Key Rail Strategies Are In Order

It must have come as quite a shock to even the most ardent rail supporters when Honolulu Authority for Rapid Transportation (HART) executive director Dan Grabauskas announced last week that the 20-mile rail transit project is now going to cost $550 million to $700 million more, and therefore will require an extension of the half-percent Oahu tax surcharge beyond 2022.

As the mayor who helped lead the charge in 2005 to revive rail, I don’t understand this SOS call at a time when so much has been accomplished to lay the groundwork for a successful launch.

Are we really running out of money? My administration set aside nearly $900 million for contingencies such as delays. Moreover, the four bids awarded between 2009 and 2011 for half the guideway, a storage facility and rail cars altogether came in at $315 million under budget.

HART is claiming that delays caused by lawsuits and awarding construction contracts before they were authorized and ready to build are responsible for about $190 million of the projected shortfall. While I’m not in a position to comment on all the lawsuits, I contend it was a prudent fiscal decision when, as mayor, I awarded those contracts to take advantage of an economic recession and slumping construction industry to realize the

HART curiously is silent on the fact that the state administration in 2010 had delayed by six months the timely acceptance of rail’s Federal Environmental Impact Statement (FEIS) that would have triggered the notice to proceed from the involved state and federal agencies. To former Gov. Abercrombie’s credit, within days of taking office late that year, he initiated the acceptance of the FEIS that enabled construction to begin at long last. In fact, if you factor in the $315 million saved in those first four contracts, the project should still be $125 million under budget.

Also conspicuously missing in this shortfall discussion are the added costs incurred by changes that HART has made since it assumed responsibility for overseeing the project, to wit: inclusion of platform safety gates that are, interestingly, not part of many transit systems elsewhere in the nation, and changing to longer rail cars with more seats and longer platforms.

Other factors that have raised the budget include construction market escalation costs associated with the cancellation of a major nine-station bid that was poised to be awarded, plus another bid to construct the second half of the guideway, and the increased salaries and bonuses of HART executive director and deputy director. HART now is reverting to the template we adopted in 2009, in which we crafted smaller bids to encourage competition, lower prices and give local companies more opportunities to participate. (Learning its lesson, HART recently re-bid that giant contract as a smaller, three-station package.)

Surely we didn’t need a news conference bemoaning rail’s fiscal challenges to know that legislative reaction would be lukewarm. A key legislator opined that “the Legislature has been completely out of the picture (on) the rail discussion,” a telling statement. Imagine the Legislature’s likely response, let alone the public’s, once it is understood that the project has a balance of more than $400 million to spend, with another $40 million to be added from the fourth quarter this year, that there is $532 million remaining in the contingency fund, and that the tax surcharge will generate between $160 million and $200 million each year until the law expires in 2022. With this positive cash flow, why should the Legislature be willing to consider the city’s request for an extension at this time?

Rather, the city needs to go back to basics and develop a realistic and measured plan.
First, now more than ever, HART must place a greater emphasis on cutting costs and being transparent on every aspect of rail construction and operation. Its leaders have to stop looking to the past to rationalize their shortcomings, and be better prepared to justify mistakes that are being made and are bound to happen as the project progresses.

Second, the city should request that the Legislature and new state administration investigate and confirm if the Department of Taxation is collecting and transferring to the city every tax dollar earmarked for rail.

Bear in mind that this state agency still conducts some of its operations manually, and has been known for late billings and collections. It wouldn’t surprise me if an audit revealed that the city hasn’t been given its full share of the surcharge. The original rationale for the state keeping 10 percent of the surcharge was that the tax department needed to invest in a proper mechanism to collect the rail tax. It’s been nearly seven years of the state government skimming about $20 million annually for these administrative expenses, a sum that totals about $140 million.

Third, it seems to me that, if the city is looking for more money, its strongest case would be in lobbying for the termination of this raid on rail funds.

In reality, this is money that rightfully belongs to Honolulu’s rail initiative and is not a new or additional tax. It may take a session or two or three for the change, but I’ve always maintained that once the first phase is completed and people get to actually ride rail, they’ll be clamoring for the extension to the UH-Manoa campus to be built sooner rather than later. It would be logical to give the city what it is owed to get it built quickly.

If the city pursues this ill-conceived tactic of crying wolf when there is no crisis, public support for the largest capital improvement project in Hawaii’s history will erode and jeopardize thousands of jobs, taking with them the added benefit of transit-oriented development.

Adhering to the tried but true adage of crawling before you walk and walking before you run, HART’s mission should be to demonstrate more of a track record of success before pleading for more help. The rail project needs to get done wisely and judiciously.