The board that oversees construction of the Honolulu rail project has approved a plan to partner with a private firm that would take over design and construction of the 20-mile rail line and run the system after it’s completed.
The Honolulu Authority for Rapid Transportation’s next challenge will be to take proposals from private firms and craft an agreement that protects the public from more of the construction delays and ballooning costs that have plagued the project, which was originally estimated to cost about half the current $8.29 billion price tag.
Even advocates of the partnership said the venture poses a challenge. Honolulu Mayor Kirk Caldwell testified in favor of the partnership but said the endeavor was as risky and difficult as an expedition to scale Mount Everest.
“I look at this as a huge climb,” Caldwell said.
HART board member Tobias Martyn summed up the challenge by saying, “We don’t know what we don’t know and are kind of learning on the fly.”
The private partner will be expected to complete what’s widely viewed as the most expensive and complicated part of the project.
HART is well underway building the 20-mile line, which consists of a heavy railroad constructed on a concrete guideway elevated by massive pillars. The first 10 miles of track and guideway and nine stations are complete; a second, 5-mile stretch from Aloha Stadium to Middle Street is under construction. The issue is how to plan and build the last 4 miles in what HART calls the “city center” — through Kalihi, along the edge of Chinatown and downtown and through Kakaako and part of Ala Moana.
As described in a draft paper HART published in July, the private partner would take over designing and building this costly segment, expected to cost about $1.4 billion, and front the money for finishing the line. The scope of the private company’s work would include building the guideway and rail line, as well as big-ticket items like rail stations and a parking facility at Pearl Highlands.
The private partner would get reimbursed with state general excise and hotel tax money only after the project was complete and running, Robbins said in an opinion piece published in the Star-Advertiser on Wednesday.
On Friday, HART received a letter from the Federal Transit Administration saying the agency had 30 days to decide whether to pursue the public-private partnership.
If HART missed the deadline, the FTA said it might seek to enforce remedies for noncompliance with its funding agreement, which include withholding about $740 million in federal money. The FTA letter also insisted that Honolulu officials adopt the federal agency’s estimated project cost of $8.299 billion, an increase of $134 million.
Also Friday, Caldwell held a press conference urging the City Council to help Honolulu fulfill its obligations by passing measures needed to fully commit $44 million from the city.
The FTA is providing a grant of about $1.52 billion. Honolulu taxpayers will have to provide an operating subsidy to cover operations and maintenance once the rail is running.
Before the unanimous vote green-lighting the partnership, Damien Kim, an electricians’ union executive who serves as HART’s board chair, noted the partnership proposal had the support of Caldwell, Honolulu City Council Chairman Ernie Martin, the Hawaii Tourism & Lodging Association and a number of labor unions.
But one powerful group that is not supporting the public-private partnership is the Hawaii Legislature. Rep. Sylvia Luke, chair of the House Finance Committee who helped craft a bill to bail out the project during a special session last year, said she had made clear that legislative leaders are not calling for the partnership.
“I told Mr. Robbins, ‘Do not think the Legislature wanted P3,'” she told Civil Beat, using the nickname for the public-private partnership. “P3 is not the end-all solution to the financial problems, and P3 could potentially cost more money,” she said.
Even Caldwell said during the HART meeting the key to the partnership agreement will be how it allocates risk between the partner and the public. If a partnership agreement puts too much risk on the private partner, it will want more money, Caldwell said.
“We have risk no matter what,” he said.
Luke agreed, and added that HART shouldn’t expect the state to step in again to bail out the project.
“The HART board better be clear that P3 will be cost-neutral or result in cost savings,” she said.
Finally, there is an issue with complying with a provision designed to ensure greater scrutiny of rail expenditures. When the Legislature passed Act 1 of the 2017 special session steering an additional $2.4 billion in tax money to the rail project, the measure included provisions setting up a payment distribution system to ensure money was being spent properly.
Among other terms, the bill required the Hawaii Department of Budget and Finance to obtain a certification statement from the state comptroller verifying that any invoice submitted by HART was legitimate. The department is required to post all certification statements received from the comptroller on its website within 10 working days of making payments.
Having a private partner cover all costs up front and request reimbursement afterward could place a massive burden on HART, which would have to submit invoices for hundreds of millions of dollars in work to be approved by the comptroller at the end of the project, Luke said. Another option, she said, would be for HART to include the current reporting and payment distribution system in the partnership agreement.
“Otherwise, it would be a lot of work for HART,” she said.
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