Federal transit chief pushes city to move on rail plan

The Federal Transit Administration is pressing the Honolulu City Council to commit $44 million in city funds within the next 60 days to help finance rail construction, and wants the rail authority to finally decide within the next month exactly how it will build the challenging city center segment of the Honolulu rail project.

The $44 million would be the first city funds committed to rail construction. Up to this point, construction has been financed with federal funds, the half-percent excise tax surcharge imposed on Oahu residents, and proceeds from a state hotel room tax increase that took effect this year.

If the city fails to respond, the FTA “may proceed” with remedies set forth in its agreement with the city to help fund the rail project, according to the letter.

While the FTA letter does not spell out what that might mean, Honolulu Mayor Kirk Caldwell said it could include cutting off any further federal funding for the rail project. However, “I don’t think we’re there yet,” Caldwell said, noting the FTA has not declared the city in default of its Full Funding Grant Agreement for rail.

Honolulu City Council Chairman Ernie Martin said he was surprised by the tone of the letter from acting FTA Administrator K. Jane Williams, which he described as “literally calling us out.”

“I would say it’s a threat,” Martin said of the terse FTA letter, which was dated Friday. “Just from the tone itself, I would perceive it as a threat.”

The FTA committed $1.55 billion in federal funding to help Honolulu build its 20-mile rail line, but has withheld about $744 million of that money while the Honolulu Authority for Rapid Transportation has struggled to manage rail cost overruns and schedule delays.

The city signed an agreement with the FTA in 2012 that called for rail’s elevated guideway and 21 stations to be built for $5.26 billion, and to be completed in 2020. However, construction and financing of the project is now expected to total about $9 billion, and HART says the project won’t be finished until late 2025.

The city submitted a rail “recovery plan” to the FTA in April 2017 and a financial plan in September 2017 that were supposed to spell out how HART will pay for the cost overruns and complete construction, but the FTA wasn’t satisfied.

According to Williams’ letter, the FTA instructed HART in June to make a variety of changes to the recovery and financial plans, including increasing the rail budget by $134 million, and pushing the rail completion date back to September 2026. HART hasn’t done that, and hasn’t said exactly when it will, according to the letter.

The FTA has “exercised considerable patience” since 2015 as HART sorted through its problems, Williams wrote, but “HART’s repeated difficulties with identifying cost savings or sufficient funding have led to significant, recurring project schedule delays and cost increases.”

“Decisive and expeditious action is needed to prevent further cost escalation,” Williams wrote.

As an example, Williams noted that the September 2017 rail financial plan called for $44 million in city funding of rail construction this year, money that Honolulu Mayor Kirk Caldwell included in his proposed administration construction budget, but the Council deleted.

Martin said the Council removed the $44 million from the mayor’s construction budget but added a $44 million line item to the HART budget. That essentially authorized the rail authority to spend the $44 million without actually transferring the money from the city to HART.

That was done because HART indicated it does not need the $44 million immediately, he said.

“It’s just another step that I’m assuming that they want us to take and actually float the bonds,” Martin said.

The concern is that as soon as the city issues bonds and borrows that money to transfer it to HART, city taxpayers must begin paying interest on the borrowed funds even though HART says it doesn’t need the $44 million right away, he said.

“I think the FTA wants Honolulu to jump through as many hoops as they can put before us,” Martin said. “A lot of it is, I think, some of the changes in the federal administration in terms of how they perceive Honolulu from a political perspective. Where they can make things difficult for us, they will, and this is a classic example.”

Martin said the Council can meet the FTA’s 60-day deadline by passing a resolution to issue the necessary bonds with a single vote by the full Council, and then transferring the money to HART.

Caldwell also has been pressing the Council to take that step, but said it hasn’t been done because “people are running for re-election from districts that don’t support rail, and they don’t want to have to vote ‘yes’ on bond issues for rail. They put politics ahead of policy.”

Caldwell said he is speaking of Council Budget Chairman Trevor Ozawa, who he said “wants the election to be completed before he has to make a hard decision.”

Ozawa replied that “it was the mayor who ran in two elections on the promise that he would not use general funds, and he made the promise to the people. And he also promised that it would be on time and on budget. I am just holding the mayor to the promises that he made to the people.”

The Council also will need to take the politically sensitive step of amending a city ordinance that prohibits the use of city general funds or construction funds to build rail.

HART has been considering whether it should seek to enter into a public-private partnership to complete the last segment of rail from Middle Street to Ala Moana, and the FTA letter asked that HART decide whether to use that approach within 30 days.

Caldwell has said he supports that approach, and the HART board of directors is scheduled to consider the issue on Thursday .

Andrew Robbins, executive director of HART, said in a statement that the timeline proposed by FTA is “aligned and consistent with HART’s schedule for doing so.”

“I look forward to discussing these and several other issues at the meeting I have scheduled with the FTA on Monday in Nashville while attending the Annual Meeting of the American Public Transportation Association,” Robbins said in his statement.