Editorial: Much doubt cast on P3 rail benefit

There is no free lunch, let alone a free mass transit system. Everyone knows that the cost of building the Honolulu rail line has nearly doubled, the projection now hovering around $9 billion.

But now comes a proposal making the rounds at the Honolulu Authority for Rapid Transportation (HART) that a public-private partnership offers the promise of greater cost-control than conventional design-build contracts, at least in the construction phase, for the budget-busting rail project.

The HART board is at a critical decision point on whether to take this approach, with a vote possible as soon as its Thursday meeting. Unfortunately, its executive team has not yet made a persuasive case that such a “P3” deal represents a net bargain for the taxpayers.

Rather than leaving Honolulu residents sighing with relief, the idea leaves worrisome questions hanging in the air, about what the city may give up and what, in fact, HART has to offer a potential partner.

Above all, taxpayers should wonder whether there is sufficient partner interest in such an arrangement, or whether pursuing it will simply force even more costly delays for an already vastly extended timeline.

The HART elevated rail project comprises 20 miles of fixed guideway with stops at 21 stations, from East Kapolei to Ala Moana. The system is geared to provide an alternative conduit between Honolulu and the Second City other than the congested freeway corridor.

It also represents potential for concentrating development along this transit spine, with development incentives that could yield more affordable housing units that Oahu desperately needs.

All of that is still true, in theory. In practice, execution of this plan has been hobbled by some admittedly bad luck, and some undeniably bad decisions.

A push to get ahead of the construction market as the post-recession recovery began was halted by lawsuits over the contracts — and that was just the beginning. Originally pegged for a 2019 completion, the final 4.3-mile segment hasn’t yet begun.

And given the project’s myriad construction problems, residents and business owners who live and work in the “city center” phase of construction are quite reasonably worried about how messy construction plans, spanning from Middle Street to Ala Moana, will play out.

The dense and crowded corridor along Dillingham Boulevard is certain to yield any number of surprises and delays. Surely HART must work with the community on configuring detours and closures to soften the impact as much as possible, because those construction cones will be there for a long time.

Into this mix is mounting tension with the Federal Transit Administration, which is withholding a $745 million subsidy until it accepts HART’s financial “recovery plan.” Time is running out. In a terse letter Friday, the FTA urged a decision on P3 within 30 days, and a final version of the recovery plan within 60 days.

HART and city officials have wrangled over the proposed recovery plan since submitting it a year ago. Andrew Robbins, HART executive director, had told the board the P3 proposal would plug in one of the principal missing pieces in the financial puzzle, to satisfy the federal agency.

In August 2017, HART tabled its design-build contract plans for the City Center segment; in a special session the next month, lawmakers approved a $2.4 billion bailout for the project.

Suddenly P3 appeared as another facet of the rescue plan. HART commissioned a white paper on the topic, outlining but not resolving the risks of partnership.

Specifically, a partner in these arrangements typically absorbs the risk at the front end and often can lock down spending more securely. But it is not a charitable organization; it will seek adequate return on investment at some point.

One option would be an operations contract bundled with construction. The complication here is that the city already awarded a $1.4 billion, five-year contract to Ansaldo Honolulu JV — a firm that has filed a claim with HART over delays — that includes operating and maintaining the finished rail system for five years. It’s unclear how this could work.

Complicating other incentives for a potential P3 deal is that HART does not control land-use permitting for development, which is what the city has to offer in exchange for completion of the rail line.

In its own white paper on the realities of P3, the nonprofit Economic Policy Institute concludes that one way or another, taxpayers end up paying the bill. Costs are recouped in higher fares, fees or other givebacks, according to EPI.

This prompts a question: Will Oahu realize its hopes for affordable housing on the rail line? It would be tragic if that public benefit became another sacrifice.

Such details will be murky for some time, but taxpayers deserve at least some advance answers.

To be sure, a P3 would be a “gamble,” as one board member described it. But HART executives have to put more of their persuasive cards on the table.