One down, two to go — on three weighty conditions that the Federal Transit Administration is demanding within 60 days from Oahu’s troubled rail project, now entering its final and most complex urban stretch.
On Thursday, the Honolulu Authority for Rapid Transportation (HART) met the first condition, of committing to a project-delivery method: it voted to pursue a “P3” strategy for a long-term deal with a private partner, who would assume risks to design, build and finance the final City Center span and Pearl Highlands transit station, then operate and maintain the
20-mile system for 30 years.
It’s a gamble for taxpayers, to be sure. Valuable months could be lost if this strategy doesn’t pan out by early next summer, when P3 final bids would be due. City Center progress has already stalled since December 2015, when contract-letting was frozen while the P3 concept was vetted. As we know all too well, time is money — billions, in fact.
And weighed against the near-term satisfaction of getting rail up and running, with risks absorbed by a private entity, are myriad unknown tradeoffs. Deal specifications for the private bidder will be complicated. Designing and building rail’s last
4 miles to Ala Moana is estimated at $1.4 billion, with potential for several billions over 30 years — and stipulations such as the city coming out cost-neutral or with savings will require a level of contract acumen
and oversight that HART has not shown so far, with rail’s price tag
ballooning from $5.26 billion in 2012, to $8.165 billion today.
As ominously noted by HART board member Tobias Martyn: “We don’t know what we don’t know and are kind of learning on the fly.”
Risky business, for sure. Still, there was some assurance at this early stage to hear from HART CEO Andrew Robbins that four to five entities are interested, so the competition might bode well.
HART’s decision to pursue the P3 strategy checks off one FTA demand — outlined in its Sept. 21 letter, which some perceived as a “threat” — but cues up two other pressure points with a Nov. 20 deadline:
>> Revising rail’s overall cost upward — again — another $134 million, to a total $8.299 billion, and outlining revenue sources in a revised financial recovery plan.
>> Getting the City Council to authorize $44 million of city funds for rail construction.
At stake is the FTA’s $1.55 billion grant to help build rail, $744 million of which has yet to be released. In order to fulfill these FTA demands, though, city politicians will need to break a significant promise to taxpayers: that city funds, derived from property-tax dollars, would not be used to construct rail.
The two controversial vehicles before the Council: Bill 42 (2017), which would lift a restriction on the use of city funds for the rail project; and Resolution 18-132, authorizing the city budget director to issue $44 million of general obligation bonds to help finance rail.
Neither is palatable, of course. Ideally, the city administration should be looking at budget-
squeezing in the near-term to transfer up to $44 million into HART’s coffers — money, by the way, that HART itself says is not needed for now, but the FTA insists upon. Should city leaders approve the $44 million bond issuance, interest payments would start on bonds that really shouldn’t be issued yet; opening that funding gate now makes little sense.
As for the $134 million increase in rail’s projected cost, prompted by FTA’s risk analysis: Robbins must make the adjustment on paper — though he avers that his team will continue working under the assumption of the current $8.165 billion budget, which he stands by. He acknowledged that it will fall on him and his team to identify funding sources — especially since Mayor Kirk Caldwell insists the city should not have to cover the extra millions and that HART should cut expenses or find ways to satisfy the FTA.
The next several weeks will be critical as City Council members, and the mayor, debate and posture on options to meet the FTA’s demands — or risk substantial federal funds. It will be a high hurdle to schedule needed hearings and reach consensus, plus revise rail’s financial plan, before Nov. 20.
And if all that isn’t enough, yet another battle is intensifying: between HART and state auditor Les Kondo, tasked by state lawmakers to audit the rail project as part of Act 1, the $2.4 billion rail bailout passed by legislators in a 2017 special session.
On Thursday, Kondo expressed frustrations over HART’s stonewalling in providing information, showing HART board members pages of minutes from a board executive session provided to his staff — pages almost wholly redacted or blacked out, with few words visible.
“Absurd,” said Kondo, and he’s absolutely right.
The audit is required under state law — and obstruction serves no one, least of all Oahu taxpayers bankrolling the rail project. Knowing past practices is valuable, especially with financials sure to get even more complicated with a private partner. As HART rolls ahead into the P3 unknown, it needs to keep the books as open as possible for all to scrutinize.
