Editor’s Note: Civil Beat has spent months examining financial records relating to the Honolulu rail project. “Off Track” is an ongoing series that explores what’s happening to the taxpayer money that is going into the biggest public works project in Hawaii history.
Taxpayers wanting an idea of what they’ll be riding in when Honolulu’s commuter rail system finally gets up and running can visit Kapolei Hale to examine an actual replica of the railcars city officials hope will be zipping across Oahu by the end of the decade.
They won’t be able to get inside the car, however, as it’s cordoned off by orange and white construction barriers and a polite sign telling visitors to please not sit on the train. Instead, the shell sits in the cavernous open-air foyer of the municipal building collecting dust and occasional bird droppings.
When it comes to spending billions of tax dollars to build a railroad, molding favorable public perceptions is important — and expensive. The Honolulu Authority for Rapid Transportation paid $63,714 just to have the model shipped from Italy and a few dollars more to decorate it with twinkling lights at Christmas.
But the cost of giving the public a peek at the new railcars is pocket change alongside the millions being spent by HART and its prime contractors on public relations, lawyers, lobbying and scores of consultants adding their two bits on how the project should be managed, designed and built.
Additional hundreds of millions have been spent actually constructing the first two miles of elevated guideway, purchasing properties along the rail line and designing the stations where the country’s first fully driverless commuter trains will stop along the route from the farm fields east of Kapolei near the University of Hawaii West Oahu to the bustling Ala Moana shopping center between downtown Honolulu and Waikiki.
Civil Beat obtained a copy of the city’s checkbook for rail expenditures through a public records request. It shows that from July 5, 2007, to March 13, 2015, more than 4,800 checks totaling $1.389 billion had been cut by the city to pay rail bills. That amount has increased since the latest spending figure of $1.44 billion was reported in HART’s most recent monthly progress report covering the period through March 31 and does not reflect additional spending in April.
“Even those who support rail are beginning to question whether we have the ability to deliver this project in a cost effective manner.” — Honolulu City Council Chairman Ernie Martin
But knowing how many checks were cut and to whom they were issued doesn’t tell the whole story. The checkbook doesn’t provide the necessary detail to thoroughly scrutinize how taxpayer dollars have been spent on the largest public works project in the state’s history.
And getting that information has proven difficult, not only for the public but for the lawmakers who are expected to oversee the project and increase taxes to pay for a projected shortfall currently estimated to be as high as $910 million.
Checks issued through mid-March have been in payment of more than 11,400 separate bills and invoices — documents that only a few people examine. According to HART’s Project Management Plan, these requests for payment are verified by the rail agency’s accounting department, approved by the executive director and forwarded to the city’s Department of Budget and Fiscal Services for further verification and payment.
Despite this verification process — and HART’s rhetoric about transparency — it’s impossible for the public to determine the details of what is being purchased because only a few people have access to the invoices.
For example, the cost of shipping HART’s railcar mockup was contained in a December change order and was included along with other items in larger payments made to Ansaldo Honolulu JV, the project’s core systems contractor responsible for manufacturing the train cars. During the period immediately following approval for shipping the railcar model, three checks totaling $6.2 million were issued to Ansaldo for providing “a fully integrated rail and operating system.”
Honolulu City Council Chairman Ernie Martin is pushing for an audit in response to what he says is widespread frustration about the lack of financial detail and questionable oversight of the state’s largest public works project.
Martin told Civil Beat he initially wanted a forensic analysis of the project, which would typically look for for criminal activity such as money laundering or embezzlement. But, he says, he was told that the city auditor did not have that authority.
His focus now is on making sure HART keeps close tabs on how taxpayer dollars are being spent, especially now that the Legislature has approved an extension of Oahu’s general excise tax surcharge that will be used to pay for the projected shortfall. Gov. David Ige still needs to sign that bill, and the City Council still needs to take steps to continue the tax past 2022.
“Even those who support rail are beginning to question whether we have the ability to deliver this project in a cost effective manner,” Martin said. “We want to do it the right way for the right cost. We don’t want to be giving a blank check.”
A real problem with following the money is HART’s lack of tracking payments to subcontractors. HART says it doesn’t know, or have the authority to find out, how much individual subcontractors are paid. But federal regulations suggest that it does, in fact, have the authority to examine the books of prime contractors if it chooses to do so and these documents would reveal what subcontractors are being paid.
The dearth of information on subcontractor payments makes it virtually impossible for lawmakers and the public to see what actual services are being provided by subcontractors and what they cost. This is clearly illustrated in the area of public relations where millions has been spent. Just like the Ansaldo rail car display in Kapolei, public relations is crucial to maintaining taxpayer support for the project and helps in convincing lawmakers to keep tax money flowing.
