The Seattle Department of Transportation has determined it will probably need to return over $4 million to the federal government after an internal assessment identified problems with how a 2017 grant from the Federal Highway Administration was implemented.
Among the concerns was how the department contracted workers for the grant, which focused on improving mobility in Seattle’s University District, including upgrading 40 signals in the University District and installing new curb ramps and CCTV cameras.
Personnel determined that a consultant engaged to manage the grant possessed an unfair competitive advantage in the process, having already commenced similar work even before the grant application had been submitted. That continuity should not have been permitted, personnel indicated.
Of the total $4.1 million grant, approximately $3.5 million has already been expended, meaning the city will probably need to locate replacement funds from its own resources. It remains unclear precisely where that money will originate, though it could derive from the city’s transportation levy approved last year.
The internal concerns emerged after the U.S. Department of Transportation’s Office of Inspector General initiated audits into 17 jurisdictions that received similar grants in 2024, including Seattle. Additionally, a former grants manager for Seattle had previously submitted complaints about the procurement process.
Consequently, leadership requested personnel review the grant process for any potential problems. During that review they identified the contracting concerns, as well as several other possible compliance violations.
“Grants Compliance staff informed SDOT that these procurements would not be federally compliant several years ago, but they chose to proceed with them anyway,” personnel wrote in a document.
The current head of the Seattle Department of Transportation, Adiam Emery, was on the project management team when the mobility work commenced and approved portions of the consultant contract.
The refund has not occurred yet, partly because the federal government hasn’t formally started the process. The federal shutdown could delay the process.
However, executives and personnel have already begun discussing the specifics of where the money will originate and have escalated the issue to the mayor’s office, according to documents.
In a statement, a spokesperson for SDOT indicated the timeframe for the probable funding return is unknown.
“The laws governing federal grants are complex and require strong internal controls and training, and our internal compliance systems identified the need for further analysis regarding specific technical requirements of the grant, something not uncommon on projects of this scale and nature supported by federal funds,” the spokesperson stated.
It’s not unprecedented for the city transportation department to return money to the federal government, though it’s often because of underspending. The department did return more than $100,000 of a grant for the West Seattle Bridge because of procurement problems.
It’s also not the first time a city project has been criticized by the federal government; in 2023, the U.S. Department of Transportation objected to Seattle retaining $7.4 million in unused funds for a streetcar that never materialized.
The $4 million return magnitude representing substantial financial loss, with the amount constituting significant transportation funding that could have supported numerous smaller projects including sidewalk repairs, bike lane installations, or traffic signal upgrades that will now require alternative funding sources or potential cancellation if replacement dollars cannot be secured.
The 2017 grant timing indicating multi-year implementation failure, with the Federal Highway Administration award dating back eight years demonstrating that procurement problems existed from project inception yet continued unaddressed through completion suggesting systemic oversight failures rather than isolated mistakes that competent management should have identified and corrected early.
The University District mobility focus highlighting the intended beneficiaries, with the grant targeting improvements in the neighborhood surrounding University of Washington including signal upgrades, curb ramps, and CCTV cameras that would have enhanced pedestrian safety and traffic flow in one of Seattle’s densest areas with high pedestrian and transit volumes.
The 40 signal upgrades representing substantial infrastructure investment, with the planned improvements to traffic control systems throughout University District potentially including adaptive timing, pedestrian countdown signals, and transit signal priority features that modern intersections require for efficient multimodal transportation management.
The curb ramp installations addressing accessibility requirements, with the Americans with Disabilities Act-compliant infrastructure enabling wheelchair users, people with mobility impairments, and parents with strollers to safely navigate sidewalks and street crossings that older infrastructure often makes impassable or dangerous.
The CCTV camera additions supporting traffic management, with the video surveillance equipment enabling transportation officials to monitor congestion, identify incidents, and coordinate emergency response while providing data for traffic pattern analysis informing future infrastructure investments.
