The $1.55 billion Honolulu expects to receive from the Federal Transit Administration to help build the controversial Honolulu rail project could now hinge on the opinion of a federal judge.

City officials have all but guaranteed that this money is on its way, but after a hearing Wednesday involving former Hawaii Gov. Ben Cayetano’s legal challenge to the rail project, the outcome doesn’t appear so clear.

For more than a year, the city has been fighting with Cayetano and others over whether the studies leading up to the current iteration of the 20-mile, $5.26 billion rail line from West Oahu to the Ala Moana Center
were done adequately under federal environmental, transportation and historic preservation law.

Last month, U.S. District Court Judge A. Wallace Tashima issued a split decision, saying that for the most part the city had complied with federal requirements, but that it needed to do more work in three areas.

Those areas included accounting for traditional cultural properties along the rail line, more thoroughly considering the impacts to Mother Waldron Park and studying whether a tunnel under Beretania Street is a feasible alternative to building through Chinatown and other parts of downtown Honolulu.

The city previously found a $650 million King Street alternative was too cost costly. But Tashima ruled in November that it needed to explain why the less expensive Beretania route wasn’t considered.

On Wednesday, however, attorneys for both sides argued over the best way to address Tashima’s concerns.

Cayetano’s group, which includes Cliff Slater, Randy Roth and Walter Heen, said work should be stopped on the entire rail project while the city updates its paperwork.

The city and federal government contended otherwise, wanting to move forward with design and construction while doing the court-ordered work in the interim. Should that not happen, millions of dollars and thousands of jobs would be put at risk.

But while there are many legal ins-and-outs to each argument, it is increasingly clear that Tashima’s next ruling could have severe and potentially debilitating impacts to rail that go beyond construction delays.

It could result in the city losing its federal funding.

Maybe Going Backwards

At the heart of the matter is whether Tashima decides to vacate the FTA’s Record of Decision, which is essentially a federal stamp of approval to proceed with the project.

Honolulu Deputy Corporation Counsel Gary Takeuchi said that should that happen, the federal funding would be put in jeopardy.

“There’s certain things you can only do when you have an approved ROD, or Record of Decision,” Takeuchi said. “(Without it) we couldn’t continue with many of the activities that we’re doing now, so the effect of that would be to stop the project.”

In court records, Honolulu Authority for Rapid Transportation CEO and Executive Director Daniel Grabauskas says the city might have to repeat many of the steps it already went through to get the Record of Decision from the FTA in the first place, including those required by National Environmental Policy Act.

This could take “several years,” he said, and could result in the city losing out on the $1.55 billion in federal funding that today is destined for Honolulu.

In addition, Grabauskas said the city would have to go through the grant evaluation and rating process set up by through the FTA’s New Starts Program. This program is discretionary, he said, “so it is unclear as to the level of future federal funding that may be available for the project.”

If the process has to start over, the Honolulu City Council and Mayor-elect Kirk Caldwell will be put in an awkward position of figuring out how to make up for the loss of federal money, which accounts for nearly one-third of the project’s costs.

Cayetano and the other opponents say the city should have followed the rules from the beginning. They want an injunction ordering the project stopped until the Beretania tunnel has been evaluated.

Tashima didn’t say when he would make a ruling in the case, although he said he hoped to have one out shortly.

Regardless of what he decides, appeals are expected.

Takeuchi said it would be a “strong option” should Tashima side with Cayetano and the other plaintiffs.

Cayetano’s attorney, Nicholas Yost, indicated the same thing should the opposite occur.