Gov. Chris Gregoire announced Friday that the state received two bids at or below the $1.1 billion target price for a new Highway 99 tunnel along Seattle's waterfront.

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Gov. Chris Gregoire appeared in Seattle on Friday morning to deliver what she considered good news: A pair of bids to build the Highway 99 tunnel came in within the state’s $1.1 billion price target.

She also promised to veto any attempt by lawmakers to try to charge Seattle taxpayers for any cost overruns on the project.

Three hours later, Seattle Mayor Mike McGinn held a news conference to criticize Gregoire. He said the bids appear low only because the state promised to pay the winning team more than $200 million in last-minute allowances, which would cut into the tunnel project’s emergency cash reserve.

“I don’t believe we can trust the governor to keep … promises to protect us,” McGinn said, adding: “I don’t trust the Legislature, either, to protect us from cost overruns.”

The fear that Seattle would be on the hook for cost overruns for the 1.7-mile tunnel has been a frequent complaint for McGinn, and was the centerpiece of his campaign for mayor.

McGinn said he asked the governor Tuesday in his office to sponsor a bill protecting Seattle taxpayers, but she declined. McGinn said Gregoire answered, “You need to find another sponsor.”

The governor has no interest in introducing such legislation because she doesn’t believe overruns are a threat to Seattle, her spokesman Cory Curtis said later.

The bids, from two international construction teams, were submitted Thursday in Olympia. Only a few companies are capable of drilling what would be a world-record 56-foot-diameter hole in wet, abrasive glacial soils.

“We are very fortunate to have two bids on the project. Competition is our friend,” said Transportation Secretary Paula Hammond.

At her news conference, Gregoire said a 2009 law passed by the Legislature, which would assign cost overruns to “Seattle property owners who benefit,” was merely a statement of intent, and only a more specific follow-up bill would have any real effect.

Further, she noted that when highway costs spiked in the mid-2000s, the state absorbed that expense by cutting its own project lists — and has never foisted the increases onto local cities.

McGinn replied that only the Seattle tunnel has its own legislation that includes language seeking to charge city residents. One reason he cited for distrusting the governor was that she had the chance to veto the 2009 language, and didn’t do so.

While McGinn did not attend Gregoire’s news conference, other local officials did, including King County Executive Dow Constantine, City Council President Richard Conlin and City Councilmember Tom Rasmussen.

The City Council supports the tunnel, but has yet to sign final utility and right-of-way agreements. Members have accused McGinn of obstructionism.

McGinn said Friday that he’ll push again for the council to demand more cost protections before the signings, in light of the project’s shrinking contingency fund.

Rasmussen, transportation committee chair, issued a statement Friday, which said, in part, that early review of the bids “should put the question of cost overruns to rest. I applaud Gov. Gregoire, and all the regional partners for their steadfast commitment to this effort … and for diligently moving the project forward.”

The tunnel would replace the aging Alaskan Way Viaduct, built in 1953.

The new four-lane roadway would stretch from Sodo to South Lake Union, to depths as much as 200 feet below the surface. Cut-and-cover excavation at the south tunnel entrance would begin in late 2011, assuming an environmental-impact statement is approved by the federal government next summer. Deep drilling could start in early 2013.

McGinn said that while the state announced that the bids had come in under budget, “the only way they can make that statement is because in the last couple of weeks, they gave away most of the contingency fund to bidders. … Our protection is now dwindling away.”

When the tunnel plan was first announced in January 2009, the state Department of Transportation set aside $415 million to cover risk, inflation and unforeseen costs.

Throughout this year, officials said they would draw upon that reserve before reaching a contract. But a series of concessions this month, meant to keep the two bid teams at the table, were sizable — $110 million for inflation, $100 million for bonds and insurance. That leaves $205 million, Gregoire said.

But of that amount, up to $105 million would be paid out to repair any downtown buildings, lease Port of Seattle property to stage construction equipment, fix any damage to the giant drill deep underground, and provide a $100,000 daily bonus if the job is done before Nov. 1, 2016.

That leaves $100 million that is still free to cover any unknowns.

Project leaders say they haven’t looked yet at actual bid prices. Instead, each construction team signed a one-page document attesting it is at or below $1.09 billion for the basic contract. A team of state engineers and outside experts will now examine the construction and design features submitted by the two teams, then open the price documents in public by mid-December, said Hammond.

DOT project administrator Ron Paananen said the tunnel remains on track to meet its $1.96 billion budget, part of the broader $3.1 billion Highway 99 corridor that includes two major interchanges. City utility relocations, a new sea wall, and reconstruction of the Mercer Street corridor add hundreds of millions more.

Meanwhile, anti-tunnel Initiative 101 has about 11,000 signatures, with a goal of 25,000 to reach a possible spring ballot, said organizer Elizabeth Campbell.

Also, Constantine and Gregoire said they are working on a strategy to boost long-term transit funding.

That was part of the inter-government tunnel agreement in January 2009, but Olympia has yet to deliver, except $32 million in Highway 99 funds for increased King County Metro transit service during tunnel construction.

Supporters hope the tunnel will replace most of the road capacity, while allowing the once-in-a-century chance to create a quieter, more parklike waterfront.

Detractors cover a wide spectrum — from people who would retrofit the current viaduct to keep its views and road capacity, to environmentalists who seek a non-highway waterfront boulevard in an effort to reduce the number of cars.

Staff reporter Emily Heffter contributed to this report. Mike Lindblom: 206-515-5631 or mlindblom@seattletimes.com