Honolulu rail’s federal partners are officially losing patience with the city and the local agency overseeing the financially challenged transit project.

In a Friday letter, the Federal Transit Administration set a deadline for the Honolulu Authority for Rapid Transportation to update its recovery plan — the road map to rescue the project financially — so that it reflects the FTA’s new, higher cost estimate for rail.

The FTA’s estimate puts rail’s price tag at $8.3 billion – a full $134 million more than the city’s budget estimate. HART now needs to find that additional money in the next 60 days.

The letter also asks that HART and the city decide in the next 30 days whether it will use a public-private partnership to complete rail’s final and most challenging stretch into town. It further demands that the city commit its first $44 million contribution to rail, as outlined in the 2017 recovery plan, sometime in the next 60 days.

If HART and the city miss those deadlines, the FTA “may proceed with the remedies set forth” in its 2012 full funding grant agreement, the letter stated. That deal provided $1.55 billion in federal funds for the rail project.

Under the agreement, if the city is in default, the FTA could demand its money back.

HART rail guideway car photo op Farrington Hwy Waipahu Sugar Mill train wide1. 30 may 2017
A Honolulu rail train is tested along Farrington Highway near the Waipahu Sugar Mill Cory Lum/Civil Beat

“The FTA has exercised considerable patience since requesting in August 2015 that HART provide additional information about the project budget and schedule in light of then-apparent problems,” the letter said, referring to the transit project’s initial financial crisis.

“The FTA repeatedly has highlighted the need for action while working with HART to identify potential solutions. However, HART’s repeated difficulties with identifying cost savings or sufficient funding have led to significant, recurring project schedule delays and cost increases.”

It’s unusually blunt language as far as the agencies’ public communiques on rail go.

So, far, the project has received more than $800 million from the FTA — about half of its federal contribution. The FTA is withholding future payments until it approves HART’s recovery plan.

None of the steps demanded in the FTA’s letter will be easy.

A public-private partnership will require approvals not just from the HART board but also from Honolulu’s mayor and City Council. That’s because the contract would likely give a third party a deal to run the transit line for at least 20 years, and the city is slated to oversee rail’s operations and maintenance.

Both the mayor and the City Council have expressed support for pursuing a public-private partnership, however.

City leaders have been unable to find a way to cover the city’s first $44 million share of rail costs that appeases the FTA — even after they traveled to Washington, D.C., to meet with federal officials in person on the issue.

City Council members, led by Budget Chairman Trevor Ozawa, devised a maneuver to include those dollars in rail’s capital budget and then not actually float those bonds. The FTA rejected the idea.

In a June 27 Council meeting, Ernie Martin, the Council’s chairman, fumed over the matter:

On Friday, Martin said in a statement that the FTA’s latest letter confirms what he first sensed during a previous meeting — “that our relationship with these agencies have become extremely adversarial.”

“Our relationship with previous Administrations has been cordial and more of a working partnership,” Martin said. “It is disappointing that we are in this situation and I was looking forward to working with the FTA on finding a common ground.”

Martin’s comments echo what some other city officials have said privately and others in public: That the “Trump administration is a different administration,” as city Budget and Finance Director Nelson Koyanagi put it in March, “and is not real friendly to the project.”

Earlier this summer, FTA officials told Civil Beat that if the city decides to add the $44 million to HART’s capital program it would only consider those dollars “sufficiently committed” once the bonds are actually issued.

The FTA “continues to evaluate cost and schedule information provided by  (HART) to determine the reasonableness of HART’s estimates to complete the project,” the agency said in a statement in June. The agency “will not release any further federal funding for the project until it determines the financial plan is sufficient to cover the estimated cost and that all local funds have been sufficiently committed.”

Property Taxes For Rail?

An updated financial plan with an extra $134 million could prove the toughest hurdle for the city.

In his July testimony before the HART board, Mayor Kirk Caldwell said property taxes “most likely” would have to be raised if the city actually had to cover that expense.

“It’s troubling. It’s concerning. It means our share goes from $214 million to $348 million,” Caldwell told the board July 19.

The bottom line, he said, was that the extra millions would be far more than the city could afford unless it raised property taxes.

Mayor Caldwell testifies at HART meeting held at Kapolei Hale.
Honolulu Mayor Kirk Caldwell testifies at HART’s July 19 meeting, telling the board an extra $134 million in rail cost would likely result in property tax increases. Cory Lum/Civil Beat

HART leaders have expressed confidence that their less-expensive $8.16 billion estimate is still solid. However, their federal partners are standing firm. Their higher estimate followed rail’s latest biennial “risk-refresh” report, in which federal consultants found the project would need more cash and take nearly a year longer to complete than previously estimated.

On Friday, in response to questions over the FTA’s demands, HART Executive Director Andy Robbins issued a statement saying that he looked forward to discussing the issues with FTA officials during a meeting scheduled Monday in Nashville, Tennessee, during the American Public Transit Association’s annual meeting.

In January, Robbins told Civil Beat he was optimistic the FTA would approve HART’s recovery plan for rail by the end of June.

Here’s a copy of the FTA’s letter:

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