Most of the individuals and companies providing public relations and related services are paid as subcontractors and what they receive is seldom disclosed. The exception are payments to Disadvantaged Business Enterprises, which are required by federal law to be reported.
Through March, three of these firms had received slightly over $2 million for public relations work as subcontractors to AECOM Technical Services and Parsons Brinckerhoff, both prime contractors. A fourth firm received at least $5.7 million, but the portion attributed to its public involvement services was not itemized.
Payments to another 22 firms providing PR services to Parsons, AECOM and two other major contractors, the Kiewit companies and Infraconsult — the project’s primary program management support consultant — have never been disclosed.
Although many financial details are sketchy or non-existent, a review of HART’s check register does shed some light on where public money is going.
At one point there were at least 30 individuals or companies being paid for some type of public relations work or “government liaison” services. But in 2012, during his first year on the job, HART executive director Dan Grabauskas cancelled eight contracts outright and reduced the amount of two others — an action he said saved his agency at least $2.8 million.
A subsequent audit found that an estimated $13.9 million had been shelled out by either the city itself, or the rail project’s prime contractors, since July 2007 when Honolulu began keeping payment records.
The big question is how much detail is contained in the thousands of individual contractor invoices and purchase orders flowing across the desk of city officials who actually write the checks. Since one large check may cover payments for multiple invoices and the payment is described in only general terms, it is impossible to tell.
While the city may not be paying attention to invoice detail, or writing checks directly to the hundreds of HART subcontractors and vendors, the municipal checkbook isn’t sitting idle. From July 5, 2007, to March 13, 2015, checks totaling almost $1.4 billion were issued by Honolulu’s Budget and Fiscal Services to pay for the rail project — about 23 percent of its currently estimated $6 billion cost.
And city officials aren’t providing HART with bookkeeping, check-writing and other services for free.
Under terms of an agreement between Honolulu and HART, the rail agency must reimburse BFS for salaries and fringe benefits paid to employees performing work for HART. The city also charges HART a central administrative services fee amounting to 5 percent of HART’s operating budget. In fiscal year 2014 that fee totaled just over $1.06 million. For the current fiscal year the fee is expected to increase slightly to just over $1.07 million.
In return, city officials have been busy paying HART’s bills — from the largest single check written to date – $18.3 million to Kiewit Infrastructure West Company for designing a section of the fixed guideway along Kamehameha Highway — to some of the smallest — $12.57 for cookies served at a public hearing, $12.52 for colored paper and scissors and $62 for lei hung around the necks of federal transit officials.
Thousands of other checks have covered things like $5,488 for two shredders, $967 for “No Trespassing” signs, $687 for a television set, $627 for a typewriter, $539 for sandwiches served during a meeting with the project’s federal watchdogs, $205 for tablecloths from Amazon.com and $79.50 worth of candy for one of Grabauskas’ trips to Washington, D.C., in 2014.
The fact HART can tell the public it spent $15 for a one-year subscription to Honolulu Magazine, $8.37 for a wireless mouse or $8.15 for a rubber stamp, begs the question of why it can’t tell taxpayers what it spends on services provided by subcontractors.
These details are important in order for the public — and policy makers like Council Chair Ernie Martin and Gov. David Ige — to decide whether the public’s money is being effectively spent and whether HART should get even more of it in the form of a GET extension.
Ige remains leery about the tax hike, and has yet to decide whether he will sign House Bill 134 to extend the GET surcharge for rail for another five years beyond its Dec. 31, 2022, sunset date. The governor’s spokeswoman, Cindy McMillan, said in a statement that officials are still analyzing HB134, which would include looking at the financial information that was provided to legislators by HART and the city.
“The bill is undergoing legal and policy review now,” McMillan said. “Before making a decision about whether he will sign it, Governor Ige will be looking at the specific provisions of the bill, reviewing the testimony and consulting with appropriate parties so he understands why this measure is needed now.”
Although many financial details are sketchy or non-existent, a review of HART’s check register does shed some light on where public money is going.
As might be expected in a project of HART’s magnitude, the lion’s share of payments have gone to prime contractors, consultants and lawyers. The top 25 contractors and vendors have received $1.266 billion of what has been paid since July 2007. The top 12 have received 96 percent of that amount.
Kiewit Infrastructure West Co. and Kiewit-Kobayashi Joint Venture, the contractors actually building the West Oahu-Farrington Highway Guideway and HART’s maintenance and storage yard, have so far been paid a total of $591 million. Ansaldo, the company building HART’s railcars and scheduled to operate the system when it’s completed, has collected $109 million.
