Honolulu’s messy predicament with the Federal Transit Administration over rail is getting messier.

The FTA on Wednesday clarified that the city must have the $44 million required by the federal agency on hand and ready to use by Nov. 20, with no further action necessary to get those dollars, according to Mayor Kirk Caldwell.

That means the City Council’s recent, expedited efforts to lift the ban on property tax dollars for rail construction and then float those bonds next year won’t cut it, Caldwell said. The news came in a conference call with FTA Executive Director Matthew Welbes, as well as Bruce Robinson, acting associate administrator for the FTA’s Office of Program Management, and City Council Chairman Ernie Martin, the mayor said.

Worker stops the single lane going west on Kamehameha Hwy near the future Pearlridge rail station.

A worker stops the single lane heading west on Kamehameha Highway near the future Pearlridge rail station.

Cory Lum/Civil Beat

That puts the city in an even trickier situation than initially thought when the FTA issued a new list of ultimatums in September. City officials are on the hook to show the FTA that it has $44 million in hand to cover Honolulu Authority for Rapid Transportation operations’ costs in 2018 and 2019 — even though the local rail agency has said it doesn’t even need that money due to its current cash flows.

If the city misses that deadline, it could lose some or all of its federal rail dollars. The ultimate consequences, if any, remain unclear.

“We’re going to have to figure another way to do this,” Caldwell said at a press conference in his office Wednesday, several hours after the call. He proposed using short-term financing, such as commercial paper, to cover the $44 million by Nov. 20. City officials must first confirm that step would even be legal.

Meanwhile, he urged the council to still move forward to pass Bill 42, which lifts the ban on using property tax revenues to pay for rail construction and proceed with the current bonding plan. The bonds could then pay off the short-term financing, Caldwell said.

He declined to speculate what the city would do if that step doesn’t work.

The FTA has also required a plan to cover an additional $134 million it believes will be necessary to finish building the 20-mile, 21-station rail system. Wednesday’s press conference didn’t cover that issue. HART officials have said stronger rail tax revenues will likely fill that puka.

Mayor, Council Leaders Clash Over Rail Promises

Caldwell, flanked by former Council Chairman Ron Menor, fumed Wednesday that under Martin, who replaced Menor as chairman in a surprise coup earlier this year, the council balked at passing Bill 42 until it was too late.

Caldwell took particular aim at Trevor Ozawa, the council’s budget chairman. In April, Ozawa joined Caldwell and Martin during a closed-door meeting with FTA leaders in Washington, D.C., to discuss rail. Sen. Brian Schatz also attended.

The FTA, Caldwell said, made it clear they wanted to see $44 million “committed to the project.”

Martin and Ozawa, Caldwell said, “confirmed they would deliver the $44 million within a time frame that the FTA expected” — and get those bonds by the end of September.

Bill 42 stalled in the Ozawa-led Budget Committee, however. Martin moved it earlier this month to the council’s newly resurrected Legislative Affairs Committee, where Ozawa voted against the measure last week.

“Budget Chair Ozawa directly promised to the FTA that he would deliver on the $44 million, and he’s voting against the very promise he made,” Caldwell said. “I think this goes to character. This goes to standing behind what you say.”

City Council member Trevor Ozawa1. 1 june 2016

Honolulu City Councilman Trevor Ozawa at a recent committee meeting.

Cory Lum/Civil Beat

After Caldwell’s presser, Ozawa said he made no such promise and that Caldwell mischaracterized their April meeting with the FTA.

“I never said I would move forward with Bill 42. Ever. Let’s be crystal clear with that,” Ozawa said, describing the mayor’s comments as “more politics.”

In April, after the meeting held in Washington, Ozawa told Civil Beat that that he and Martin had assured FTA officials they would incorporate the money into their final budget by June — although he couldn’t say what that might look like.

“We wanted to reassure them that we are looking at all options to provide the best and most responsible way of including that money in our city budget,” Ozawa said shortly after that meeting.

On Wednesday, Ozawa said that he had merely assured the FTA he would seek out rail’s “true capital costs” and separate them from the project’s “true administrative costs.”

That effort could be helpful, Ozawa reasoned, now that the city must cover rail’s remaining administrative costs as part of the latest, $2.4 billion bailout for the project. Lowering the administrative costs might lower the burden on the city.

Thus, after Ozawa took over as budget chairman, HART overhauled how it budgets its funding. It switched $17 million in annual HART administrative costs over to capital costs. That $17 million represented more than 70 percent of the rail agency’s operating budget.

Ozawa said Wednesday that he eventually wanted to share those changes with the FTA, hoping to convince the federal agency that only a fraction of the $44 million was actually needed to cover HART’s administrative costs.

Then, Ozawa reasoned, the city could potentially avoid using property taxes to cover the costs to build rail.

That conversation with the FTA never took place, however.

Despite the news from Wednesday’s conference call, Ozawa said he remains hopeful that he might still somehow convince FTA leaders to lift the city’s obligation.

The East Oahu councilman, who’s locked in a heated battle for re-election against political rival Tommy Waters, added that he’ll continue to vote against Bill 42.

Caldwell also said Wednesday that the FTA has no problem with language the Council added to Bill 42 last week that caps the total city dollars that could go toward rail construction at $214 million. That’s the amount listed in HART’s 2017 recovery plan. It would further cap the city’s annual contribution at $26 million.

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