As rail costs continue to climb, questions are mounting over whether a new five-year tax extension will generate enough money to complete the 20-mile transit project.

At this time last year, when state lawmakers were still debating the 0.5 percent general excise tax surcharge extension, rail officials testified it would likely provide the funds they needed to finish the project — with hundreds of millions of dollars to spare.

Since then, however, costs have swelled by at least another $415 million, and the total cash the extension is expected to produce has been downgraded from $1.8 billion to $1.52 billion, based on the most recent official estimates.

Also, completion of the rail has been delayed by about two years, pushing the largest public works project in state history deeper into one of the nation’s hottest building markets.

The future transit system’s planners did not foresee challenges presented by utility-pole clearances along the rail route, which could drive up costs even more. They say they’re still negotiating with Hawaiian Electric Co., but if talks don’t go their way, the project could be delayed by as long as another year.

Now, instead of discussing what they’ll do with an eventual cash surplus, they’re holding their breath that the tax extension approved by the Honolulu City Council in January will be enough to get them to the finish line.

“We have been gravely concerned with projections that costs are rising so fast,” Honolulu Authority for Rapid Transportation Executive Director Dan Grabauskas said Thursday. “None of us are happy, and we are equally frustrated by the circumstances that we have to face. But we’re losing sleep, working hard to address what we can affect.”

Both Grabauskas and HART board Chairman Don Horner say they want to wait to see bid prices on the remaining work before declaring whether the project is in jeopardy of running out of cash again.

HART is slated to receive the first of those bid proposals later this week, but the public won’t know the details until after the agency evaluates the proposals and awards the contract. That could be in June at the earliest, Grabauskas said.

The project’s latest official cost estimate stands at $6.57 billion, although critics such as former Hawaii Gov. Ben Cayetano have long argued the final price tag will be considerably more.

Amid rail’s worsening fiscal climate, the city’s top two elected leaders — who are political rivals — recently put their misgivings about the project in writing to rail officials.

“I remain deeply concerned and, quite frankly, unconvinced that HART is adequately managing and mitigating the potential risks to both project schedule and budget associated with the utility locations,” Honolulu Mayor Kirk Caldwell wrote to Grabauskas in a March 21 letter obtained by the Honolulu Star-Advertiser.

Caldwell, who said in this year’s State of the City address that his reputation was on the line, expressed concerns in the letter that the public doesn’t realize just how big a challenge rail still faces because HART officials don’t discuss the full magnitude in rail board meetings.

Grabauskas said HART staff is doing its best to rein in costs.

“We’re doing what we can,” he said on Thursday. “Here’s what we don’t control — we don’t control the economy, and it is red-hot. We don’t control utilities, and we have to follow what they impose.”

City Council Chairman Ernie Martin, who’s considering a mayoral run against Caldwell, sent a letter to Horner several days after Caldwell.

“Please be advised that the Council will have no choice but to stand firmly behind its decision that no more money generated by the GET tax extension be appropriated for this project,” Martin’s March 24 letter stated. “For the sake of Oahu’s taxpayers, we need to stop the bleeding.” (Martin’s letter refers to a $1.1 billion limit for rail costs from the cash extension, although the ordinance allows HART to spend past that limit after the agency gives the Council an update.)

Horner said Thursday, “The board appreciates and shares Chair Martin’s concerns regarding costs.”

It’s not clear what will happen if the extension doesn’t cover the project’s full cost. Caldwell was unavailable to comment because he’s out of state on vacation. His office provided his and Martin’s letters in response to queries about whether he’s concerned the five-year extension won’t be enough.

An email from Peter Boylan, the City Council’s housing coordinator, stated that Martin declined to comment further on the topic.

HART presented its most recent financial estimates in October. The update relied on more recent GET collection data to conclude the project will get nearly $300 million less from the tax extension than HART previously thought.

The October balance sheet exhausts the entire $1.52 billion revenue projected from the tax extension. It covers ballooning costs and it leaves rail with a $539 million contingency cushion to handle unforeseen costs.

That contingency represents 14 percent of all the remaining construction work, according to HART. The project’s federal partners, meanwhile, recommended a contingency of no less than 13 percent for the rail, agency officials say.

Those numbers from nearly six months ago don’t leave rail leaders with much room to maneuver. And since then, the construction market has gotten more expensive, analysts said.

An update with new rail budget numbers should come out in two months at the earliest, Grabauskas said.

He and other rail officials acknowledged they face a tougher climate than last year, when Grabauskas informed lawmakers that the project was facing a $910 million shortfall and that a five-year tax extension should provide more than enough cash to fill the puka.

At that hearing, held March 4, 2015, before the Senate Ways and Means Committee, Caldwell lobbied for a longer tax extension — just in case things changed.

“We can’t come back again,” Caldwell told the lawmakers. “And no council is going to go and vote to actually raise it twice.”

HART gave the Legislature the best information it had at the time, according to Grabauskas and Horner.

However, Horner, a retired First Hawaiian Bank chairman, who became HART board chairman in September, said he probably would have stressed the uncertainty still clouding rail’s price if he had participated in the hearings.

“What Don Horner would have said — and continues to say — is no one knows,” he said Monday, after officials held groundbreaking ceremonies for three West Oahu rail stations. “When you deal with construction, there’s never certainty.”

In November, during a City Council hearing on the tax extension, Councilwoman Ann Kobayashi expressed her frustration at that seemingly endless uncertainty.

“Over the years, as the numbers keep changing, the trust and confidence keeps changing also,” Kobayashi said. “It erodes.”

Caldwell 3 21 by Honolulu Star-Advertiser

Martin 3-24.pdf by Honolulu Star-Advertiser