City, state need to ensure rail goes the distance

The Federal Transit Administration has given Honolulu officials a bit of breathing room — through April — in its mandate to rewrite the financial plan for the woefully underfunded rail project. But for lawmakers and city authorities, that decision point should come well ahead of that timetable.

The April 30 cutoff date is much more comfortable than the end-of-year deadline, but it is not the July extension Mayor Kirk Caldwell hoped to get. That would have given state and city officials their full allotment of time to act on a solution.

But to paraphrase the old song, while they can’t always get what they want, the extension undeniably gives them what they need. Four extra months is enough time to make the responsible choice, enabling the completion of a project that fulfills its intended purpose.

And the most efficient means of paying the admittedly horrifying price — now forecast somewhere in the $9.5 billion range, in a worst-case scenario — is the same as it’s always been. The general excise tax surcharge assessed on Oahu remains the best way to ensure that everyone who benefits from the rail project, from tourists to local residents, pay part of its cost.

Sooner rather than later, the Legislature should come to terms with that reality and authorize a new extension of the tax surcharge, securing FTA approval of the $1.55 billion federal share of the entire tab.

The 20-mile rail project being built under the supervision of the Honolulu Authority for Rapid Transportation has enough funds, $6.8 billion, to reach the stop at Middle Street, some 5 miles from the only terminus that makes sense, Ala Moana Center.

Edward Carranza Jr., deputy administrator for the FTA’s Region IX, said in a letter to the city that it should complete not only a primary plan for completing the full buildout but also a “Plan B” that proposes a build-to-budget end point short of the full length.

The Plan B backup is rational, but only if it comes with a proposal for financing the completion of the full 20 miles. This would require financing, a mix of borrowing and other revenue sources within the city’s control. This should involve some form of cost-sharing with developers hoping to build around the planned 21 rail stops.

As for borrowing the funds, that is likely to prove anything but a bargain for city taxpayers. The high-end pricetag of $9.5 billion, almost $1 billion higher than the high estimate of only two months ago, reflects the significant cost debt service.

Let’s not forget: Interest payments don’t last forever, but they come close to it. A case in point is the Hawai’i Convention Center.

Since 1995 when repayment for that project began, the state has paid more than $450 million for the facility. At the last legislative session, members of House and Senate finance panels were told the Hawaii Tourism Authority still owes $317 million in principal and interest.

The lesson there is plain enough: Borrowing significant amounts of money to pay for the rail project will saddle city taxpayers with a crushing debt for years, and is to be avoided if at all possible.

All of that said, the city does need to come up with its own revenue sources to add to the pot for rail — state lawmakers have chafed at the notion that Honolulu Hale would have no “skin in the game” for its own public works project.

Showing a willingness to shoulder some of the financial burden would be a good-faith gesture in the negotiations at the state Capitol — and it would also put pressure on City Hall and HART to ride herd on costs.

However, there is no skirting the fact that this would be supplemental funding, perhaps even money to be socked away for future operations and maintenance costs. There is no source that can reasonably underwrite the principal construction costs better than the GET surcharge.

Politicians are generally skittish about such things, but this is not an election year, and there’s the opportunity to make the tough but realistic choice.

Lawmakers should pass the legislation enabling the extension ahead of the state budget bill, which inevitably takes until the end of session. And the governor should sign it promptly, well in advance of his midsummer approve-or-veto deadlines.

The huge cost overruns and delays in the project inarguably are loathsome, and nobody wants to embrace them. But the rail project primarily would provide a speedy alternative for moving Oahu’s commuters between urban centers. It also focuses transit-oriented development along the route, addressing critical housing shortages.

Those needs still exist. And completing the project as conceived is the still the best way to fulfill them.