selected as the site for the conference. But when Seattle was selected, in January of 1999, it was based on an open-ended financial commitment from WCIT, and an apparent cap of $1.5 million on reimbursable security costs.[WCIT Comment: this last paragraph is gratuitous and does not add to the issue of security planning. It is clear that the estimates contained in the letter were done at a time when neither the federal government nor the WTO could clearly define what they wanted in terms of the parameters of the conference. The testimony and record is that the $1.5 million was based on the APEC expenses. That has already been stated above. Is it reasonable to conclude that (other than with 20/20 hindsight) more could have been done in December, 1998?

The Mayor's Office

The mayor and his staff, and the Office of Intergovernmental Relations, were involved in promoting the conference and budgeting for it from the beginning. But they failed to require the kind of financial analysis that might have protected Seattle's taxpayers from expenses that they will ultimately end up paying.

Promoting Seattle to the WTO

The Mayor's Office played an active role in helping to bring the WTO to Seattle, in the same way that it would be expected to assist in bringing any large event to the city. The mayor served on the Seattle Host Committee, lending the city's support to the bid, wrote letters supporting Seattle as the site for the conference, and met with visitors from the State Department and the WTO in Geneva who were considering Seattle as the host for the meeting.

The Office of Intergovernmental Relations served as the mayor's staff in those promotional efforts, staying in touch with the key individuals at SHO the Washington Council on International Trade and identifying issues that might help or hurt the city's bid.

Whether because all the effort was focussed on promoting the city as the conference location, or because officials believed that Seattle's odds of being selected as host were small, there is no record of any city official expressing concern or interest about the potential costs to the city. The only memo concerning financial matters is one from the Office of Intergovernmental Relations to the mayor. It notes that he should avoid bringing up financial issues with a representative of the State Department, because the State Department was still unhappy over funds taken from its budget to reimburse Seattle for APEC costs.

Financial issues are a recurring topic in correspondence from the State Department, and those letters show some confusion about the division of financial responsibility. For example, John Dieffenderfer, who was in charge of site selection for the State Department, wrote that security and other costs "are the sole responsibility of the city, and you should not look to the U.S. government for any assistance/relief." He and other federal officials continued to see the bid as coming from the City of Seattle, in part because of the presence on public officials on the Seattle Host Committee and in the lobbying efforts. [WCIT Comment: does the record support the conclusion that the federal government viewed the bid as coming from the City? The letter does not state it is from the City. It speaks of corporate community and SHC. See WCIT Rebuttal, Attachment C, page 8)

City officials saw the bid process as a private initiative that had support from the city. The Washington Council on International Trade apparently believed that the active involvement of public officials meant that it had tacit approval to commit the city to acting as host for the conference. [WCIT Comment: There is no evidence that SHC, SHO or WCIT believed that it had the tacit or express approval to commit the city to any undertaking nor was there any attempt to commit the city. The private sector did believe that there was support on the part of the City, King County and the State as well as the congressional delegation that the conference should be held in Seattle. However, as indicated in WCIT's rebuttal, under Washington state's constitution, neither the City nor any other local government entity (e.g., the State or County) could host (underwrite) the hosting activities of the conference. Unlike the case of a possible bid for the Olympics where the City was asked to formally approve the issuance of an invitation, the City was not asked by the federal government or the WTO to formally approve the proposition of holding the conference in Seattle. Presumably if the City had objected to the proposition it could have made that sentiment known. But if the conference was nevertheless held in Seattle, the City would have been required to provide appropriate security.]

Promoting the WTO in the city

One of the reasons given for the lack of budget scrutiny during the bid process was that the city might well not have been awarded the event and city officials were working on other, more pressing, issues. Once Seattle had been selected to be the host for the conference, officials viewed the bid that had been sent in by the Washington Council on International Trade as the defining document. WCIT Comment: There is no evidence the city officials took this view. Further evidence to the contrary is that the federal government engaged in negotiations with the city regarding an MOU as to security expense issues as referenced in this draft three paragraphs below. City officials continued to ask SPD and others for estimates of security costs after December, 1998]

The $1.5 million referenced in the December 16, 1998 letter promised to defray security costs was treated as a fixed amount and officials in the Office of Intergovernmental Relations began looking at ways to obtain federal support to fund additional expenses (despite the State Department's opposition) and at ways to estimate total city costs.