Consulting firms, involved in the project almost from the beginning, aren’t far behind. The project’s three largest consultants have been paid $450.6 million so far.
|Kiewit Infrastructure West/Kiewit Pacific||$428,253,740|
|Parsons Brinckerhoff/PB Americas||$298,568,264|
|Ansaldo Honolulu JV||$108,987,584|
|AECOM Technical Services||$93,095,497|
|InfraConsult (Acquired by HDR Engineering)||$60,098,969|
|Aon Risk Services||$19,574,745|
|URS Corporation (Acquired by AECOM)||$17,130,591|
|Perkins + Will||$10,396,963|
|Anil Verma Associates||$7,687,345|
|Hawaiian Electric Co.||$7,229,841|
|Lee + Elliott||$6,474,762|
|Hawaii Department of Transportation||$1,378,715|
|Lawson & Associates||$1,302,388|
Even Hawaiian Electric Co. is pocketing taxpayer cash – having received 100 payments totaling $7.3 million for specialized equipment and various design and construction services related to relocation of utilities and providing power when the trains start running. Hawaii Gas has received $5.9 million for similar construction and utility relocation services.
HART also pays handsomely for influence in the nation’s capital, although the full magnitude of what it paid for twisting arms in Washington has largely been concealed in contract payments to Infraconsult, its program management consultant.
Since 2008, Infraconsult paid $2.1 million to two lobbying firms for what has euphemistically been called “government liaison” on HART’s behalf. All but $30,000 of this went to Williams & Jensen, a Washington law firm that besides HART, numbers among its clients Bombardier Transit — the unsuccessful bidder for HART’s core systems contract. The firm also lobbies for the County of Maui and several pharmaceutical, energy, and financial companies. At one time the firm represented SSFM International, which holds a $12 million HART contract to consult the Hawaii Department of Transportation on airport rail section design matters, and Parsons Brinckerhoff.
A real problem with following the money is HART’s lack of tracking payments to subcontractors.
According to congressional lobbying reports, from April 2008 to July 2013 Infraconsult paid Williams & Jensen $1.5 million to lobby lawmakers on funding for rail projects.
In July 2013 HART awarded a $900,000 contract to Williams & Jensen and three months later the firm substituted HART on its congressional lobbying reports, identifying its new client as “previously known as Infraconsult LLC.” Since then, according to the firm’s quarterly reports, HART has paid Williams & Jensen $530,000 for its services. However, city records show eight checks totaling only $425,000 have been issued to the firm since February 2014.
Lawyers, too, are getting their share, with $4 million paid to nine law firms so far. That doesn’t include several million dollars estimated to have been paid to the Honolulu Corporation Counsel for salaries, employee benefits and expenses related to the HART project — or amounts that may have been paid to law firms retained by prime contractors. The bulk of payments to law firms reflected in the check register — $2 million — were made to Nossaman LLP, primarily for work on lawsuits that stalled construction for more than a year.
But it’s hard to see how all that money has been spent. Civil Beat asked to review legal invoices so that taxpayers would have a better understanding of how attorneys were spending their time on the rail project. The records, however, are largely blacked out, shielding much of the detail under the guise of attorney-client privilege and an exemption to the public records law for an invasion of personal privacy.
The ultimate tab for lawyers can’t be predicted. According to the most recent HART reports to the Federal Transit Administration, the project budget includes an estimated $67.4 million for “Legal, Permits, Review, Fees, etc.” but how much of that is earmarked for lawyers is not detailed. Through February, HART had spent $21.6 million in that category.
As the pace of construction accelerates and additional contracts are awarded, thousands more checks will be written – the majority for construction and a substantial amount for professional and consulting services. HART’s most recent reports show that through February, $637.8 million of the $3.1 billion budgeted for constructing guideways, stations, support facilities, and operating systems has been spent. Of the $1.09 billion budgeted for professional and consulting services $663.6 million has been paid out so far.
And as the governor decides whether to wield his veto pen in the weeks ahead, the details will be all the more important. State Budget and Finance Director Wes Machida said he expects high-level meetings this week to discuss the rail project, and what to do about the GET extension that will help pay for it.
Machida pressed HART and the city for more financial details on the project and its cost overruns during the legislative session, which helped answer many of the administration’s questions.
Machida said some of the biggest concerns at this point involve project management and cost containment since there’s little that can be done about the money that’s been spent so far.
“What measures are being taken to ensure that the cost overruns will be minimized going out into the future, and what controls have been put in place to make sure that does happen?” Machida said. “That’s something that I believe we would want to see going forward to make sure there are no surprises and to ensure there is proper monitoring going on.”
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