Honolulu’s rail transit project has officially plunged into renewed financial crisis, with the latest estimates showing a budget shortfall of more than $1 billion.
The cost to build the full 20-mile, 21-station transit system to Ala Moana Center from Kapolei has increased by another $832 million, according to new internal estimates released this week by the Honolulu Authority for Rapid Transportation.
The megaproject also faces a COVID-19-related revenue shortfall of around $450 million. Together, those two factors have pushed rail into yet another massive budget hole, leaving its future uncertain.
HART’s Project Oversight Committee is expected to discuss in detail the latest cost increases at its meeting Thursday.
One of the main problems driving up the cost has been the local rail agency’s inability to relocate utility lines along the busy Dillingham Boulevard corridor in order to make way for construction there.
That effort has long been known to be one of the transit project’s most daunting challenges. It was recently shut down and delayed by at least nine months, however, amid HART’s inability to provide city department heads with complete designs for the relocation work there.
The latest increases also include added contingency dollars and so-called “soft costs” to keep personnel working on the project longer than anticipated, HART spokesman Bill Brennan said in an email Wednesday.
City and rail leaders have alluded to looming budget problems ever since the most recent, Aug. 27 deadline to award the project’s final major construction contract passed.
HART Executive Director Andrew Robbins told city leaders Wednesday that he’s still trying to salvage a contract award out of that two-year procurement effort, despite massive pressure by Mayor Kirk Caldwell and other city officials for him to withdraw so they can start over without further delay.
Robbins told the City Council’s Budget Committee that he hopes to wrap the procurement process, with or without an award, before Thanksgiving.
His agency’s new estimated $832 million cost increase did not come up during the more than two-hour hearing, however.
The estimate pushes rail’s nearly $8.3 billion construction budget, which excludes nearly $1 billion in financing costs, to $9.13 billion total.
It’s not clear where the city will find the money to fill rail’s latest budget gap, its third such financial crisis since December 2014. Most of the dollars funding rail come from state general excise tax and hotel tax surcharges. However, extending those sources will likely prove difficult as state leaders try to address their own daunting budget shortfalls amid the COVID-19 pandemic, city officials said.
“We know we’re not going to have the money we need,” Caldwell told the Budget Committee during more than an hour of testimony Wednesday.
“But we can do it in a phased way,” he added.
Caldwell, whose term as mayor expires at the end of the year, suggested that the city could eventually try to extend Oahu’s 0.5% GET surcharge “or other revenue-raising measures” after the state recovers from the pandemic.
The Budget Committee, meanwhile, opted not to advance a measure Wednesday that revokes the city’s $214 million commitment toward rail construction. The City Council previously agreed to that amount as part of the project’s federally approved recovery plan.
Councilman Joey Manahan, the committee’s chairman, recently introduced that measure, Bill 71. On Wednesday, Manahan said he would wait and see what happens at the HART board’s committee meetings Thursday before advancing Bill 71 further.
The city is on the hook for any budget increases under the terms of the state’s 2017 bailout package, Manahan said last week.
Both candidates looking to succeed Caldwell as mayor next year have expressed opposition to using property taxes as a funding stream to finish rail, although to a slightly varying degree. Keith Amemiya has said that “increasing real property taxes to fund rail is not on the table for me right now,” and Rick Blangiardi has said that “we’re not going to raise property taxes.”
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