The Honolulu rail project may cost as much as $7.967 billion to build and likely won’t be completed until April 2024, the Honolulu Authority for Rapid Transportation acknowledged Wednesday.
The new cost estimate came two days after the Federal Transit Administration sent a letter to HART and Honolulu Mayor Kirk Caldwell criticizing the lack of cost containment on the project, which was originally priced at about $5.2 billion.
“HART can do more to contain costs and mitigate the slippage in schedule,” wrote Leslie Rogers, FTA regional administrator, on Monday.
Rogers provided several recommendations and requested an update by Aug. 7 on how the city will complete the project within its financial resources.
Honolulu currently has $6.827 billion in tax revenue and federal money set aside for rail. According to new cost estimates provided by HART on Wednesday, that’s only enough to build the route as far as Kalihi station — the 14th of 21 planned stations — at an estimated price of $6.57 billion.
Stopping before Kalihi at Middle Street could price the project at $6.22 billion, HART estimated Wednesday. Finishing the route as planned to Ala Moana Shopping Center, or even bringing rail downtown, is no longer possible unless the city finds more revenue.
“The FTA is saying, ‘What can you build that would give you maximum ridership, the maximum community benefits for the money that you have left?’” — Dan Grabauskas, HART executive director
“We don’t have enough money,” said HART board chairwoman Colleen Hanabusa, who is also a Democratic candidate for Congress.
The Legislature and City Council recently passed a five-year extension of a general excise tax surcharge to raise money for the project but that’s not enough to account for a budget shortfall now projected at $1.14 billion.
Board members discussed several options for revising the project Wednesday, but several expressed concerns about how feasible any of the options are given the need for additional studies and the potential for delays and further cost increases.
It’s also unclear who will make the final decision about which option to pursue. HART officials aren’t sure who has the responsibility to make that call before sending an update, known as a “Recovery Plan,” to the FTA in August.
By June 17, HART will at least have a better idea of the project cost for the “airport” section of the guideway construction after bidders submit their final offers.
Brennon Morioka, deputy executive director at HART, said the agency is in the midst of procurement for the final “city center” section of the project, but is planning to send an addendum to bidders to let them know to stop working on their bids since the agency does not know exactly what the project will look like anymore.
Morioka said much of the latest cost increase can be attributed to the rising price of building the “city center” section of the rail line. Last October, HART projected it would cost less than $703 million. In March, the agency upped the estimate to $866 million.
On Wednesday, Morioka said he thought the section could cost $1.4 billion to $1.5 billion.
He blamed the fast-rising price on Honolulu’s hot construction market, which is seeing cost escalations at a rate of 14 percent per year. HART has also been affected by litigation and associated delays, and the expense of relocating utility lines.
Morioka also said that HART only realized about a year and a half ago that shafts holding up the guideway would need to have much deeper foundations than previously anticipated in certain areas, including near Dillingham Boulevard.
But Rogers from the FTA wrote that in addition to external factors, there are concrete steps HART should take internally to contain costs.
“Most importantly, HART must re-baseline the Project budget and schedule to reflect current conditions, identify a permanent risk manager, update the Project Management Plan, and streamline its organizational structure with clear roles and responsibilities,” Rogers wrote.
“We call on you to redouble your efforts to complete the Project as quickly and efficiently as possible.” —Leslie Rogers, FTA regional administrator
He also said HART should “engage a peer review with industry experts to recalibrate a critical path for Project completion that is entirely consistent with your expected financial resources.”
City officials were previously concerned about altering the rail project because doing so could risk losing $1.55 billion in federal funds under an agreement with the FTA. But HART executive director Dan Grabauskas said Wednesday that “the FTA has had a complete turnabout.”
“The ‘Recovery Plan’ should have Honolulu build the project as close to the original project that’s possible given the money that’s available,” Grabauskas said. “The FTA is saying, ‘What can you build that would give you maximum ridership, the maximum community benefits for the money that you have left?’”
Rogers’ letter didn’t specifically address concerns about what version of the project would allow the city to keep — or lose — the $1.55 billion in federal funding, but he wrote that the city’s “Recovery Plan” due in August should “demonstrate HART is taking every reasonable measure to mitigate the cost overruns and minimize the delay in opening the project to revenue operations.”
“As FTA seeks to protect the public’s very substantial investment … and HART seeks to deliver a rail transit system of enormous and lasting benefits to the island of Oahu, we call on you to redouble your efforts to complete the Project as quickly and efficiently as possible,” Rogers wrote.
FTA consultants are in Honolulu this week to discuss the project’s cost with local officials.
The nearly $8 billion rail cost estimate that HART revealed Wednesday is about $1 billion more than HART’s March cost estimate, and about $2.7 billion over the project’s initial estimated price.
The 20-mile, 21 station elevated rail line was supposed to cost about $5.2 billion and be completed by 2019.
Last month, the FTA told local officials that it estimated the project would range from $7.7 billion and $8.01 billion. Civil Beat and other news organizations previously reported that FTA’s cost estimate rose to $8.1 billion based on interviews with HART board members. But Rogers’ letter dated June 6 noted that the upper limit was actually $8.01 billion.
Both HART’s and the FTA’s cost estimates may not include some $100 million in rail-related contracts the city gave out in 2007 and earlier, prior to HART’s creation.
HART officials didn’t provide a breakdown of the agency’s new budget estimate Wednesday, and Morioka said one may not be available for another month.
HART and the FTA are using different methodologies to determine the project cost. HART’s new cost estimate includes only a $736 million contingency. The FTA’s $8.01 billion estimate has a $1.4 billion contingency, but lower estimated construction costs.
Grabauskas said after Wednesday’s meeting that he thinks the FTA will want a larger contingency, but he is hopeful that HART will be able to convince the federal agency that HART’s cost estimate contains more information regarding project construction costs.
Morioka presented the HART board with several options for how the city could potentially reconfigure the rail project in light of budget overruns.
For example, building rail as planned to Middle Street and building the guideway only to Ala Moana — skipping stations between Middle Street and Ala Moana, including downtown — would cost at least $7.59 billion.
HART could also issue public-private partnership solicitations for all stations, which would require over $900 million in private capital.
Another option is to reroute the project to Nimitz Highway, potentially decreasing costs due to the need for fewer stations. But that could tack on another seven- to 10-year delay due to environmental studies and the need for the FTA to review the new route.
All of the options for changing the route could potentially hurt ridership, which would diminish the community benefit that rail is supposed to provide as well as make it more expensive for the city to subsidize rail operations.
In addition to all the uncertainty about project construction, HART currently doesn’t know how much it will cost to operate and maintain rail the system.
The options presented included:
• Build to Middle Street and build guideway only to Ala Moana
• Build to Middle Street as planned and continue with bus
• Build to Middle Street as planned and continue with at-grade system
• Construct project as far as funding allows
• Issue public-private partnership solicitations for all stations
• Change alignment to Nimitz Highway
HART board members discussed the idea of simply building rail until the money runs out. HART provided estimates of what it would cost to build rail to each station from Middle Street to Ala Moana, but Morioka noted that the cost estimates are “high level” that “are not fully accurate” and were completed for “illustrative purposes.”
Both Grabauskas and Morioka told board members said that they would recommend striving to ensure that rail reaches downtown to maximize ridership, even if it doesn’t make it all the way to Ala Moana Shopping Center.
But the city doesn’t have enough money to do that, as HART estimates building the rail to downtown would require $7.46 billion.
“It’s going to be a balancing act,” Grabauskas said. “Every month we wait, a billion dollars of cost becomes $10 million more expensive.”
Read HART’s presentation on the options for rail below: