Rail work to be delayed while officials wrangle over funding

Amid uncertainty over whether there will be sufficient cash to build the full 20-mile line, rail officials have halted issuing the contract for the last stretch of the transit system until the Honolulu City Council decides on a tax extension to pay for it.

The Honolulu Authority for Rapid Transportation, which oversees construction of the cash-strapped rail project, had been scheduled Thursday to select (but not publicly disclose) up to three qualified finalists to build the system’s final eight stations and approximately 4.3 miles of elevated guideway, which ends at Ala Moana Center. HART has dubbed that stretch the “City Center” section.

Instead, the rail agency’s board opted to put that selection on hold.

Its members, along with HART’s executive director, expressed concerns that any bid prices the rail agency gets right now to build the City Center section will be substantially higher than expected if they move forward with the process. That’s because the competing firms will increase their prices if they’re going to take on a contract that doesn’t guarantee they’ll be fully paid, rail officials said.

HART’s official cost estimates for Honolulu’s rail project have swelled in recent months to about $6.57 billion, meaning the project now faces an approximate $1.3 billion budget shortfall.

“We thought it was prudent to recommend to the board that we pause and not issue … until funding was available,” HART Executive Director Dan Grabauskas said after Thursday’s HART board meeting. The agency expects the City Council will take a final vote in late January on Bill 23, which would enact a five-year rail tax extension that’s expected to raise around $1.5 billion.

If the Council passes the full tax extension, HART could select its finalists to build the last stretch of rail in the beginning of February, about six weeks away, Grabauskas said.

That full tax extension remains far from certain, however.

At the Council’s meeting last week, a slim majority of members expressed support for capping the amount that could be spent on rail at $910 million. The figure, proposed by Council Chairman Ernie Martin, is based on previous shortfall estimates. Rail officials have said that won’t be enough to finish the project.

Grabauskas on Thursday called it a “tough hypothetical” when asked what would happen to rail’s City Center section — or the future of the project — if the Council passed the extension with the proposed cap. “We’d have to see what was passed, what direction this legislative body was giving to us, and then make a determination,” he said.

Martin has said the cap is needed to “stop the bleeding” and hold rail spending to better accountability. Mayor Kirk Caldwell has already lobbied for the Council to disregard Martin’s proposed cap because rail’s federal transportation partners have signaled the move would jeopardize some $250 million in federal funding to help complete rail.

Despite the delay, HART board members Thursday said it’s within the City Council’s prerogative to take the time it needs to rule on the tax extension. “We appreciate the fact that we don’t print money in this organization. It’s really up to the elected officials to decide … and do their due diligence to ensure that we’re doing our job properly,” Don Horner, chairman of HART’s board of directors, said Thursday. “Mistakes have been made in the first phase (of the project). They should be concerned. We don’t say that clearly, I do think we learned … so hopefully they’ll grant us the extension.”

During last week’s Council meeting, Martin said that he had discussed the tax extension with Gov. David Ige after the state gave the Council the authority to consider the tax extension. Martin said that Ige had expressed his support for letting the Council take the time it needs to deliberate on the issue.

Grabauskas said he didn’t have estimates on how much it would cost to delay the process of awarding rail’s City Center section contract by about six weeks. HART nonetheless believed it made more financial sense to proceed with that delay rather than to take its chances with price proposals loaded with risk, he added.

Kiewit Infrastructure West Co. is building the first 10 miles of guideway, with separate firms building the stations along that stretch.

Meanwhile the rail agency is still moving ahead to award the contract to build the 5.2 miles of elevated guideway and four station around the airport because the money is available for that work, Grabauskas said. HART has already selected the finalists for that stretch but hasn’t disclosed who those firms or groups are. The public will likely learn who they are in March, when HART plans to award the contract, Grabauskas added.

The rail’s completion is estimated to be nearly two years behind schedule, with officials now expecting to finish the full public transit project toward the end of 2021.