Rail on track, report says, but funds in flux

Rail’s long-anticipated “recovery plan,” finally released Monday after several deadline extensions, touts building the full 20-mile system but still can’t answer exactly how the city will pay for it.

That’s because state lawmakers haven’t yet agreed to a funding deal that would once more bail out the cash-strapped elevated transit project and help close its latest, multibillion-dollar budget gap. Both chambers of the Legislature are slated to take floor votes on that funding package today.

The Federal Transit Administration’s April 30 deadline for the report was always expected to be tricky, requiring the city and local rail leaders to submit their recovery plan before they had all of the financial answers.

Still, rail’s interim executive director, Krishniah Murthy, insisted Monday that the 249-page report prepared by the agency he oversees, the Honolulu Authority for Rapid Transportation, provides key answers to other questions that have worried the project’s federal partners.

It looks to assure the FTA that HART’s management and its latest construction cost estimate of nearly $8.2 billion are sound, despite the agency’s earlier cost estimates falling woefully short. That figure does not include financing costs, which the recovery plan states could be as much as $1.8 billion more.

“We have done improvements to our management and the way the project’s handling is done,” Murthy told a press gaggle outside HART’s headquarters Monday. “Project controls, risk management, cost containment — all of those things that we have to do. That’s all part of the recovery.”

Murthy also said that Congress agreed this week to include rail’s final $243.7 million in its latest appropriations bill. If that bill is signed into law, the Honolulu rail project would have all its $1.55 billion in federal dollars appropriated. The FTA, however, could revoke some or all of those dollars if it doesn’t approve of the city’s recovery plan.

The recovery plan calls rail’s so-called “Plan A” — the push to build all 20 miles of elevated concrete pathway, 21 stations, and a transit center at Pearl Highlands — the only “viable Project alternative from a financial, ridership, and operationally practical perspective.”

Meanwhile, it pans “Plan B,” a less expensive proposal that would end the line near Aloha Tower and defer seven stations along the route. That scaled-back approach could potentially be covered by rail’s existing $6.8 billion budget.

Nonetheless, such changes would cut rail ridership by about 60 percent, the report states — a scenario that would strain the island’s taxpayers to cover a larger share of the operations. That alternative plan would also face delays to compile new environmental studies and deal with potential lawsuits from developers whose projects would no longer fall along the rail line, it added.

This latest report generally holds consistent with the conclusions that HART reached in its interim plan last fall, which also advocated building the full rail line from East Kapolei to Ala Moana Center.

It comes after state House and Senate negotiators agreed to a tentative deal last week to help cover some of rail’s approximately $3 billion shortfall. The proposal would increase the state hotel room tax to 12 percent from 9.25 percent for the next 10 years to provide an extra $1.3 billion or so in additional funding for rail.

On Monday a coalition of Honolulu City Council members and community leaders called on the Legislature to instead approve the city’s proposal to extend the half-percent excise tax surcharge.

“Unfortunately, the measure that the Legislature is presently considering would in fact place even greater burdens on our residents,” Council Chairman Ron Menor said during a news conference at Honolulu Hale. “It would also have severe impacts on business, industries and employees on our island.”

The measure would create a gap in the city’s fiscal year 2018 budget of as much as $30 million, requiring either an increase in property taxes or reductions in city services, Menor said.

The bill also would prohibit the city from spending more than $100 million to reconstruct or redevelop the Neal S. Blaisdell Center until after Dec. 31, 2027.

“I think an argument can be made that that is an intrusion on home rule by the state Legislature, which would render the measure unconstitutional,” Menor said. “If the Legislature passes out of a bill that is legally flawed, it’s going to result in substantial delays.”

Menor, along with Councilmen Joey Manahan and Ikaika Anderson, implored state lawmakers in a letter Monday to amend the rail bill during their floor sessions today and extend the GET surcharge by 10 years instead.

Kekoa McClennan of the American Hotel and Lodging Association said the proposed bill would be devastating to the tourism business in Hawaii.

“The impact of a 2.75 increase in the TAT is a double tax on Hawaii’s tourism industry,” McClennan said. “Effectively, Honolulu hotels will have a tax rate of 16.71 on top of the room rate. That puts Honolulu’s hotels in the highest bracket of hotel taxes in the country. That is not a place we want our No. 1 industry to be.”

McClennan said it would drive tourists to seek out unregulated, illegal vacation rentals, which would reduce affordable housing for locals and destroy neighborhoods’ residential nature.

2017 HART Recovery Plan by Honolulu Star-Advertiser on Scribd

Honolulu Star-Advertiser reporter Kevin Dayton contributed to this report.