As work accelerates on Honolulu’s multibillion-dollar rail transit system, the upcoming fiscal year will be the "single largest" for issuing construction awards — and the massive project will need to borrow hundreds of millions of dollars when revenues don’t keep pace with costs, rail officials say.
They add, however, that they still don’t know exactly how much will have to be borrowed, in bonds leveraged against the city’s general fund.
The 20-mile, 21-station rail transit system will require a $1.56 billion capital budget for fiscal year 2015, Honolulu Authority for Rapid Transportation Executive Director Dan Grabauskas told the City Council’s Budget Committee on Friday.
Four construction contracts to build the second 10-mile leg of rail will comprise the bulk of that, at $1.2 billion, he said. Many of those dollars will actually be spent in subsequent years, but HART, a semiautonomous government agency overseeing the project, needs the authorization for that spending in 2015, Grabauskas added.
The city is slated to issue as much as $787 million in bonds to cover the project’s cash flow, although HART officials said it would likely be less than that.
On Friday, they delivered repeated assurances that city tax dollars would not be used to repay those bonds. Instead, they said, the general excise tax surcharge and federal funding used to pay for rail’s construction would cover repayment of the bonds.
But HART finance officials also said they didn’t know exactly how much in city bonds they would need because they’re still working out the best strategy with the least borrowing. That left several Council members expressing frustration.
"I don’t even know where to start. You have no idea right now?" Councilman Joey Manahan said at Friday’s budget meeting, pressing Grabauskas for more details. "I know you’ve been working on it, but it’s been a year."
Councilwoman Carol Fukunaga added, "The (budget) chair had asked for greater detail than what was provided in this."
State and federal court cases against the project affected the construction schedule and helped delay completion of the borrowing plan, but it should be provided in the next four to six weeks, Grabauskas told them.
The city bonds would likely be issued by the end of this calendar year or early 2015, and repayment would likely start in 2016, HART finance officials said.
Manahan questioned whether Honolulu voters realized that rail’s construction would partially rely on city-backed bonds when voting on a rail plan in 2007. After the meeting, HART officials said they weren’t sure whether those details were part of 2007 plans but they were made clear by the time the project’s 2012 financial plan was issued.
"All the money will be paid back, plus interest … by HART and through those two sources," Grabauskas said Friday. "In the end there is no net harm."
Nonetheless, Manahan pressed concerns that the city could be left on the hook if something disrupted the GET surcharge and federal revenues. "But what if they don’t (cover it)?" he wondered aloud.
