The price tag for Honolulu’s rail project has jumped nearly $1 billion to $9.5 billion including financing.
That’s according to an updated financial plan given to the Federal Transit Administration.
Always Investigating found the number buried in a financial plan HART had to give the feds by Thursday. The increase comes from another $1 billion in financing costs not previously disclosed. The plan was turned into the FTA still labeled a draft, and is the first update to the financial plan since 2012.
Here’s how it stacks up: The actual construction costs remain unchanged from this summer’s estimate of nearly $8.2 billion. HART had been saying it would hit $8.6 billion including interest payments on things like bond and other debt financing.
But now they’ve told the FTA it could be more like $9.5 billion — $1 billion more in interest.
We asked HART’s deputy executive director, Brennon Morioka, when did this model start coming into fruition?
“The last couple months,” Morioka said, “as we’ve been working on this financial plan update and looking at different financing scenarios.”
Always Investigating asked, if it had been a couple of months, why weren’t voters made aware of this, or board members, or the general public?
“Because it takes a while to actually flesh out and evaluate those numbers,” Morioka said.
HART has about $6.8 billion it can count on, but needs $8.2 billion – plus any debt financing to cover cash flow – to get to Ala Moana. HART’s new vice chairman, Terrence Lee, learned of a now $2.8 billion funding gap, including financing, about a week ago and says he demanded an explanation of how the financing-inclusive price got to $9.5 billion instead of $8.6 billion HART stood behind this summer and fall.
“What I was explained, half an hour ago,” Lee said Friday afternoon, “is that the $8.6 billion scenario assumed that we would only have financing until 2027 (to coincide with the GE tax sunset), and that at that point, some way, some form, some fashion, the debt would be paid off.”
Always Investigating asked, paid off by whom?
“Don’t know,” Lee said. “That was the direction that was given to the staff to make that assumption.”
To recap, Lee is saying HART simply stopped counting debt costs when the G.E. tax extension ran out, assuming somehow it would all get paid off. But the new model counts on a G.E. tax extension at the same terms for another decade beyond the 2027 sunset.
Always Investigating asked Morioka for clarification, the plan doesn’t have an alternative other than “we get the extension”?
“Correct,” Morioka said, “and at that point we’re having more discussions with the FTA on where we go next.”
State lawmakers who control the purse strings already were skeptical. Senate Ways and Means Chair Jill Tokuda told Always Investigating Friday afternoon, after seeing the plan, “I think it begs further question of how confident can we be in any of the numbers they’re putting forward. Numbers like this that constantly go up exponentially six months at a time. This is not sustainable. This is not how we do right by rail.”
Always Investigating asked HART, how much more tolerance do you think either the lawmakers or the taxpayers are going to have for these billion-dollar-at-a-time changes?
“You know, I wasn’t happy about it when I learned about it,” Lee said, “and that’s why I wanted to get to the bottom of it. When you know there is a material assumption that could dramatically change the total budget, the board needs to be aware of that. And I also want to point out, this is one of my concerns with HART. They’re understaffed and overworked, and so the ability to get critical work out of them in a timely manner is being jeopardized. Until we can fix the personnel and staff issues, and stop the revolving door we have, I think we’re going to continue to have challenges in getting timely information.”
Morioka said HART is running 20 to 25 different scenarios, all assuming extension of a half percent excise tax surcharge but with varying state versus city portions, and varying durations. The $9.5 billion cost including financing is just one of the outcomes assuming the city keeps getting a 90 percent cut of the G.E. tax surcharge for an extra 10 years past 2027.
Always Investigating asked, what are the ranges at this point that if $9.5 billion is one of many? How much higher could it go?
“I have not been advised on any of the other scenarios yet,” Lee said.
“We’re still running them,” Morioka said.
Always Investigating asked, when will taxpayers and lawmakers know?
“I think over the course of the next month. We’re still running those scenarios,” Morioka said, “and we’ll be sharing the information with those people who will be working back and forth on trying to negotiate between both the city and the state on what kind of G.E.T. extension would be reasonable that the rest of the project could be financed. I think lawmakers understand most projects are financed with G.O. bonds or revenue bonds.”
“The more money the Legislature, the City, God gives us to pay toward the construction costs, that will lower the interest expense,” Lee said. “The only way you bring that number down is if you get more money sooner.”
Honolulu Mayor Kirk Caldwell’s spokesperson said the mayor is still reviewing the financial plan.
The FTA told Always Investigating, “FTA is in receipt of HART’s draft updated financial plan submitted on Dec. 1. We anticipate receiving additional information from HART, including final decisions on a Recovery Plan, before we can make a determination on next steps. FTA remains committed to working with local officials to determine a path forward for completing the Honolulu Rail Project.”
As to whether or not the FTA will grant an extension for the full recovery plan, which is due at the end of this month, FTA told Always Investigating, “No decision yet.” HART had asked to be given until next summer to turn that in.
“They know that at the end of the day probably in June is when we will be submitting a full recovery plan,” Morioka said, “which will be including a final financial plan, inclusive of the revenues and financing strategies.”
Honolulu City Council chairman Ernie Martin said in a statement: “We cannot lose sight of the fact that rail is much more than the anchor of a multi-modal transportation system, it is an economic driver that will spur development, connect more workers to new jobs, and improve the quality of life for thousands of people who suffer through traffic everyday. The rising cost projections continue to be a major concern but we need accurate, updated information to make decisions about how to pay for the project that the voters supported. The City continues to work with our state and federal partners to come up with the money to build a rail line that connects the West Side to downtown.”