The latest rail financial crisis has burst open for the public to see just before Honolulu elects a new mayor, but the candidates for the job are at a loss to explain exactly what they intend to do about it.
The nearly $10 billion project is now short between $1.25 billion and $1.5 billion, and outgoing Honolulu Mayor Kirk Caldwell told members of the Honolulu City Council earlier this month that “we know we’re not going to have the money we need” to finish the project as planned.
If that “October surprise” has triggered any innovative thinking on the part of mayoral candidates Rick Blangiardi and Keith Amemiya, there is no sign of it yet — and voters are already sending in their ballots in the all-mail Nov. 3 general election.
When asked how he plans to proceed in the face of the latest rail crisis, Blangiardi replied in a written statement Tuesday that this was “a question I cannot adequately answer at this time. In fact, without the benefit of having a lot more information, anything I might say would be highly speculative, and candidly, not the way I want to begin my administration as Mayor.”
Amemiya said in an interview that he cannot say what his plan for rail is going forward, either, “because it’s a changing situation. Should I be elected, there will be a transition period for me to get more information, and I’ll have more specifics for you at that time.”
Colin Moore, director of the Public Policy Center at the University of Hawaii at Manoa, said those responses are “scary,” but not surprising.
“There is no easy solution to this. The solution to this is to somehow generate more revenue to cover the difference, change the plan for rail, or pray that the feds are going to provide more funding,” Moore said. “It’s the sort of position that no one running for office — or frankly no politician — ever wants to be in because there’s really no good option.”
Both candidates are pro-rail, and “at least until the election, I don’t think they really want to deal with this, which was already one of the most difficult public policy challenges for the city and county. Now, with COVID and the monster economic and fiscal crisis we’re in, it’s even less clear what the solution is,” he said.
“I think they’re being honest; they don’t have a plan and they don’t know,” Moore said.
The most basic question is where to find enough money to complete the project.
The Honolulu Authority for Rapid Transportation now estimates the pandemic will reduce the tax collections earmarked to pay for rail construction by $423.5 million, while Caldwell says he calculates the actual decline in rail revenue will be closer to $650 million.
That tax revenue was supposed to help pay for construction of the 20-mile rail line from East Kapolei to Ala Moana — the largest public works project in state history — but city officials now expect those taxes will never be collected because of the economic downturn triggered by the COVID-19 pandemic.
And that was only part of the flurry of bad news about rail this month. HART later disclosed new estimates that the cost of rail construction actually increased by $831 million.
Blangiardi told Hawaii News Now after that bad news broke that “I will not raise property taxes to pay for rail.”
He added that “I would not take property tax money to pay for the construction of rail at the expense of core city services.”
Amemiya’s statement on taxes at the time was more squishy. “Well, I’m against using real property taxes for rail,” he told Hawaii News Now when interviewed about the project. “So, I’m very bullish on making sure we do it, but of course try to be mindful of the cost overruns and delays.”
Those are similar to the responses both candidates made to Honolulu Civil Beat earlier this month before the scope of the construction cost increases was made public.
“We are not going to raise property taxes,” Blangiardi told Civil Beat at the time. Amemiya was again more cautious, saying that “increasing real property taxes to fund rail is not on the table for me right now.” But he added that “Realistically, you can’t put a red line through anything if all else fails.”
“But I don’t think we’re at that point yet,” he said.
Both candidates express hope that the federal government will step in to help the city pay for rail, but the Federal Transit Administration has been withholding $744 million in federal funding for the Honolulu line for the last six years.
The FTA refuses to release that money until it is satisfied the city has a workable financial plan to complete the project. In particular, the federal agency was waiting to see if the city would successfully award an affordable public-private partnership contract — or P3 agreement — to complete the last four miles of rail line through the city center.
But the P3 procurement also appears to be failing. Caldwell has withdrawn from the effort to award a P3 contract, saying the bids the city received were “so far out of reach that there was no way to make it work.”
HART had estimated construction of the last 4.16 miles of elevated rail line through the city center, eight rail stations and a 1,600-stall parking garage and transit center at Pearl Highlands would cost $1.4 billion.
However, the chief executive officer of the Los Angeles-based Tutor Perini Corp. disclosed to investors in July that the company submitted a bid of more than $2 billion as part of its proposal for the Honolulu P3 contract.
Embattled HART Executive Director Andrew Robbins is trying to salvage the P3 deal, but Caldwell contends Robbins cannot finalize a P3 contract on his own.
That history suggests the FTA won’t be eager to offer a federal bailout. When the Great Recession hit more than a decade ago the federal government provided a modest $4 million subsidy for the Honolulu rail project under the American Recovery and Reinvestment Act, but there is no way to know for sure if a federal bailout on a much larger scale is possible.
As for the possibility that the city or state government might be able to cover the rail shortfall, Amemiya said, “I would have to speak to the leaders of both the city and the state, and we need to explore every option at this point.”
Amemiya suggested the city should also explore borrowing money to complete the project under the federal Transportation Infrastructure Finance and Innovation Act, or TIFIA. When asked how the city would repay such a loan, Amemiya said TIFIA offers long-term financing, and in the years ahead “hopefully to city will have sorted out its financial affairs on rail.”
Caldwell has suggested to the Honolulu City Council that the final segment of rail might be completed in phases that would be built when the city has enough money. As an example, he said the project might be broken down into two chunks, with each chunk consisting of two miles of elevated rail line and four rail stations.
But Amemiya said he is concerned about any suggestion that the city might “pause” work on the rail project to regroup financially because it is unclear when construction would resume, if ever. The years of delays in the rail project have already proven that delays increase the cost of rail, he said.
“I’ve been consistent with my position that rail should be completed to Ala Moana Center as originally planned, but again, I need more information,” Amemiya said.
Blangiardi has been more open to pausing the rail project short of Ala Moana Center if the city doesn’t have the money to complete the project.
“I was always an advocate of building rail to completion. COVID-19 is a wake-up call — there’s a ‘pre’ and a ‘post,’” Blangiardi said during a July interview with Hawaii News Now and Civil Beat. “If we can’t build it, we make the call. We stop it.” He later clarified he meant to say “stall” until city revenues rebound.
Blangiardi did not sit for an interview this week, but in a written response to questions he said HART should terminate the P3 procurement process and prepare a new formal proposal for the FTA by Dec. 15.
That should include a detailed timeline for shifting to a more traditional design-build procurement strategy for selecting a contractor for the city center construction. Design-build is the approach used in much of the rail construction to date.
The HART proposal should also “include a phased approach and/or a value engineered proposal demonstrating the City’s financial capacity to proceed,” Blangiardi said in his statement.
HART has already engaged in various “value engineering” efforts over the years to revise plans for the rail stations and take other steps to cut costs.
Blangiardi also pledged to have “more open and transparent communication by the HART to its Board, the City, and the general public.”
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