It should be noted that the Seattle City Council had rejected a bid for the Olympics in December of 1998. The council had the opportunity to reject that bid because it required a formal resolution of support from the city – something that the council refused to provide. In the case of the WTO, the invitation went out from a private organization and no formal city action was required.

If council approval had been required for the WTO meetings, it is not clear what the outcome would have been. The actual cost to the city would have been a key issue and that was still vague in the first two months of 1999. By early March, 1999, estimates were that the total cost for security would be $3 to 4 million. The goal, as described by the Office of Intergovernmental Relations, was to find a mechanism for obtaining federal aid to cover the costs that were in excess of the $1.5 million.

Shortly after the announcement regarding the selection of Seattle, the office of the U.S. Trade Representative (USTR) asked for a memorandum of understanding (MOU) that would detail the division of responsibilities and expenses involved in preparing for the conference. The proposed draft clearly showed that the Trade Representative's office, like other federal agencies, had misunderstood and assumed that the bid submitted represented a commitment on the part of the city. [WCIT Comment: There is no evidence in the record to support this conclusion. The federal government initially sought to have a three party MOU among itself, the City and SHO. When SHO indicated that it could not be responsible for security issues, the negotiations were bifurcated to two separate negotiations between the federal government and the City on the one hand and the federal government and SHO on the other hand. The federal government was at all times clear that the December 16, 1998 letter did not purport to commit the City. That the federal government later sought to have the City subscribe to undertakings pursuant to an MOU is another issue. See WCIT Rebuttal, page 8 and also Attachment C, pages 8-9.) The MOU draft, which would have required council approval, asked for commitments in areas like hospitality, where the city is legally unable to support private organizations. After consultations with the law department, the Office of Intergovernmental Relations began negotiating with the (USTR), and those negotiations continued clear into November without producing a satisfactory document. Any agreement, with federal agencies or the Washington Council on International Trade, would have likely required city council approval. [The mayor's office may have been concerned that a formal council review of the WTO proposal would invite public criticism.][WCIT comment: is this comment necessary and is this conclusion supported by the record? Is it fair?]

Through the first three months of 1999, city expenses and potential income were vague. In a city council briefing at the end of March, the event was portrayed as ideally costing the city nothing, assuming that the federal and private funding sources work out. Councilmembers did ask at that point for some firm agreements to pin down the possible sources of funds, but the Office of Intergovernmental Relations did not act on that request.

There is no indication that anyone from the mayor's office or any of the city departments working on the conference ever asked SHO the Washington Council on International Trade if it could provide more reimbursement to cover the city's rising costs. There is also no indication that anyone ever asked SHO the Washington Council on International Trade for an agreement or for any sort of bond or guarantee that would have ensured receipt of the $1.5 million pledged.

Throughout the spring and summer of 1999, the potential security costs of the event increased. and Tthe private fund-raising effort faltered, and SHO revised its budget accordingly. [Please do not confuse SHO budget and City budget.] There were reports that the money promised to defray security costs was in jeopardy. At the end of August, 1999, the director of the Seattle Host Organization wrote to the city, saying that fundraising was behind and that the city could be paid only after all other creditors had been satisfied. There is no indication that anyone from the city ever objected to that announcement or made any attempt to force the private organization to fulfill its commitment.

The mayor's office clearly did attempt to keep city expenses as low as possible. In early August, 1999, after various reports of large demonstrations headed for Seattle, the deputy mayor met with budget officials and determined that the security budget would be reduced, since fewer heads of state were scheduled to attend the conference. There may have been ongoing concern over an adverse reaction from the city council: As one official from the Office of Intergovernmental Relations put it in a memo, "The Mayor presents his budget next week and we are steeling for a possible issue made out of WTO security costs. If not now then perhaps later."

