The Honolulu Authority for Rapid Transportation is about to hit a cash crunch, and might borrow money that puts taxpayers on the hook.
HART will present to the board this week that it may soon dip into short-term borrowing.
It’s a move HART once dismissed as unlikely, unless there was a major disaster. But last year, the city and HART agreed borrowing would be part of the financial plan for rail.
Always Investigating was the first to reveal that the federal government is holding off on more than half-a billion in payments to HART.
HART is now telling its board it will essentially run out of cash next month when it hits a minimum reserve threshold.
The borrow would be of short-term city credit — something it got open-ended approval to do years ago on the promise borrowing would be unlikely and infrequent.
In 2012, the rail authority received the green light to use the city’s equivalent of a line of credit (a.k.a. commercial paper) for hundreds of millions of dollars. HART said at the time that it was needed to keep the federal government happy in financial plan documents.
Though it evolved into being an expected part of interim rail financing in a memorandum of understanding (MOU) signed last year, HART told the council as recently as May that borrowing would be unlikely until summer 2017.
HART had originally told the council back in 2012 it would only be drawn in case of disaster, war, terrorism, strikes, or economic jolts.
“Even (former Honolulu mayor Peter) Carlisle, when he was mayor, said they wouldn’t need that money until the moon falls into the ocean,” said Honolulu City Council budget chair Ann Kobayashi.
Add “cash crunch” to the list because HART is effectively hitting the bottom of the piggy bank in July, because it must keep a certain reserve untouched in the bank. They don’t have to ask taxpayers again, because it was pre-approved years ago.
“Can anything be done to stop it?” Always Investigating asked.
“No, not this short-term commercial paper,” Kobayashi said. “It’s a loan that has already been authorized. They can just go ahead and take all the money that we could be using on our parks and on our streets and our community centers. They can take it all and use it.”
The first borrow presentation says $20 million. HART recently told the city council it was burning through cash at a rate of $50 million a month and its budget shows $62 million to be spent in July.
According to HART board chair Colleen Hanabusa, “We’ve asked staff to look at whether they’ve maximized the drawdown of the federal match before they go in and use commercial paper. We’ve never had to do it to date. We don’t want to have to pay interest on money if we don’t have to.”
After that’s used up, the federal government says it isn’t releasing any more federal grant money — holding back $500 million and counting — until HART submits an updated budget that shows they can finish the project with dependable funding.
“If the federal government doesn’t trust this project, why would the city put all our resources out on the line and have the taxpayers there to pay in case HART doesn’t pay, and how can they pay if HART doesn’t have cash?” Kobayashi said.
According to a spokesman, HART will no longer be making its request to the board this week, but may still be borrowing next month.
It expects to draw on enough federal money and receive the next GET surcharge installment at the end of July, which would make $20 million all it needs to borrow.
HART says it can pay the money back by the end of the project.
Documentation from HART:
- Draft resolution to draw commercial paper
- Presentation on draw and cash balance
- 2012 letter to City Council outlining unforeseen events in which borrowing would be needed
Editor’s note: A previous version of this story covered HART’s original agenda and presentations, which included a request to the board to borrow, something HART confirmed in its initial statement. After our story aired, later that evening, HART informed Always Investigating it would no longer be making the official request to use the money, but may still need to do so by that same date in July.