Under the agreement, the federal government would contribute slightly more than 17% of the cost of the rail line from Kapolei to downtown.

A proposed new financing agreement between the Federal Transit Administration and the city that should quickly free up $125 million in new federal money for the long-delayed Honolulu rail project appears on the verge of final approval.

The document still needs the nod from the Honolulu City Council, Mayor Rick Blangiardi and the board of directors for the Honolulu Authority for Rapid Transportation in the weeks ahead, but it is a significant milestone in the city’s effort to get the project back on firm financial footing.

The HART board will consider the FTA’s proposed new Full Funding Grant Agreement at a special meeting on Wednesday morning. The document was made public for the first time on Monday.

Skyline train rail commute mass transit free Keone’ae University of Hawaii West Oahu
Riders wave to people waiting on the platform of the new Skyline train at the University of Hawaii West Oahu station on June 30. After a long wait, the Federal Transit Administration is finally ready to sign off on a new full funding grant agreement. (Kevin Fujii/Civil Beat/2023)

Despite its name, the new agreement only commits the federal government to fund about 17% of the cost of building the rail line from East Kapolei to downtown. Construction is now expected to cost $9.93 billion, with most of that money coming from state general excise taxes and hotel room tax revenues.

The amended Full Funding Grant Agreement calls for the federal government to contribute nearly $1.72 billion of the total cost of construction, a sum that includes money from four separate appropriations made by the Congress since 2009.

The bulk of the federal share will come from $1.55 billion in FTA New Starts funding that was first pledged in an earlier full funding grant agreement with the city in 2012.

The FTA has withheld $744 million of that money since 2014 as the city tried to cope with rail cost overruns and a long series of construction delays.

The city submitted a “recovery plan” to the FTA last year that shortened the rail line from the original 20 miles to 18.9 miles to cut costs. The new plan ends the line at a station near the intersection of Halekauwila and South Streets, rather than building it to Ala Moana Center as originally intended.

The new plan also indefinitely defers construction of two rail stations and a 1,600-stall parking garage in Pearl Highlands.

HART officials had hoped those steps would persuade the federal government to quickly finalize a new FFGA and release additional federal funding last December, but that process took a year longer than expected.

The FTA has agreed to release $125 million of that funding once the new grant agreement is finalized.

U.S. Sen. Brian Schatz said in a written statement Monday that finalizing the new agreement has been “a long and difficult process,” but the Hawaii Democrat said he intends to “make sure we close the deal and finish this project for the people of Honolulu.”

“While we still have more work to do, this key milestone recognizes the hard work HART and the city have done to provide more accountability and get this project back on track,” Schatz said in the statement.

The first 11 miles of the rail system opened on June 30, but ridership on the half-built system has been limited thus far. The full rail line is now scheduled to open in late March 2031.

Comparing the 2012 agreement between the city and the FTA with the new proposed grant agreement shows some key areas where costs escalated wildly during the past decade.

For example, the 2012 agreement predicted that professional services such as engineering, legal and design work on the project would cost less than $1.2 billion, but the amended FFGA estimates those costs will end up at more than $2.5 billion.

Construction of the elevated guideway, track and stations was expected to cost cost $1.78 billion in 2012, but the FTA now calculates the guideway and track construction will actually cost more than $2.32 billion.

And the FTA cost estimate for the category labeled “site work and special conditions,” which includes utility relocation work, has escalated from about $1.1 billion in 2012 to more than $3.18 billion in the new agreement.

Efforts to relocate utilities such as water, electrical and sewer lines to get them out of the way of the crews that are building the rail line have proved to be particularly troublesome and costly, especially along Dillingham Boulevard.

By contrast, the cost of acquiring property and moving homes and businesses out of the way of the project increased from an estimated $222 million in 2012 to $240 million in the new agreement.

The estimated cost of the train cars themselves and the rail operating and electrical systems increased from about $456 million in 2012 to about $541 million in the new agreement.

Read the amended Full Funding Grant Agreement draft here:

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