The Seattle Police Department

The mayor's office has insisted that throughout the planning process it relied on the Seattle Police Department for honest estimates of the cost of providing security. Senior police officers involved in the planning support that contention. But for whatever reason, everyone who has reviewed the security planning for the event has found it woefully inadequate. The chief criticism has been the failure to bring in a sufficient number of officers from other agencies, a failure that the Seattle department's "after action" report attributes to an inadequate budget.

It is clear that the Seattle officers did believe that the conference could be handled with a more modest response than other law-enforcement professionals predicted would be necessary.

The first record of any Seattle Police Department involvement in the WTO conference is in mid-November of 1998, when three officers met with representatives of the WTO and the State Department, who were in Seattle on one of their site selection visits. Other participants in those meetings say that the delegation did bring up riots in Geneva during the previous WTO conference, but no one in the Seattle Police Department recalls any mention of those riots until after March of 1999. That pre-bid meeting was apparently viewed as an effort to convince the visiting delegation that the Seattle Police Department was competent to provide security, rather than an opportunity to gather factual information about the meeting.

There was no subsequent police involvement with the proposed conference until after the announcement of the selection of Seattle at the end of January, 1999. Shortly after that announcement, Burdena Pasenelli, the agent-in-charge at the Seattle office of the Federal Bureau of Investigation, held a meeting the discuss the security challenges presented by the conference. She discussed the civil disturbances that had occurred at the Geneva meeting, and the likelihood that they would be repeated in Seattle.

One of the participants at that meeting, Jackson Beard from the King County Sheriff's Office, left with some concerns and did some additional research on the WTO. He concluded in a Feb. 16, 1999 memo to the sheriff that, "Even a peaceful and orderly conference would tax local law enforcement resources." Predicting substantial costs, he suggested that "The three chief executive officers of the principal law enforcement agencies in this state combine their voices and communicate in writing to Executive Sims, Mayor Schell, Governor Locke, the WCIT, and the World Trade Organization our concerns about the unfunded costs of providing law enforcement services to this conference."

At least one other law enforcement official reports leaving the FBI meeting with the same concerns. Assistant Chief Ed Joiner, however, who attended for the Seattle Police Department, does not recall any discussion of Geneva and has said that he was not aware of the civil disturbances there until later in the spring of 1999. The Seattle Police Department continued to develop budgets based on the escort requirements for the foreign dignitaries expected to attend the conference. Despite concerns expressed by some members of the department, Chief Joiner and others involved in the planning process did not focus on the budget for demonstration management until early summer of 1999.

Unlike other agencies involved in the process,[which agencies? Not SHO] the Seattle Police Department did prepare budgets for its participation in the conference. Those budgets left its own officers [woefully][necessary?] ill-equipped to deal with the challenges that they faced, but Chief Joiner insists that was the result of naivete rather than the result of being given inadequate resources.

The Seattle City Council

The Seattle City Council did not have a role in the financial planning for the World Trade Organization meetings. Individual members of the council did assist during the pre-bid phase, by entertaining the visitors from Washington and Geneva, but there is no indication that those council members were involved in planning or in preparation of the bid. There is no record of anyone on the council expressing any concerns about the conference until the first briefing, held on March 29, 1999, when representatives from the mayor's office, police department, and the Office of Intergovernmental Relations provided a formal review of the state of the planning process.

At the meeting on March 29, 1999, several council members expressed concern that the security demands for the conference would stretch the Seattle Police Department too thin, leaving parts of the city without adequate protection. Council members were told about the efforts to obtain federal funds, and Council member Martha Choe requested that the Office of Intergovernmental Relations prepare MOUs with the Washington Council on International Trade, asking that it cover all WTO-related costs, and with federal agencies. She requested that these MOUs be provided to the city council for approval prior to distributing them to the affected parties.

That request was never acted upon. Cliff Traisman, director of Office of Intergovernmental Relations, said that he determined that it was too late in the process to negotiate over those agreements, and so did not proceed. Councilmember Choe does not remember what happened to her request, or whether she ever inquired further.

