Honolulu Mayor Kirk Caldwell says the financial plan for rail has changed dramatically.
An updated financial plan put the price tag at $9.5 billion, an increase of nearly a billion dollars in just a few months.
It’s an issue Always Investigating first told you about last week and tonight, we look into the fallout.
The mayor’s spokesman says Caldwell learned about the new numbers along with the public last week as the Honolulu Authority for Rapid Transportation turned in a financial plan on deadline day to the Federal Transit Administration.
The mayor now says it appears rail payments will continue long after the project is built.
Up until now, taxpayers were under the impression the general excise tax and federal grants would cover it, with the exception of short-term borrowing here and there.
The mayor said in a statement to Always Investigating Monday evening:
“The people of Honolulu are not going to get another chance to fund the rail project, and what happens at this year’s legislative session will determine the outcome of the project. We have to be completely transparent with all aspects of this project, including how we’re going to control costs, as well as the estimate to complete all 20 miles and 21 stations. As the financial plan for rail changes dramatically from a pay-as-you-go arrangement to long-term financing, one of the key cost items is interest on borrowed money. Bond payments for rail will continue long after the project is finished being built, and perhaps this is a more equitable way to pay for the system instead of placing the entire burden on today’s taxpayers. I look forward to discussing this with all stakeholders, from members of the state Legislature and the governor to the people of the City and County of Honolulu.”
As we were first to report last week, the cost of rail including debt service jumped about $1 billion from the last estimate HART disclosed just this fall, from $8.6 billion with interest to $9.5 billion. HART only has $6.8 billion it can count on so far, and assumes it will have to borrow much of it.
HART says the base cost of getting rail to Ala Moana still stands at an estimated $8.2 billion. The difference in the latest tally comes from the earlier fall estimate calculating interest only for another decade, rather than how long they’ll really keep having to pay the interest tab unless a giant lump-sum somehow materialized to pay off the balloon in 2027, kind of like a mortgage with a big balloon payment left to the end.
The $9.5 billion estimate paces out the payments, assuming they’ll get another G.E. tax surcharge extension at the Legislature, with the city getting 90 percent and the state getting 10 percent, but HART says it’s just one of many models.
Always Investigating asked, if $9.5 billion is the outcome of staying the course essentially, what is the higher end from there should we get lesser share than the 90 percent or a shorter extension?
“You know, I’d really hate to guess on what it might be,” said Brennon Morioka, acting HART executive director, CEO. “It’s really going to depend on what kind of mortgage you’re going to get.”
“The assumption of how long a debt service you’re dealing with is a material assumption, then you need to disclose that up front to the board so they understand it and the public understands it,” said HART vice chairman Terrence Lee.
Lee said he was surprised when told the billion-dollar jump came when staff felt instructed by the board to stop calculating interest expense at the $8.6 billion mark, even though the source of a large balloon payoff at the end was not clear.
The previous board and administration tells Always Investigating it was not a board directive, but was discussed between staff and certain board members, and says the payoff cutoff coincided with the 2027 G.E. tax sunset.
The draft financial plan includes lots of other details, like anticipated fares, city general fund subsidies, and operating costs ranging from $127 million a year to $144 million a year. It includes placeholder numbers for some large unknowns, like how much it might cost to inspect the rail on an ongoing basis.
The elevated rail is to be treated like a 21-mile bridge structure and already is being scrutinized for snapping steel cables and cracking plastic shims.