Honolulu Mayor Kirk Caldwell is asking the City Council for the go-ahead to issue and sell $44 million in bonds to cover administrative costs of the Honolulu Authority for Rapid Transportation, even though the agency has said it doesn’t need the money right now.

Rail’s federal partners have “indirectly” said they want the city to float those bonds to show Honolulu’s commitment to building the 20-mile train, Caldwell said at a press conference Friday.

“We’re going to actually give HART money they don’t need, which doesn’t generate fiscal responsibility at all. It’d be like giving a kid money they’re not asking for and expecting them not to spend it,” Caldwell said.

Honolulu Mayor Kirk Caldwell, flanked by Budget Director Nelson Koyanagi, discussed the urgency of issuing bonds that will for the first time commit city money to rail construction. Natanya Freidheim/Civil Beat

Once HART receives the money, he added, the agency is expected to “sit on it.”

But Honolulu Budget Director Nelson Koyanagi clarified after the press conference that those city funds will in fact be used, replacing federal and state funds that HART would have otherwise spent in the upcoming fiscal year.

“You can’t issue bonds and just hold onto the money. You need to spend it within a certain period of time,” Koyanagi said. “And so because we’re issuing it today we need to spend it today. Consequently the amount of other bonds would be reduced, and probably issued later down the line.”

Before the city can issue the bonds, the council must pass Bill 42 to lift the ban on using city funds for rail construction. Until then, only state and federal revenues can be used to build rail. Issuing bonds can take months, Koyanagi said, and he said he aims to issue the $44 million by mid-August.

In early March, a council shakeup put rail critics in power and Bill 42 has stalled since late February.

“I’ll be there every day to get this bill moved and expedited,” Caldwell said.  

The mayor can expect some tense discussions. Council members have expressed vehement opposition to mining city coffers, made up mostly of property tax revenue, for the project.

But $744 million in federal grant dollars is apparently on the line should the council refuse the mayor’s request. The Federal Transit Administration is withholding the funds until it sees an acceptable recovery plan for the project.

Caldwell announced Friday he added restrictions to Bill 42 to make the measure more palatable and control the flow of city money to HART.

Caldwell proposed two caps on how much city money can go to the agency: $214 million from fiscal years 2020 to 2030, the year rail is slated for completion, and $26 million annually.

HART Rail contractors from STG work along Kamehameha Highway.
Rail workers along Kamehameha Highway. Cory Lum/Civil Beat

The city needs to start paying for HART’s administrative costs because state lawmakers made it a requirement as a part of a $2.4 billion bailout passed last year. Honolulu is also on the hook for $54 million in “additional costs” listed in HART’s recovery plan.

The agency doesn’t need the $44 million this fiscal year, Caldwell said, because it has surplus money. Starting in fiscal year 2020, however, those administrative costs are projected to increase and the agency will depend on city money.

As HART crafted its budgets this year, the agency re-examined its administrative demands, winnowing its operating budget in part by shifting expenses to its capital budget. The new accounting might lessen the burden for Honolulu taxpayers.

“Going forward, HART’s operating budget will be in the $5 (million) to $7 million range, versus the $20 (million) to $24 (million) or more,” Koyanagi said. “We should be able to cover that in our operating budget.”

Federal grants can cover 30 percent of HART’s operating budget, he said, but the city will need to find room in its operating budget for the rest. That ultimately means raising city taxes and fees or cutting services.

HART was created to take politics out of the construction of the approximately $9 billion project, Caldwell said at the press conference. The semi-autonomous agency is governed by a board of directors that includes mayoral and council appointees; a structure that limits the mayor’s control over HART.

“We have very limited oversight of the HART budget,” Caldwell said. “Now, if you were to ask me if I would do it again, I would not create HART. I’d like to have it over at (the Department of Transportation Services) so I could have direct input. Right now I have all the responsibility, none of the authority.”

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