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Rail officials were hoping the federal government would release more federal funding this month to help finance rail construction, but it is uncertain whether that will happen now that the rail authority is entangled in a federal investigation.
The Honolulu Authority for Rapid Transportation confirmed Thursday it was served with a sweeping federal subpoena this week seeking construction documents and a variety of other records in connection with the $9.2 billion project.
The Honolulu Star-Advertiser reported in December that federal investigators were taking an interest in the project, but it is still unclear exactly what aspect of it triggered the inquiry, which involves the U.S. attorney’s office and the FBI.
State House Speaker Scott Saiki said he suspects the Federal Transit Administration will now delay any decision about releasing additional federal funding for the rail project.
“This investigation absolutely raises red flags about the project. At this point I’m not sure what the scope of the investigation is, but it is troubling that the federal authorities are involved,” Saiki said. “It’s clear that the city needs to begin to make contingency plans in the event that it loses revenue or doesn’t receive sufficient revenue.”
HART CEO Andrew Robbins declined to discuss the subpoena when asked about it Thursday morning at a HART committee meeting, but the rail authority later issued a statement describing the records being sought by federal authorities.
“The documents required include those going back to the project’s beginning such as consultant contracts, a list of contractors and subcontractors, contractor change orders and supporting documents, archaeological studies and correspondence” with the Federal Transit Administration, according to the HART statement.
“HART pledges its full cooperation in complying with the subpoena, and wants to assure our many stakeholders that our staff and contractors will continue to work toward completing the project and having it ready to open for limited passenger service next year,” the written statement said.
According to HART, the federal demand for records and files largely duplicates the list of documents HART has already provided to the Hawaii state auditor.
“The city encourages and expects HART’s full cooperation with the subpoena for documents related to construction of the city’s rail project,” said Acting Mayor Roy K. Amemiya Jr. “The transit authority needs to continue building greater community trust.” Mayor Kirk Caldwell is traveling on business in Japan.
City Councilwoman Kymberly Pine said the news of the subpoena is “a very disappointing development for a project that has been plagued by mis-management, broken promises and a lack of transparency.”
“The people of the City and County of Honolulu deserve better, and it is unfortunate that the federal government has to step in and investigate whether the systemic failures at HART are in fact the result of criminal waste, fraud and abuse,” Pine said in a written statement.
Budget bailouts
The rail line from East Kapolei to Ala Moana Center is the largest public works project in state history, and the city has struggled for years with cost overruns and construction delays.
The city signed an agreement with the Federal Transit Administration in 2012 that called for rail’s elevated guideway and 21 stations to be built for $5.26 billion by 2020, but the project is far over budget. Construction and financing of rail are now expected to total about $9.2 billion, and the rail authority expects to finish the system in late 2025.
State lawmakers approved a $2.4 billion financial bailout of rail in 2017 using state hotel room taxes and an extension of the half-percent excise tax surcharge on Oahu, which was the second time the state had to intervene to shore up the project’s finances.
That second bailout prompted state lawmakers to instruct the Hawaii state auditor to scrutinize the financial management of the project to determine whether the money being pumped into rail construction is “being managed and used in a reasonable manner.”
The auditor has released two highly critical reports on the project and is expected to release two more later this year. Among the problems cited by the auditor were the hundreds of millions of dollars the rail project has paid out to contractors over the years in delay claims and change orders.
The most recent report released by the auditor tallied up more than $354 million in delay claims and change orders, and blamed much of that cost on prematurely awarded rail contracts. Since then HART has agreed to pay contractor Ansaldo Honolulu JV an additional $160 million to settle yet another delay claim, bringing the total to more than $514 million.
The FTA has agreed to provide $1.55 billion to help finance the city’s rail project but has withheld nearly $744 million of that money until HART develops an acceptable “recovery plan” for rail.
That recovery plan was submitted to the FTA last fall and assumes the FTA will authorize the city this month to resume drawing down federal funds, but that hasn’t happened yet.
“Should the authorization occur later than February 2019, additional debt may need to be to be issued” to cover the cost of ongoing construction, according to the recovery plan. The HART plan assumes the city will receive $100 million in federal funding this year.
If that federal funding is delayed or reduced and the project runs short of cash again, “I really do not believe the city is in a position to return to the Legislature to request additional funding,” Saiki said Thursday. “I cannot see the Legislature in good conscience approving an additional funding request while an investigation is pending at the federal level.”
A spokesman for HART did not respond to questions about whether the FTA has been informed of the subpoena or whether federal funding for the project might be affected.
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