In hindsight, it appears that the request from that council briefing did represent a genuine effort to ensure that the citizens of Seattle were protected as planning for the conference got underway. Following through on that request might have brought out the unresolved issues that created so much difficulty later and possibly prodded the Seattle Police Department into a broader analysis of the challenge it was facing.

Federal Agencies

The original invitation to the World Trade organization came from the White House. The agency normally charged with dealing with the WTO is the office of the U.S. Trade Representative. The U.S. State Department had an important role in assisting with the conference planning because it has more staff in that area than the relatively small Trade Representative's Office.

These agencies were as fragmented in their efforts to organize the conference as the planners in Seattle. The WTO itself did not have an experienced staff in this area, and the federal officials were more familiar with issues involving U.S. attendance at foreign gatherings than with the requirements for hosting a major event in the U.S.

The initial site selection process reflects some of that lack of experience. Officials emphasized saving money for the federal government by looking for the best financial package. But in selecting the generous financial package offered by the SHC Washington Council on International Trade on behalf of the private sector, they did not ask for any financial guarantees, or a contract that would have defined the sources of funds and the responsibility for unanticipated costs.

Nor did State Department officials ask for any commitment from the city. They apparently assumed that city officials involvement in lobbying for the conference represented city support for the event. In fact, requiring formal city approval might have produced a very different response.

Immediately after the selection of Seattle as the site for the conference, the Office of the U.S. Trade Representative did ask for a memorandum of agreement with the city. The proposed draft illustrates confusion on the part of the agency as to the role of the city in hosting the conference. That draft assigns all of the financial responsibility for the event to the city, ignoring the undertakings of the private sector pursuant to the December 16, 1998 letter written by fact that the Washington Council on International Trade and the Seattle King County Convention and Visitors Bureau had committed to underwriting the organizational costs. Once that relationship was clarified the agency continued to ask for agreements with the city and with the Seattle Host Organization, but the drafting work went slowly and the agreements were never signed. If the U.S. Trade Representative had pressed the point, the process of working through those agreements would have defined financial responsibilities and revealed some of the areas of planning that were not being adequately accounted for at that time.

The federal confusion continued right up to the eve of the conference. In early November, 1999, officials in the White House became concerned that preparations for the conference were stalled for lack of funds. Washington's Representatives Norm Dicks and Jim McDermott were called to the White House for what McDermott described as a "very difficult meeting." Both Dicks and McDermott called the mayor to relay the White House's concern over the finances. The mayor wrote back on Nov. 8, saying that, "I would like to clear up some apparent misunderstandings about my role as the Mayor of Seattle in hosting this important event," and pointing out that the funds were the responsibility of the Seattle Host Committee, not the city. Those misunderstandings had been around for at least a year, and derived from the failure of the parties involved to require a clear statement of financial responsibility early on.

Conclusion

The mayor's office, the Washington Council on International Trade, the Seattle Host Organization [in this context it is inaccurate to include SHO in the list. SHO had a budget from the beginning], the Seattle Police Department, the Seattle City Council, and various federal agencies all shared responsibility for planning for the World Trade Organization conference in Seattle. Their planning failed, in part, because from the very beginning those agencies failed to prepare appropriate budgets for the event.

A comprehensive budget for the event would have defined the tasks to be done and the responsibility for those tasks. In the case of the World Trade Organization conference, the tasks were not well-defined and the responsibility for costs was left vague.[Again, as it pertains to SHO, this statement is false. SHO knew exactly what it had to do and prepared its budget accordingly, working on it throughout the year!]

In the end, the much of the planning was poorly coordinated, and Seattle taxpayers will end up paying most many of the security-related costs.

Any one of these organizations could have raised strong concerns early in the process about the finances of the event. If the city council had insisted on financial protections for city taxpayers, if the police department had asked for larger budgets to ensure that its officers had adequate backup, or if the U.S. Trade Representative had demanded that its MOU be signed early in the process, those demands would likely have triggered an overall review of the financial implications of the conference by everyone involved. That review would have led to action to deal with the foreseeable problems.