City audit calls HART’s finances, plans ‘outdated and unreliable’

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The Office of the City Auditor released its audit of the Honolulu Authority for Rapid Transportation to the Honolulu City Council Friday.

The 176-page document outlined multiple recommendations to HART on the rail project. Read the entire report online here.

The auditor called Honolulu’s rail finances and plans “outdated and unreliable as decision-making tools.”

An excerpt explains: “HART made concessions to a single contractor; did not perform quantitative analysis to justify a major decision to repackage a bid for nine stations in the Westside Stations Group; and paid $1.5 million in stipends to unsuccessful bidders without knowing the bidders’ actual costs. HART is also paying for vacant office space. Contract administration controls need to address invoice payments, procurement file documentation, and prevent improper payments.”

Some of the biggest problems ahead have to do with the unresolved power utility and relocation costs. Always Investigating has been reporting about that for years now.

The auditor followed up on those issues, saying things like costly change orders are poorly controlled. HART calls it all off-base.

The audit found several instances of HART projecting costs rising way higher than could be proven, while HART under-reported what its take of the GET surcharge would be. It says any contingency on the books now is not adequate, and calls HART’s cost-control approach insufficient.

We’ve also reported a lot about contract “change orders,” or amendments. The audit says there’s no supporting documentation for $450 million worth of cost hikes for that.

Huge utility agreements totaling more than $100 million weren’t even in the system’s forecast report. Another $46 million in “project enhancements” could not be supported either. HART turned over a handwritten escalator price guess of between $17 and $25 million.

HART also paid $1.5 million to firms that lost bids without regard for their actual costs.

The audit also blasted HART for paying for vacant office space, a full 41 percent of one floor’s offices and workstations at Alii Place, where HART rents four floors, and criticized HART for still not identifying its other revenue sources for operations and maintenance.

HART says the auditor was rushed and discredits most of its findings. It responded in writing (Appendix H) that the audit was “written in a fashion to intentionally mislead, is issued in an improper manner, and conceded to politically motivated pressure,” all sentiments HART’s CEO Dan Grabauskas also expressed in a preemptive news conference Thursday ahead of the audit’s release.

“We anticipate additional cost overruns will occur,” the auditor told the Honolulu City Council in the document, adding that “HART’s attempts to discredit the audit work and attempts to intimidate the auditors were unprofessional.”

Honolulu City Council Chair Ernie Martin echoed that sentiment. “No credibility to his statements, very irresponsible methodology (Grabauskas) chose to take,” he said.

Grabauskas said Thursday that the audit’s timeline was rushed, but on Friday, the report said HART had five weeks to respond to draft reports.

Grabauskas also said the report was not confidential.

“He said the report was leaked to some councilmembers and some media,” KHON2 told Martin.

“There was only one councilmember who was given the report and that was myself, the chair,” Martin responded.

Martin said moving forward, he expects to see a greater transparency and accountability from HART. There are options the council could take and he mentioned a redo on the GET extension that was recently passed to help pay for rail.

It’s an option budget chair Ann Kobayashi brought up three days ago.

She told KHON2 on Friday it’s troubling, because they haven’t even reached the most expensive part of the rail project and there’s already all kinds of money problems.

Now she wants to see if the city council will bring back a bill that was already approved and signed into law. Bill 23 extends the half-percent general excise tax surcharge another five years up to 2027.

She says by bringing the bill back for reconsideration, maybe the council can finally get some answers on how much more the rail will cost.

“We could take another look at that Bill 23 which we just passed that allows the extension of the GET. That of course would cause a lot of problems,” Kobayashi said. “It would be a way to bring out the truth, a way we could start discussion again and then maybe we will get the truth.”

Grabauskas said if that happened, HART would not have the money to pay for the project.

“Is that a threat to HART?” KHON2 asked.

“I haven’t threatened anybody. I’m encouraging HART to come forward” and work with the council, Martin said.

Kobayashi added that it may also be time to seriously consider shortening the rail route and having it end on Middle Street.

HART has been adamant that it cannot be done because the funding received from the Federal Transportation Administration or FTA is contingent on have the project go all the way to Ala Moana Center.

“I’m sure if we talked to FTA they would allow us to end at Middle Street. I don’t think they would force us to finish the whole project when we’re running out of money,” Kobayashi said.

“Chair Martin also said that you’re also not the appropriate person for the job. Are you planning to resign?” KHON2 asked Grabauskas.

“That will really come up in conversation with the board of directors and myself. We’ve got an ongoing process,” Grabauskas said.

The HART board is evaluating Grabauskas, which could take a couple more months.

“So you don’t want to resign?” KHON2 asked.

“I moved here, lock, stock and barrel. This is my home,” Grabauskas said. “I’ve put down roots now over the last four years. I love Hawaii. I’d love to stay here and I’d love to see this project through.”

Honolulu Mayor Kirk Caldwell said in a statement: “I received the HART audit at noon today and will take my time to thoroughly review its findings and conclusions. Ultimately, the report provides an opportunity to address concerns about the rail project to the HART board of directors, as well as Executive Director and CEO Dan Grabauskas. My focus is on building this transformational project as quickly and inexpensively as possible. The residents of the City and County of Honolulu deserve no less.”

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