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Report: Rail costs underestimated by $1.7 billion

Gov. Linda Lingle releases state-funded study

By B.J. Reyes

POSTED:
LAST UPDATED: 12:39 p.m. HST, Dec 03, 2010

The proposed 20-mile rail transit system is likely to cost the city an additional $1.7 billion over the next 20 years, raising the total price tag to at least $7 billion, according to a state review of the project's finances.

Conflicting estimates of rail system's cost

A state analysis of the city's rail transit project sees a much higher total price tag.
City's estimate:

$5.269B

State's estimate:

$6.994B

Difference:

$1.725B

For the complete state rail report, go to http://www.scribd.com/doc/44620236
The 135-page report released yesterday also contends there is "substantial risk" that the $1.7 billion additional cost could grow to $4.5 billion.

Gov. Linda Lingle, who leaves office Monday, commissioned the report at a cost of $350,000 from the state Highway Fund.

"If construction and operating costs replicate the experience of many peer projects in cities without previous rail development, or if the optimistic federal fund assumption is not fully realized, this new and additional funding requirement ($1.7 billion) could grow to nearly $4.5 billion," the report said.

The report was prepared by Infrastructure Management Group Inc. and CB Richard Ellis, and says it "goes substantially beyond" the periodic reviews undertaken by the Federal Transit Administration.

Additional costs are expected to come from major rail repair and equipment replacement expenses not factored into the original plan, according to the report.

Also, money from the state's general excise tax dedicated to the rail system is likely to be about 30 percent lower than forecast, while ridership also is "likely to be substantially lower" than currently forecast, the report says. It notes that the project will be competing with other financial obligations for the city, including unfunded pension and retiree health care liabilities and increased costs related to compliance with a consent decree to improve the city's waste-water and sewage systems.

Financial challenges could be overcome by increasing the size or duration of the half-percent GET surcharge on Oahu that goes to fund the rail project, the report stated. The GET surcharge is set to expire in 2022.

Copies of the state report, which is not part of the official federal approval process, were delivered yesterday to Gov.-elect Neil Abercrombie, Mayor Peter Carlisle, City Council Chairman Nestor Garcia, the FTA and U.S. Secretary of Transportation Ray LaHood.

Carlisle administration officials said the report was received yesterday afternoon but that the mayor had not had time to review it in detail. Carlisle pledged his support for rail the day he was sworn in. He traveled to Washington, D.C., in his first week in office in October to meet with FTA officials and affirm the new administration's commitment to seeing the rail project through.

Lingle had been waiting for the results of this study before she signed off on the rail project, but now that decision will be left to Abercrombie. The governor's approval of the rail project's environmental impact statement, or EIS, is needed before the project can proceed.

Abercrombie has said Lingle's financial review would have no bearing on his decision to sign off on the environmental study. The final EIS is being reviewed by the state Office of Environmental Quality Control and has yet to reach the governor's desk. Abercrombie said he would review only whether the EIS was conducted properly, saying he believes it is the city's responsibility to weigh the merits and finances of the project.

Abercrombie is in Washington for the annual meeting of the Democratic Governors Association. A spokeswoman said he planned to meet soon with Carlisle to review the report.

"Gov.-elect Abercrombie's decision on the rail transit system's environmental impact statement will be based on the criteria required by the law," spokeswoman Laurie Au said in a statement.

The rail project was spearheaded by former Mayor Mufi Hannemann, Carlisle's predecessor, who did not return a telephone message seeking comment last night.

Hannemann had said the rail project was among the most scrutinized in the country, noting that federal transit officials and independent reviews commissioned by the city all had given the project high marks.

"The FTA has already performed several rigorous independent financial reviews and risk assessments of the project," Hannemann said before leaving office in June to run for governor.

Lingle ordered her financial analysis last spring to determine whether the rail project was feasible given the state's economic struggles. She said she wanted an objective assessment because the project is being financed by Oahu taxpayers as well as the federal government.

 

Executive Summary - Honolulu Rail Transit Financial Plan Assessment






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