Rail swells to $10B to build and finance, gap now $1.2B as tax sinks

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HONOLULU (KHON2) — The estimated cost of rail has jumped once again, bringing the construction and interest tab to the $10 billion threshold. The mayor tells us it will probably grow more, and the shortfall to pay for it all now tops more than $1.2 billion.

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Honolulu Authority for Rapid Transit (HART) revealed the latest sticker shock on rail cost at a rail authority Project Oversight Committee board meeting on Oct. 15. The “estimate at completion cost” is now $832 million more, with the construction cost alone up to $9.13 billion.

Interest on borrowing and bonds stood at $840 million in the last estimate, likely to climb more as the build-out is delayed and the base cost goes up. But even conservatively using the $840 million figure, it is essentially now a $10 billion train, not counting operating costs.

Mayor Kirk Caldwell says the tab is likely to jump even more, calling HART’s numbers unreliable.

“As mayor I’m not surprised,” Caldwell told KHON2. “Having been here now for 8 years every estimate provided by HART has actually gone up, not down. We know with the utility relocation being delayed one to four years, and the fact that the $400 million bid is probably going up to $640 million and maybe higher.”

As costs go up, the money to pay for rail is going down fast. Honolulu’s share of the GE tax surcharge for rail has plummeted with the COVID economic crash. HART estimated earlier this summer that they were projecting a $450 million shortfall on the tax take.

Pairing just the tax revenue shortfall of $450 million with the $832 million in added construction costs, the financial hole left to fill — in which no sources of funds are yet identified — is nearing $1.28 billion.

Then there is federal grant money in jeopardy. The Federal Transit Administration told KHON2: “FTA will not begin to release any of the $744 million that has been withheld for the project until the cost of the City Center procurement is identified and shown to be within HART’s ability to finance it.”

A quarter-billion of that federal grant will lapse at year-end. KHON2 asked what the mayor plans to do about Rail’s growing financial hole before he leaves office.

“There should be a third-party independent cost estimate done at this point, not just relying on HART’s numbers,” Caldwell said. “We need to come up with an actual real number and then figure out how we build, how we phase it, and go to the FTA with a plan and the time is running out. We will lose $250 million at the end of the year. Waiting until Thanksgiving doesn’t give us much time. I think it doesn’t give us the time we need. We need to start now, and you’re asking the right kind of questions, Gina.”

At the HART Board meeting, CEO Andy Robbins cautioned against going back to the drawing board and still wants to salvage the P-3, or public-private partnership, negotiations the city has pulled out of.

“We want to see if there’s a path forward that would make sense for us to continue the process,” Robbins said. “Ultimately the idea would be to reissue the RFP after we engage the bidders on what they would see changing in the RFP to result in a more awardable package.”

The HART Board said the feds have told them the Honolulu project is the most troubled and challenging of any in the country. The Board called for all sides to come together quickly to figure out what can be afforded and how to pay for it.

“We have to present a unified front and a unified approach here,” said HART Vice Chair Terrence Lee.

Because the next mayor will have to take on the project at this financially fragile time, KHON2 also gave each Honolulu mayoral candidate a chance to weigh in. Here are their statements:

Keith Amemiya: “I am extremely disappointed to see yet another increase in budget to complete rail. This project has been riddled with problems throughout its life, and voters have lost nearly all confidence in HART’s ability to manage and deliver the project. Oahu residents knew there was an increase coming due to COVID and the City Center. HART needs to provide information on federal TIFIA opportunities for funding, potential savings from station re-engineering, and options for phased completion. Oahu’s families deserve all the opportunities that rail brings from transit connectivity between home and work to truly affordable and livable communities along the line. If elected, I am ready on day one to bring accountability and transparency to this project and ensure Oahu residents know exactly how we are going to get the job done.”

Rick Blangiardi: “Without knowing the details behind the assumptions in the presentation and the correlation between the numbers provided and the P3 proposals, these numbers confirm the important role the next Mayor will play in working with the FTA, the City Council, HART and the state on project funding and oversight. My administration will prioritize increased transparency, accountability and open communications between all the stakeholders, including the taxpaying public.”

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