Honolulu Mayor Kirk Caldwell is ramping up the pressure on the Honolulu City Council, and particularly Chairman Ernie Martin, to pass a five-year extension of a 0.5 percent general excise tax surcharge and to do it quickly.
Failure to do so would put $1.5 billion in federal funding at risk for the Honolulu rail project and make the city seem “lolo” — crazy — Caldwell said Monday.
“We want to be taken serious, and this is absolutely serious what we’re dealing with now,” Caldwell said. “We’re not talking about small sums of money.”
Caldwell called a press conference to discuss a recent meeting he had in Washington, D.C., with Federal Transit Administration officials, who told him they planned to withhold $250 million in grant money if the council doesn’t act soon on the tax.
Martin responded Monday afternoon with his own statement, saying the City Council supports the rail project but does not want to issue a “blank check” in exchange for $1.5 billion in federal money.
A potential challenger to Caldwell in the 2016 mayoral election, Martin has said the city should consider breaking its contract with the FTA to retain more local control over the project. He said if the city weren’t bound by the FTA parameters there could be more discussion about shortening the route or cutting the number of stations to save money.
Martin has also floated a proposal to extend the GET surcharge for rail while placing a $910 million cap on the revenues that could be used on the project. Rail officials say that cap would not provide the Honolulu Authority for Rapid Transportation with enough money to cover the current estimated deficit.
Caldwell said the FTA is worried that the longer the council waits to pass the extension, the more likely it is that costs will rise for the $6.6 billion project, which is already facing a deficit of more than $1 billion.
“They’re saying show us the money,” Caldwell said of the FTA. “Show us you’re committed to building the project you promised to build and you’re legally obligated to build.”
Honolulu entered into a $1.5 billion full funding grant agreement with the FTA in 2012 to build a 20-mile, 21-station rail system with 80 train cars that will run between East Kapolei and Ala Moana Center.
Caldwell said if the city doesn’t build to those parameters, it risks having to pay back the grant money it has spent so far and forgo the rest. So far the project, which is being managed by the HART, has spent about $450 million of the federal grant money.
“We’re talking about a half a billion dollars that would have to be given to the United States government, and we’d have to find that money to do that,” the mayor said. “Money we don’t have.”
Caldwell provided a two-page letter from FTA Acting Administrator Therese McMillan that summarized their Nov. 12 meeting in Washington, D.C.
McMillan’s letter includes the agency’s threat to withhold $250 million in fiscal year 2015 grant money, and described the council’s approval of the GET extension as “paramount.”
McMillan also worried that any delay in securing the GET extension would result in additional cost increases because it could delay awarding future construction contracts.
“We recognize the challenges the project is now confronting,” McMillan wrote, “but FTA must be assured of the commitment of the revenue needed for the project before we can move forward together.”
In his statement Monday, Martin accused the mayor and HART of using the FTA as leverage to get the council to act on the tax extension, “expecting nothing more than a rubber stamp of a seriously flawed and mismanaged project.”
He said that HART has failed to provide any certainty about the cost of construction. In particular, there are concerns that utility relocation and burying electrical lines along the rail route will add significantly to the project costs. Without that information, Martin said the council needs to limit how much money can be expended on the project.
“The FTA has not issued any specific comment on the budget shortfall or offered to increase the federal share of the cost. At what point does it question the viability of the project entirely?” Martin said. “We are still missing a reliable projection on the cost of operation and maintenance. It is clear to me that the Council is the public’s last line of defense against spiraling costs which have yet to be determined and it cannot abdicate this responsibility.”
The City Council Budget Committee is scheduled to vote on the GET surcharge extension Wednesday morning. If it passes there are still several key votes that need to take place before it can be signed by Caldwell.