Rail builders need to detail soaring costs

The public understands two things about the cost of Honolulu’s rail project: One, it keeps rocketing upward and, two, the taxpayer is footing the bill.

What never gets satisfactorily explained, or even aggressively challenged by the city and state politicians who all have a role to play, is why. Why have costs risen so much and over such a short period of time?

The latest scare came last week from the Honolulu Authority for Rapid Transportation (HART) with the discussion about a statistical risk analysis prepared by consultants hired for managerial project oversight. In it was a figure that, despite the cautions against taking it as a cost estimate, was impossible to ignore.

It was $10.79 billion. That was what the Federal Transit Administration called an “upper bound,” or highest possible cost projection. The FTA insists that this figure arises from its risk modeling to help determine how much in contingency funding is necessary, and is not a real estimate or worst-case scenario.

That figure, the feds say, is still between $7.73 billion and $8.01 billion — scary enough.

Yet, who can be sure the costs couldn’t climb that high? Colleen Hanabusa, who chairs the HART board, observed that the current actual projections are actually higher than the upper bound figure of 2014.

The only way to be sure that the project doesn’t blow through the new ceiling, too, is to do something to rein in costs. And the state’s construction industry, fully aware of the profit opportunity of a massive public works project, has some explaining to do to the public and those who represent them.

Of course, it’s plainly obvious why elected officials tend not to press industry too hard for these answers. Construction companies and interest groups have influence on lawmakers because they are key donors to their campaign funds.

But it’s well past time for the hard questioning to begin. The City Council, in authorizing in January the extension of the general excise tax surcharge funding rail, added a requirement for HART to produce reports with contracting cost details.

That was a good start, but unfortunately that’s only an annual report and the accountability for sky-high bidding has to start now.

Some of the answers should come from Pacific Resource Partnership. PRP is the industry advocacy group representing unions and contractors, and the key entity funding the campaign for the rail project in the first place.

Its executive director, John White, was interviewed about high bidding in another project: the initiative to install air conditioning in more public schools. Recently, completion of that initiative was sidelined because bids overwhelmed the industry estimates of only months earlier.

White said there are various reasons costs go up but did not provide specificity. But details are required. Government can’t possibly plan for ways to reduce costs if the factors driving them higher are unknown.

Besides rail and public schools, the outsized bids are complicating private- sector plans as well. Outrigger Enterprises Group had to switch gears on a plan to build a 32-story hotel tower because of skyrocketing costs.

Unfortunately for rail, alternative options, and the freedom to simply wait for prices to fall, are more constrained.

Nonetheless, elected officials now must finally buckle down to do some math of their own. House Speaker Joe Souki — a Maui representative — mentioned a property tax increase, dismissing sources that come from the state.

But there are ideas floating around, including giving the project a cut of the transient accommodations tax. That deserves a look.

And, in case Souki has missed the umpteen previous calls to do the right thing on taxation: The Legislature should finally return to the project the 10 percent state skim taken from the GET collections that rightfully belong to rail.

“Find the money; the money is there,” Souki said.

Some of it is even within the speaker’s reach.

Other funding streams, however limited, should be explored.

In a commentary appearing today, City Council Chairman Ernie Martin has echoed the call for “a more equitable share” of the GET.

He also suggests that the state invest a share of its federal highways dollars and community development block grants for rail improvements serving needy communities that qualify.

The FTA has set an Aug. 7 deadline for the city to present a formal proposal of ways to move forward. HART should now pursue public-private partnerships to help fund the Middle Street-to-Ala-Moana section and analyze ways of reducing spending without up-ending the project. Postponing construction of a few stations could be one option.

But first, the numbers. Taxpayers need more accurate cost comparisons of the remaining options, what would be gained or lost with each of them.

To the construction industry, we say: We need some answers.