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The $2.4 billion rail funding package that passed Friday won’t just bring a big influx of of cash to the over-budget and behind-schedule project
It also potentially begins an era of closer oversight and more accountability for the Honolulu Authority for Rapid Transportation.
The bailout measure was approved Friday after a five-day special legislative session. Gov. David Ige is expected to sign the measure into law.
The bill is projected to raise about $1.3 billion from Hawaii hotel guests by increasing a statewide hotel room tax to 10.25 percent from 9.25 percent for 13 years. It would also raise a projected $1.046 billion from Oahu taxpayers by extending the general excise tax surcharge three years, from 2027 to 2030.
The bill is also intended to bring greater scrutiny over the project, whose estimated cost has soared to $8.165 billion, not counting financing expenses.
Here are three things to look for down the line if the bill passes Friday.
Beyond the escalating costs of building the 20-mile rail line from East Kapolei to Ala Moana Center, the question of how HART will pay to maintain and operate the system once it begins operations has remained unanswered. Now lawmakers want an explanation.
Specifically, the bill asks the Hawaii State Auditor to obtain from HART “a detailed financial plan that describes the predicted means by which the the agency Honolulu and the City and County of Honolulu will finance the ongoing costs of maintaining and operating the Honolulu rail transit project without the use of state moneys or other state-provided financial supports.”
It’s just one of several items the bill asks the state auditor to examine and report to the Legislature on before the start of the 2019 session.
The bill also requires the auditor to examine “(a)ll contracts awarded for, and expenditures associated with, the Honolulu rail transit project, including payments to contractors, subcontractors, and consultants, as well as any change orders” and virtually all expenditures made by HART.
To conduct the audit, the bill provides State Auditor Les Kondo’s office $1 million for the 2017-18 fiscal year.
During the special session, several rail critics and some legislators called for a “forensic” audit, with some calling for an “independent” auditor instead of Kondo. While the bill does not use the word “forensic,” Kondo testified that the review would go far beyond a review of HART’s internal controls.
As for independence, “Generally Accepted Government Auditing Standards” emphasize the need for safeguards to preserve independence.
To meet these standards, the Hawaii State Constitution establishes that the auditor is appointed to an eight-year term and can be removed only by a two-thirds vote of the Legislature. Peer reviews in 2013 and 2016 found the office’s constitutional and statutory authority sufficient to ensure the office’s independence.
The bill also sets up a cash distribution system. Tax money will flow into a special fund to be administered by the Hawaii Department of Budget and Finance. Before disbursing the money to HART, B&F must obtain a certification statement from the state comptroller, which is to verify that any invoice submitted by HART is legitimate.
B&F is required to post all certification statements received from the comptroller on its website within 10 working days of making payments. The bill gives the comptroller $400,000 to hire three full-time workers to verify HART invoices. While HART’s records are public, the increased oversight – and public posting of the invoice reviews – will provide easy-to-access, regularly updated information that the public and media can use to follow the money.
Much has been made of a July 24 letter from the Federal Transit Administration to HART’s interim executive director, Krishniah Murthy. The letter said HART’s plan to salvage the foundering project, submitted in April, was inadequate and asked HART to provide a financial plan by Sept. 15.
The FTA didn’t explicitly say it would pull the plug on its $1.55 billion funding and try to claw back the roughly $800 million HART had already received. But the letter said the FTA would “be required to consider its remedies” as outlined in its contract with HART, which calls for the authority to build an elevated train from East Kapolei to Ala Moana Center.
Legislators considered the letter a serious threat.
One of the most controversial questions during the session was whether the Legislature’s bill would be enough to satisfy the FTA. Mayor Kirk Caldwell repeatedly said it was not. He was joined in his assertions by Honolulu City Council Chair Ron Menor, Vice Chair Ikaika Anderson and Budget Committee Chair Joey Manahan.
With his City Council allies backing him, often literally, Caldwell repeatedly asked for more money. He said the Legislature’s $8.165 figure to finish rail, supplied by HART, wasn’t enough. The city needed about $8.7 billion, Caldwell said.
In meeting after meeting Caldwell demanded some $548 million more than what the Legislature had put together. Caldwell said the money was needed to satisfy a “stress test” risk assessment that the FTA would require. Later Caldwell said the city needed some $600 million to $900 million more.
Caldwell finally backed off the stress test claim Wednesday, but only after U.S. Rep. Colleen Hanabusa quoted FTA officials refuting Caldwell’s assertion.
Caldwell was left with legislators bluntly saying they could not trust him.
Post-special session, one of the biggest challenges facing the mayor and his City Council allies may be restoring their credibility on rail issues.
Senior Business Reporter Stewart Yerton worked as an analyst for the Hawaii State Auditor from January 2012-April 2017.