The so-called “recovery plan” leaves open the question of how it will cover a funding gap of more than $2 billion because the Legislature and Gov. David Ige are still finalizing a proposal to raise the hotel tax for 10 years to make up much of the difference. HART says that the FTA has already “invited” the city to submit a supplemental plan when the financing is settled.
A rail guideway near the Kamehameha Highway in February.
Cory Lum/Civil Beat
But the plan makes one thing clear: The city intends to complete the project as first envisioned, to the Ala Moana shopping center, and does not believe a scaled-back “Plan B,” floated in an interim plan to the FTA last year, is viable.
Stopping the project at the Downtown Station near the Aloha Tower would eliminate seven stations and leave no money for contingencies, according to the plan. It would cut ridership by 60 percent and require a supplemental environmental impact statement, leading to further delays and possible litigation.
HART would have to renegotiate contracts, leading to claims from contractors that could offset any savings, the plan states.
“These analytics call into question whether Plan B would be a project of independent utility,” according to the plan — that is, would do enough good to be worth it, and to pass muster with the FTA, which is contributing $1.55 billion to the project and could hold back some of that money if it determined the rail line would not be useful enough.
The FTA asked for the plan in June in response to rising costs and schedule delays. The project is now expected to cost $8.2 billion, but with financing costs that could go as high as $10 billion. GET and federal funding adds up to only $6.8 billion, leaving a gap of some $3 billion.
At first, the FTA wanted the recovery plan by August. But the federal government eventually extended the deadline until April 30 — not as long as the city had requested, but enough time for the Legislature to consider options for covering the funding shortfall.
Lawmakers had considered an extension of a Oahu-only surcharge on the general excise tax past the current expiration date in 2027. But last week, House and Senate leaders struck a tentative deal to instead raise the hotel tax, officially known as the transient accommodations tax.
The TAT would go up from 9.25 to 12 percent for 10 years starting in 2018. The move would generate $1.3 billion for the project over that time.
Honolulu Mayor Kirk Caldwell said the move would still leave the project with a cumulative deficit of as much as $1.5 billion by 2037. He said the city would have to make up the difference with some combination of higher revenues and cuts to other services.
The plan is scheduled for a final House and Senate vote Tuesday, and then would go to Ige for his consideration.
In a “Note to Reader” at the front of the 249-page recovery plan, HART notes that the plan does not presume the passage of any actions by the Legislature, the governor, Caldwell or the Honolulu City Council.
“The FTA has required that this Recovery Plan be submitted by April 30, 2017, in advance of any final action,” the report states.
The report reiterates steps HART has taken to rein in costs, such as hiring and keeping experienced managers and consolidating contracting divisions into a single entity reporting directly to Interim Executive Director Krishniah Murthy.
HART also created a board that allows senior management to analyze change orders from contractors and consider impacts on cost and schedule. It also negotiated agreements with the Hawaii Electric Company to buy new service maintenance vehicles to allow electrical work to be done near the rail guideway and HECO poles and to get variances avoiding the need to relocate utilities.
The full rail line is scheduled to start operating in 2025.
Sign up for our FREE morning newsletter and face each day more informed.