When is the good news about rail ever going to start rolling into the station? “Not anytime soon” is about the kindest spin anyone can put on the answer, given that the first scathing audit in a series of reviews has just arrived, with three more installments to come.
The takeaway from Parts 2, 3 and 4 aren’t expected to be any rosier, but it could hardly be a message more sour than this one: The decision to “prematurely” award the first rail contracts Opens in a new tab snowballed into a string of delay claims and change orders that ultimately tacked on $354 million to the ledger, according to last week’s report from state Auditor Les Kondo.
If nothing else, this ought to put more pressure on the Honolulu Authority for Rapid Transportation (HART) to make sure some usable segment of the rail alignment is up and running as its officials have promised, by the end of 2020. Without some witnessing of rail transit’s practical benefit to the public, it will become very hard for even the project’s supporters to keep the faith.
Although HART officials say anticipated construction costs for now have stabilized at nearly $8.3 billion, financing costs likely will push it up to $9.2 billion. And HART is still working to settle a claim by contractor Ansaldo Honolulu JV. The company, according to sources, two years ago demanded $200 million for costs associated with construction delays.
The first report of 39 pages is part of a series ordered by state legislators as a condition of approving a financial bailout of $2.4 billion in extended taxation. The local investment in the 20-mile Honolulu elevated rail project now includes a share of the state’s transient accommodations tax (TAT) revenue.
The assertion about delays driving up costs has been part of the rail critique for years now, but the state Office of the Auditor actually hung that stunning pricetag on rail missteps.
The report, issued Thursday, lays out with painful clarity where project costs ballooned. Now the reader sees how the costs mounted until the final figure almost doubled the total that planners, peering through rose-colored glasses, initially projected.
The report placed the start of the upward spiral at 2009, when former Mayor Mufi Hannemann’s administration pronounced the project “shovel-ready” and awarded a $483 million contract to Kiewit Pacific Co. for designing the first segment. This was in advance of the environmental impact statement completion.
Awards of $2 billion more in design, construction and operations contracts followed before all the federal clearances were in, according to the audit.
Auditor staffers cited key points in the process in which HART was less than transparent about the costs. HART staff was struggling with unexpected increases in 2015 but failed to report them to its own board, according to the report.
In 2017, legislators who initially balked at increasing tax revenues for the project were shaken by what many saw as unreliable figures provided by HART staff. And now the agency is still awaiting federal approval of its project recovery plan and the release of the remaining federal subsidy for construction, about $744 million.
In his response, Andrew Robbins — HART’s chief executive officer since 2017 — said the authority has since implemented “prudent accounting through a system that tracks all financial costs.” The board now is given monthly financial reports, Robbins added.
In addition, he pointed to a new risk-assessment and management system to deal with change orders with good documentation.
This all sounds reasonable. But the fact that such elements weren’t present at the outset only underscores the poor planning and management in the early years.
Not all the lessons learned in the auditor’s study can be neatly applied to the future costs, which are still unknown. That’s because Robbins is pressing ahead with a plan to complete the final portion of the rail through a public-private partnership.
In this “P3” scenario, a group of companies would compete for the comprehensive contract in which risks of cost inflation would be borne by the consortium. The more promising part of the deal for them would be a more lucrative operations contract after completion. HART officials say there could be savings through this arrangement, at least at the front end.
But there’s no free lunch here, and the tab the taxpayers pick up when the rail is running very well could be larger.
Confronting the financial reality of this project is unpleasant, for the public most of all. But as construction proceeds toward the city center, through the most congested and difficult part of the alignment, it’s still important to have a clear view of the project conditions as they really are.
Postponing the disclosure of true costs won’t make them go away. So it’s HART’s duty to provide the straight facts — to the feds, to its board and other overseers and, most crucially, to the riders who hope to reap the benefits of the rail someday.
