Volcanic Ash: P3 plan to shift rail costs burdens future generations

For those having trouble understanding the city’s scheme to finish the grossly over-budget rail project with a public-private partnership, perhaps it would help to think of it by another name: Kick the Can Down the Road.

The so-called P3 plan approved by the Honolulu Authority for Rapid Transportation would enlist private partners to finance and build rail’s tricky final leg from Middle Street to Ala Moana Center, as well as the Pearl Highlands Transit Center, for a guaranteed cost of $1.4 billion.

For absorbing the risk of further construction cost overruns that have bedeviled rail, the private partners would get the right to operate the train for 30 years, worth billions of dollars.

It potentially solves the city’s political problem of finishing rail construction within the current budget of about $9 billion, avoiding heavier use of property taxes or a return to the Legislature for yet another bailout.

But it could balloon future operating costs, already estimated at some $130 million a year with no funding source yet identified, as potential partners cover construction-side overrun risks by bidding up their operating profits.

HART claims a public-private partnership will save $46 million on construction and $300 million on operations, but from the sketchy information provided, these numbers seem pulled from the same nether regions as the rail agency’s many other off-the-mark cost projections.

Deliberations on P3 have hardly inspired confidence.

Mayor Kirk Caldwell supports P3, but described it as a “huge climb” comparable to scaling Everest; he’s worried HART is rushing to find private partners without nailing down details that could inflate overruns.

“I’m like, holy moly, we’re doing exactly what we did before, and we know what happened before,” he told HART.

Rail CEO Andrew Robbins called HART directors “pioneers,” an aptitude they’ve never demonstrated, and board member Tobias Martyn said, “We don’t know what we don’t know and are kind of learning on the fly.”

State Rep. Sylvia Luke, who oversaw the Legislature’s last rail bailout, disapproved of P3 and predicted it could cost more in the end.

A major complication is that the city is effectively allocating rail operating rights twice.

Ansaldo Honolulu JV, which has a $1.4 billion contract to build the rail cars, already has rights under that deal to operate the train for half of the 30 years proposed in the P3 and would have to be involved in any new partnership or have its rights bought out.

Ansaldo, which has a pending “mega-substantial” claim against HART for project delays, would likely demand a hefty price to cooperate, and it’s hard to see how this squares with HART’s promise of reduced costs.

It leaves a nagging concern that once again we’re skirting costly obligations by passing them to our kids and grandkids.

Reach David Shapiro at volcanicash@gmail.com.