Price tag soaring

Facing lagging revenues and soaring costs, Oahu’s rail transit system — the largest public works project ever built in Hawaii — finds itself at yet another crossroads.

The 20-mile, 21-station project is now on course to cost anywhere between $550 million and $700 million more than originally thought, rail officials revealed in their latest "project risks update" report Thursday during a Honolulu Authority for Rapid Transportation board meeting.

They blamed the price hike on as much as $190 million in added costs from construction delays, combined with the prospect of soliciting bids for the project’s remaining contracts in a booming construction market.

Meanwhile, the project is $41 million behind what officials had expected to collect so far in Oahu tax surcharge revenues. Those general excise tax dollars are supposed to fund about two-thirds of the project.

"It’s very transparent and much overdue for the public," HART board member William "Buzz" Hong said in reaction to the report. "I think it shows the impacts of the lawsuits, the impacts that these delays had on future construction. I think that’s a tremendous amount of money."

The news confirmed what many critics have asserted since the elevated rail project’s $5.26 billion budget was established: that the price tag would inevitably increase. Despite the new price projections released Thursday, it’s still unclear how much Oahu’s rail project will eventually cost.

Some 40 percent of the work to complete the rail line still hasn’t been put out to bid, including half of the elevated guideway heading into town. Rail officials are taking steps that they hope will curb some of the escalating bid prices that they’ve been getting — but they’ve yet to see if those steps will succeed.

The goal now, rail and city officials say, is to work to try to rein in those costs as much as possible while looking for new funding sources to cover the growing price to bring a public rail system to the island.

That will likely include a new push to persuade state lawmakers to extend the 0.5 percent general excise tax surcharge on Oahu used to fund most of the project, they say.

The surcharge is set to expire in 2022, but at a news conference immediately after HART’s board meeting, Honolulu Mayor Kirk Caldwell said that HART Executive Director Dan Grabauskas would lead an outreach effort at the state Capitol to try to lift that sunset.

City and rail officials actually started floating the idea to lift the sunset on that tax about a year ago, promoting it as a sound way to fund future rail line expansions to the University of Hawaii-Manoa campus to the east and Kapolei to the west.

On Thursday, however, they mentioned it for the first time as a way to help complete the initial rail line.

"We’re going to be exploring every single option, with no promises, but we’re going to look," Caldwell said Thursday. "We’re going to leave no stone unturned."

Caldwell and his administration’s transportation services director, Michael Formby, did shoot down the idea of diverting more than $200 million in federal dollars normally used for the city’s bus system.

Those so-called "5307" federal Urbanized Area Formula Program funds were included in the financial plan to build rail essentially as an added layer of insurance, even though various elected leaders and bus advocates questioned the move. Federal transit officials also cautioned against using those dollars for rail, citing Honolulu’s relatively old bus fleet.

"We do not intend to use these funds," Formby, who’s also a HART board member, said at the Thursday meeting. "We’re building a system. We’re not building a rail versus bus. We can’t be taking from one to build the other."

Caldwell said he spent his first official meeting with Gov. David Ige discussing ongoing confusion over rail’s GET revenues. City officials said they still don’t understand why those revenues are lagging when the state is reporting growing GET numbers.

"The rail issue will definitely come up in this legislative session and we will look at all of those issues as they come," Ige said Thursday while touring the lava flow site in Pahoa. "I do believe that it’s premature at this point in time to look at extending (the surcharge) but I have talked to the mayor and committed to doing a better job at counting for the surcharge amounts that the county currently gets."

Meanwhile, the approximately $190 million in delay costs for rail stems from both legal challenges and city officials awarding contracts before they were authorized and ready to build, according to rail officials.

On Thursday, Cliff Slater, who led the effort to stop rail in federal court, called it "nonsense" that rail opponents held up the project in court. He claimed instead that rail officials dragged out the lawsuit in court, as a way to raise legal costs and to "drive us out of the lawsuit."

The bulk of the city contracts that went out too early occurred under then-Mayor Mufi Hannemann’s administration and preceded HART’s 2011 creation to oversee the project. Those premature contracts resulted in at least $80 million in delay costs.

However, Hannemann defended the moves Thursday, saying that his administration looked to capitalize on a sagging construction market still trying to recover from the Great Recession. Even if the delays cost $80 million, Hannemann said, the contracts came in about $150 million under budget by going out when they did.

This past summer, the bids to build the transit system’s first nine stations exceeded the project’s budget for that work by more than $100 million. Those bids were canceled and the work will be divided into smaller packages that HART officials hope will attract less pricey bids — even if they’re still more expensive than what HART budgeted.

Rail officials say they plan to re-package that work next year for new bids. They’re now considering splitting the work instead into two 5-mile stretches, and including the stations that will be built within those areas. They hope the move will curb at least some of the higher costs they’re seeing in the bids.

HART had originally budgeted $750 million to build that 10-mile guideway stretch.

"We still have time to do something about it," HART board member Keslie Hui said Thursday of the mounting costs. "I think we’re finally at the point where we’re looking forward and we can say these are real challenges."

Ultimately, those challenges should be informed by the local community, Hui added.

Star-Advertiser reporter Megan Moseley contributed to this report.