Last year Honolulu Mayor Peter Carlisle told a radio audience that Honolulu’s rail project had "too much momentum" to be stopped.
Now former Gov. Ben Cayetano plans to put Carlisle’s claim to the test, and is running for mayor with the stated intention of killing the $5.27 billion rail project.
If Cayetano is elected, he will have considerable power to wield against the project. There is at least one recent precedent where a newly elected chief executive stopped a rail project that was even more ambitious than the Honolulu system.
Republican New Jersey Gov. Chris Christie terminated one of the largest public works projects in the nation in his first year in office in 2010, halting construction on a rail tunnel under the Hudson River that was supposed to provide a new link between New Jersey and Manhattan.
Christie said he stopped the New Jersey project because he was alarmed at potential cost overruns that could have pushed the price tag for the tunnel, known as the Access to the Region’s Core, or ARC, project, to as much as $13.7 billion.
Rail supporters don’t want that to happen here.
"Oahu voters approved the (Honolulu) rail system to address our significant traffic problems," said Don Horner, chairman of the Finance Committee for the Honolulu Authority for Rapid Transportation. "We are following the will of the people."
Cayetano, a Democrat who served as governor from 1994 to 2002, warns that the costly rail project is being carried out at a time when the city needs to make billions of dollars in upgrades to streets, sewers and water systems.
If the city undertakes all of that infrastructure work as well as the rail project, Cayetano predicts the city will be forced to raise taxes or go bankrupt.
Cayetano last year joined with a group of rail opponents who sued in federal court to try to block construction on the Honolulu rail project. The launch of Cayetano’s campaign for mayor last week reopens the political front in opponents’ long drive to stop rail.
The political offensive by Cayetano raises the possibility that the engineers, planners and project officers the city hired to build the 20-mile Honolulu rail system might suddenly be confronted by a hostile city administration with the power to block key components of the project.
"Last year voters created the Honolulu Authority for Rapid Transportation as a semi-autonomous agency to remove politics from the rail project," City Managing Director Doug Chin said. "It’s spelled out in the charter what HART, a mayor or the City Council can or cannot do, and all city officers including a mayor have sworn to uphold this. A delay or stop to the project now would forfeit up to $1.55 billion in federal assistance that Honolulu is poised to receive, invite costly litigation and provide no viable alternative to traffic congestion on Oahu. This would be a large and unnecessary setback for us and future generations."
Perhaps the most critical piece of the rail project that the mayor directly controls is debt. The Honolulu project needs to borrow $2.913 billion starting in fiscal year 2013, and the mayor can control that borrowing.
The borrowed funds are supposed to serve as bridge financing to pay contractors and keep the project moving while the Honolulu Authority for Rapid Transportation waits for billions of dollars in federal funding and revenue from the half-percent general excise tax levied on Oahu to come in.
The rail financial plan calls for all of that debt to be repaid by 2023 with either federal funds or revenue from the excise tax surcharge. Supporters of the rail project emphasize that city general funds will not be used to build the rail system, and all rail-related debt would be repaid shortly after the 20-mile rail line is scheduled to open in 2019.
Of the $2.913 billion in borrowing planned for rail, $1.208 billion would be from city general obligation bonds, and another $350 million would be through a form of shorter-term borrowing called bond anticipation notes, or BANs, according to the rail financial plan.
The financial plan also assumes HART will use the city’s program for borrowing through tax-exempt commercial paper to raise another $600 million for the rail project, and will tap another $755 million in borrowed funds through an instrument called grant anticipation notes, or GANs.
Toru Hamayasu, interim executive director of HART, said the rail agency is relying on the city to issue that debt to raise the money needed to build. And the task of actually borrowing the necessary money falls to the city administration, which is under the control of the mayor.
Chin said Mayor Peter Carlisle "has reviewed and concurs with the current financial plan" for rail, which includes the borrowing plan.
But Cayetano made it clear he does not intend to cooperate with HART or the rail project. As he explained at a news conference last week, "The mayor doesn’t have to release money. The mayor can veto appropriations, and I think that if I get elected, quite frankly, the Federal Transit Administration will say, ‘That’s it, Why should we give this city money when they have a mayor who doesn’t support the system?’"
That would be a huge setback, as the city is relying on $1.55 billion in federal New Starts funding from the Federal Transit Administration.
Cayetano cites the anticipated cost of rail as his primary concern, and cost was also cited by New Jersey Gov. Christie for halting the ARC project in 2010.
The budget for the ARC rail tunnel under the Hudson was $8.7 billion, but Christie announced he was killing the project after he said the FTA offered new estimates that the project likely would actually cost $11 billion to $14 billion.
Christie said New Jersey taxpayers would be required to pay the entire cost overrun, and halted construction in October 2010.
With that decision, Christie turned away $3 billion in federal funding, the largest financial commitment for a single project in FTA history. Supporters had projected the rail tunnel would create 6,000 construction-related jobs.
In the fallout that followed, the FTA demanded that New Jersey repay $271 million in federal funds.
New Jersey officials spent more than $1 million on legal costs to fight that demand, finally agreeing last year to repay $95 million to the federal government.
An audit of New Jersey’s NJ Transit agency later concluded the agency lost $297 million on the project, most of it on engineering and design work or payments to contractors.
If Cayetano were to win election and stop the rail project, the city could face some similar risks.
As of late last year, HART estimated that $342 million had been spent so far on rail, including more than $64 million in federal funds. Most of that money has been spent on planning, engineering and design work.
Rail supporters also point out the city has awarded nearly $3 billion in contracts to build, operate and maintain the Honolulu system, and warn that terminating those contracts could trigger expensive lawsuits against the city by disappointed contractors.
Cayetano said last week it is "really irresponsible for the people at HART to be dishing out these contracts" when the federal government has not yet committed to put up its share of funding, and when there is a lawsuit pending in federal court to stop the project.
Carrie Okinaga, chairwoman of the HART board, said the contract process is subject to oversight by the FTA, including the planning, procurement and implementation of all contracts.
"The city and HART have followed federal guidelines and will continue to do so," Okinaga said. "The budgets have been approved over the past four years by City Councils and mayors for these contracts, and the project has been awarded $120 million in federal funding thus far."
