At a news conference at Honolulu Hale Jan. 31, former Gov. Ben Cayetano warned that voters would have to pay more for the city’s proposed rail-transit system than they’re being told.

The governor called out Mayor Peter Carlisle and former Mayor Mufi Hannemann, criticizing their support of the project.

“Cost overruns on FTA-approved rail systems (are) averaging about 40 percent,” Cayetano said. “Forty percent — if you guys were a private company, you’d be out of business.”

Is the former governor correct that cost overruns for FTA approved rail systems average 40 percent?

He is, according to a 2007 report released by the Federal Transit Administration.

However, it’s important to note that the timing of the comment might give the impression that Honolulu residents should expect the rail project to cost 40 percent more than the current estimate of $5.5 billion. That’s not the case. In Honolulu’s case, the 40 percent would be applied to a base of essentially $4.2 billion, bringing the cost to roughly $5.9 billion if Honolulu tracks the average trend.

The report, titled, “The Predicted and Actual Impacts of New Starts Projects,” offers an analysis of 21 “recently opened major transit projects” that have received funding from the FTA’s New Starts program.

New Starts is the “federal government’s primary financial resource for supporting locally-planned, implemented, and operated transit ‘guideway’ capital investments,” according to the FTA website. The largest chunk of federal funding for Honolulu’s rail project will (potentially) come from New Starts.

The 21 projects the report focused on were completed between 2003 and 2007. The two stated purposes of the report were to:

1) Provide an up-to-date assessment of the actual performance of projects compared to the forecasts made for those projects.

2) To consider the effectiveness of the procedures and technical methods used to develop information for decision-making by project sponsors and the FTA.

The methodology of the report focused on project scope, service levels, costs, and ridership, which were documented during the four milestones below:

  • Selection of the locally preferred alternative (LPA) or entry into preliminary engineering (PE), usually signified by the completion of the AA (alternatives analysis) and Draft Environmental Impact Statement (DEIS);
  • Entry into final design, usually signified by the completion of a Final Environmental Impact Statement (FEIS);
  • Signing of the Full-Funding Grant Agreement (FFGA); and
  • Project completion, for capital cost data, and two years after opening (if available) for ridership results

On Cayetano’s point, the report states: “On average, for the 21 projects completed between 2003 and 2007 actual construction costs exceeded the inflation-adjusted estimates developed in alternatives analysis by 40.2 percent, the final design entry cost estimates by 11.8 percent, and the FFGA estimates by 6.2 percent.”

Costs for transit projects similar to Honolulu’s proposed rail system do balloon, on average, by about 40 percent from the alternatives analysis report to construction, according to the FTA. (However, it should be noted that according to the table below, four projects were not actually included in the calculation from alternative analysis reports to construction for varying reasons. So, rather than the the 40.2 percent figure being based on 21 projects, it seems like it should probably have been based on 17 projects. But we can hardly fault Cayetano for that. Hat Tip: CB Reporter-Host Mike Levine)

The table below shows costs for the 21 projects.

This table shows the percentage increases for the projects.

According to Honolulu’s rail-transit alternatives analysis report from November 2006, the purpose of the report was “to provide the Honolulu City Council with the information necessary to select a mode and general alignment and general alignment alternative for high-capacity transit services on Oahu.”

The report looked at four alternatives for the project:

1) No Build Alternative

2) Transportation System Management Alternative

3) Managed Lane Alternative

4) Fixed Guideway Alternative

Honolulu (in case you haven’t heard) decided on the Fixed Guideway Alternative.

The screenshot below shows the cost estimates for the four alternatives in the alternatives analysis report:

Honolulu chose to pursue the last option, the 20-Mile Alignment East Kapolei to Ala Moana Center. According to the 2006 estimates, the project was expected to require $4.19 billion.

If the project does proceed as planned, and rail costs inflate by the average of 40 percent from the alternatives analysis report, Honolulu taxpayers can expect the final tab for rail to be close to $5.87 billion.

Current estimates are that rail will cost $5.5 billion.

If the project increases by the average of 11.8 percent from submission of the FEIS to completion, the cost would be around $5.7 billion. (The FEIS report estimated total capital costs for rail in year-of-expenditure dollars would be $5.1 billion.)

Honolulu does not have a full-funding grant agreement (FFGA) with the FTA, so it is unknown how much a 6.2 percent increase might effect final construction costs. The city expects to have an FFGA by late 2011 or early 2012.

Could it have been considered slightly misleading that Cayetano used a 40 percent figure this far out from the alternative analysis report? Possibly. But his statement explicitly said cost overruns for FTA approved rail systems average about 40 percent.

The FTA backs up his claim, regardless of the timing of his statement. The former governor was correct.