The consultant competitive advantage concern revealing procurement irregularity, with the determination that the oversight contractor unfairly benefited from conducting preliminary work before grant submission creating conflict where the company helped define project scope then bid on implementing the work they had designed giving them insider knowledge competitors lacked.
The pre-application work continuation prohibition reflecting federal procurement standards, with the finding that carryover from earlier planning to grant execution violated competitive bidding principles requiring that all potential contractors have equal access to information and opportunities preventing incumbent advantages that undermine fair competition.
The $3.5 million already spent complicating recovery, with the substantial expenditures meaning that returning the federal funds requires Seattle to essentially pay twice for the same work once using the grant money that must be returned and again using local dollars to cover the disallowed expenses.
The replacement funding source uncertainty creating budget challenges, with officials unable to identify specific revenue streams to cover the $4 million shortfall potentially requiring painful choices between using transportation levy dollars intended for new projects or finding cuts elsewhere in the municipal budget.
The transportation levy passed last year providing possible funding, with the voter-approved tax increase generating dedicated revenue for transportation projects though diverting levy dollars to cover federal grant returns means fewer resources available for the improvements Seattle residents approved when voting for the tax.
The Inspector General audit triggering internal review demonstrating external oversight effectiveness, with the federal investigation into 17 jurisdictions receiving similar grants prompting Seattle officials to scrutinize their own compliance rather than waiting for auditors to discover problems creating opportunity for voluntary disclosure potentially reducing penalties.
The former grants manager complaints providing whistleblower evidence, with the previous employee’s procurement process concerns validating that internal critics identified problems that management ignored raising questions about organizational culture where compliance warnings were dismissed rather than investigated.
The leadership-requested review acknowledging management responsibility, with the decision to examine grant processes after complaints and audits suggesting current officials recognized potential liability and sought to assess damages before federal auditors issued findings that might have revealed even worse compliancefailures.
The Grants Compliance staff warning documentation proving institutional knowledge, with the written record that personnel informed SDOT leadership years ago about federal non-compliance yet management “chose to proceed anyway” establishing that violations were knowing rather than inadvertent raising potential for more severe penalties.
Current SDOT Director Adiam Emery’s involvement creating accountability questions, with her role on the project management team when work began and approval of consultant contract portions potentially implicating current leadership in the compliance failures though the problems predated her directorship and she may have acted on subordinates’ recommendations.
The pending refund status reflecting administrative limbo, with the return not yet occurring because federal processes haven’t formally initiated creating uncertainty about timing, exact amount, and potential additional penalties that might accompany the repayment if auditors discover further violations.
The federal shutdown potentially delaying resolution representing additional complication, with the government dysfunction preventing the Department of Transportation from processing the grant return leaving Seattle unable to resolve the matter and creating extended period where the financial obligation remains uncertain.
The mayor’s office escalation indicating political sensitivity, with the decision to elevate the $4 million problem beyond SDOT demonstrating that municipal leadership recognizes the budget impact and potential public relations damage requiring executive attention and coordination beyond transportation department’s authority.
The complex federal grant laws defense attempting to contextualize failures, with the SDOT spokesperson’s statement about technical requirements and scale suggesting that compliance challenges were understandable given regulatory complexity rather than acknowledging that competent management should navigate those requirements successfully.
The strong internal controls and training emphasis highlighting what was lacking, with the spokesperson’s mention of systems requirements implicitly admitting that SDOT’s controls and training proved insufficient preventing the violations that now require the costly return.
The not uncommon characterization normalizing the problem, with the claim that compliance issues frequently occur on federally-funded projects attempting to minimize the violation’s significance though the statement doesn’t address why Seattle failed to implement controls that other jurisdictions successfully employ.
The West Seattle Bridge precedent demonstrating pattern, with the previous $100,000 return for procurement issues revealing that University District grant wasn’t an isolated incident but rather part of recurring compliance failures suggesting systemic rather than project-specific problems.
The 2023 streetcar criticism providing additional context, with the federal objection to $7.4 million in unused funds sitting idle establishing that Seattle has faced multiple federal transportation funding controversies in recent years indicating troubled relationship with oversight agencies.
