Neither the board that oversees rail nor the public have seen the latest so-called “recovery plan” – a new attempt by local transit officials to present a plausible path forward for a megaproject that has once again strayed over-budget.

Honolulu Authority for Rapid Transportation Executive Director Lori Kahikina said in a meeting last week that her staff is working “frantically” to get it done ahead of the Federal Transit Administration’s June 30 deadline.

That hasn’t stopped HART board members from voting in favor of the consequential plan that they have yet to see, so that they can pass it along to the City Council in time to make the FTA’s drop-dead date.

On Friday, the board approved a resolution that supports the recovery plan “as we understand it” – which is how Chairwoman Colleen Hanabusa phrased it – based on the details that she and a select group of three other members have learned from HART staff in recent months.

HART rail guideway construction near Middle Street and Dillingham.
Construction of rail’s guideway and stations has reached Middle Street. HART hopes to change its deal with the FTA so that it only needs to build as far as Kakaako in order to receive federal funding. Cory Lum/Civil Beat/2022

“We are really strapped,” Hanabusa said of the severe time constraints to hold multiple votes on the board and council levels and then send the recovery plan to the FTA. “We knew we would be tight but we never expected to be in this position.

“We had to pull the trigger on this to give everyone an idea of what we know today.”

The board then discussed at length some of the financial assumptions that are expected to be included.

Still, Natalie Iwasa, a legislative appointee to the board, called it “a concern” that no one’s actually seen the plan yet. She expects the report to be voluminous. Iwasa expressed further concern that the board hasn’t received one of its standard financial updates from HART in about eight months. It did receive a special update in December on the overall cost and schedule estimates, which was largely done by outside consultants.

The recovery plan will be available to both the board and the public on Friday, according to an agency spokesman.

Once it’s done, it will be at least the third such plan produced by HART since 2016 amid rail’s repeated budget problems and construction setbacks.

Unlike the previous versions, however, this one is expected to seek FTA approval of major changes to the project’s scope and its decade-old $1.55 billion federal funding deal.

The city agreed in 2012 to build rail as far as Ala Moana, but since then the costs have more than doubled. Currently, the construction effort is expected to collect about $10 billion total through its various tax sources. But HART now estimates that it will cost more than $11 billion to reach Ala Moana Center as planned.

City leaders, including Honolulu Mayor Rick Blangiardi, have said that through the new recovery plan they’ll pursue a revised deal with the FTA. It would allow them to build the rail line only as far as the Ka’ākaukukui or “Civic Center” station in Kakaako – which is more than a mile short of Ala Moana – and still get access to the remaining $744 million that the feds agreed to pitch in.

The FTA has withheld those dollars for the past seven years, demanding that HART and the city show a viable plan that still gets rail to Ala Moana.

In December, however, FTA Regional Administrator Ray Tellis sent Kahikina a letter stating that he understood HART was considering a shorter rail line. His agency “stands ready to engage in further discussions” as the city “evaluates alternatives,” Tellis wrote.

While testifying before the City Council earlier this month, Kahikina said that Tellis’ letter was “unsolicited,” suggesting that FTA took it upon itself to bring up a different scope and alternatives for rail.

A Subtle Change In Messaging

Meanwhile, some rail leaders have pushed back in recent weeks against the notion that they’re in any way stopping rail construction in Kakaako and pushing the rest of the line to some potential future phase.

Instead, they say, they remain fully committed to reaching Ala Moana. They’re merely presenting what they call a “truncated project scope” to the FTA in order to secure rail’s remaining federal dollars.

Then, they say, they’ll keep building toward Ala Moana using local tax revenues alone, without the help of the feds.

It’s not yet clear what the funding scheme for that would be, however.

HART Interim Director Lori Kahikina listens as Mayor Blangiardi conducts his post State of Honolulu speech Q&A with the media.
HART Executive Director Lori Kahikina insists that the city is still committed to rail reaching Ala Moana and that the plans they’ve put forth to shorten the line only apply to the city’s funding deal with the FTA. Cory Lum/Civil Beat/2021

“I cannot stress enough,” Kahikina told the City Council earlier this month. “Right now, this is just the contractual portion that we are talking about with the federal government. So we’re still getting to Ala Moana – we’re just truncating the project temporarily to the Civic Center.”

That’s somewhat different from the more phased approach that Blangiardi described in March.

Immediately following his state-of-the-city address, Blangiardi said: “This is phase one of a project on what this city can afford to pay for right now. The future belongs to the next phase. If you look at these megaprojects … they go in phases. We’ll hope for a better day in the next phase.

“We’re going to build what we can afford to build.”

However, Hanabusa said on Friday that HART’s latest budget forecast is very conservative and cautious. The revenues currently available to rail will likely get it closer to the mall than currently predicted, if not all the way there, she added.

“That’s why the board feels so strongly … you know, we will get to Ala Moana,” Hanabusa said at the board’s most recent meeting. “We’re very confident that we’ll get to Ala Moana.”

HART Board nominee Colleen Hanabusa answers media questions.
HART Board Chairwoman Colleen Hanabusa said she believes the rail project has a promising financial outlook, despite its numerous historical problems and challenging construction phase ahead. Cory Lum/Civil Beat/2021

Hanabusa pointed to a handful of factors for her optimism. First, she said she believes that the project’s current $800 million contingency is too high given how far along construction is, and how close HART is to finally solving its crippling utility-relocation woes along Dillingham Boulevard.

She also said she believes that HART is using conservatively low projections for annual growth of general excise tax revenue – rail’s biggest funding source by far – and conservatively high projections on the cost to borrow money for the project when it’s needed.

HART could reduce its current estimate of $745 million in financing costs by about $200 million, according to Hanabusa and the select group of board members that’s been studying the issue.

Further, Hanabusa pointed to nearly $240 million in so-called “bond premium proceeds,” or the extra amount that bond purchasers pay to buy Honolulu city bonds because they’re considered a relatively safe investment. It’s not clear why those proceeds weren’t previously listed as a revenue source for rail.

Still, rail officials in earlier phases of construction have delivered rosy projections only to see the project get hit with jarring cost increases and construction setbacks. HART has already seen two of its executive directors dismissed from the project and has endured massive staff turnover.

Honolulu rail could face more potential budget hardship in the future from inflation and uncertainty related to Russia’s invasion of Ukraine, project officials acknowledge.

Plus, officials say that the most difficult stretch of construction still lies ahead through Honolulu’s crowded urban core.

“We all know that this last segment has the most complexity, the most impact, the most cost and the most risk of all the segments,” Michele Chun Brunngraber, another legislative appointee to the board, said Friday.

Iwasa said she supports stopping the rail line well short of Kakaako at Lagoon Drive but that the city probably will find a way to eventually get the system all the way to Ala Moana.

“Rail kind of has a life of its own. It doesn’t really matter what happens,” she said during a session of Civil Beat’s “IDEAS Live” Monday. “Somehow, some way, it’s going to continue working through. I think we might go to Ala Moana … I wouldn’t be surprised if we do.”

Read Tellis’ December letter to HART and Kahikina here:

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