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The city will pay $918 million to Hitachi Rail International to operate and maintain the city’s rail line for its first 13-1/4 years under an agreement reached last week by the Caldwell administration and the vendor.
That’s roughly $88 million more than an original contract agreed to in 2011 by the city and Ansaldo Honolulu JV (Hitachi’s predecessor) for the same 13-year, three-month period, or an average of about $6.8 million more annually.
The contract will pay Hitachi an average of about $69 million annually. But city officials say part of that would be paid through farebox revenue from those riding the 20-mile, East Kapolei-to-Ala Moana system. As a result, they expect the share to be borne annually by the city general fund — made up of revenue primarily from property taxes — to be lower than $69 million.
The Honolulu Authority for Rapid Transportation, which is tasked with building the troubled $9.2 billion project, has set a December 2020 opening date for the first segment from East Kapolei to Aloha Stadium. Full build-out is expected by the end of 2025.
City officials said the additional amount factors in changes made to the system over the last nine years.
Mayor Kirk Caldwell, at a news conference Wednesday, said the agreement is good for the city because it locks in the maximum amount the city will need to pay for operation and maintenance.
“It’s a cost we can cover in our budget,” Caldwell said, noting that the first six months’ operational cost is factored into the fiscal 2021 budget plan that he will submit to the City Council Monday. The new fiscal year begins July 1.
City officials noted that the city pays substantially more to operate TheBus annually.
The city actually already has a contract with
Hitachi for operations and maintenance, so city
officials described the new agreement as an amendment to the original contract.
A 2011 contract valued at $1.4 billion with Ansaldo Honolulu JV included $830 million for operations and maintenance over the first 13 years and three months of service. Ansaldo was subsequently bought by Hitachi.
Mark Garrity, the city’s operations and maintenance rail interface manager, said the 2011 contract “included a lot of assumptions that had to be updated so we’ve spent the better part of the last year renegotiating with them on this amendment to the existing contract.”
The city is also getting more bang for the buck, Garrity said. “The original contract didn’t have a station attendant at each station, so we’re having some additional or improved services compared to the original contract,” he said. “Plus there’ve been some changes to the operation that are the result of changes made by HART over the last few years.”
For instance, the project now calls for four-car trains instead of two-car trains. “There’s a difference in costs associated with that — operating costs,” he said. “In addition, we’ve added platform screen gates to protect passengers from potentially falling into the tracks, that’s a safety measure that was added later.”
The contract requires
Hitachi local company Hitachi Rail Honolulu Joint Venture to operate and maintain both the system and its facilities, Garrity said.
“They will have people at every station (and) they’ll be providing the train service in a very reliable, fast and frequent way so that we can have good service for the public,” Garrity said. “Having this contract in place gives us the certainty of knowing how much it’s going to cost and what we’re going to get for the money.”
Hitachi also will be entirely responsible for maintenance and upkeep of all of the project’s equipment. “At the end of their contract, they have to return that equipment back to us in good working condition,” Garrity said.
The city’s latest recovery plan submitted recently to the Federal Transit Administration projects $127 million for total annual operating cost in the first full year after the full 20-mile route is operational.
That figure “includes a number of costs which are outside of the Ansaldo-
Hitachi contract,” Garrity said. “Those include things like further capital asset replacement, energy costs, the electricity costs associated with operating the system.”
The larger $127 million figure also includes the Department of Transportation Services’ administrative costs, Garrity said.
City officials said they expect the new agreement to help with HART’s efforts to find an entity to form a public-private partnership (P3) to build the final four miles of the project because it provides more certainty to potential bidders.
The P3 contract is supposed to run 30 years and whatever firm wins the award would need to honor Hitachi’s operations and maintenance contract for its 13-year length, Garrity said.
“This would be fully integrated into a P3, and a P3 would essentially wrap around this O&M contract,” Garrity said. “So all of … the numbers we’ve been negotiating with Hitachi would end up going into a P3 contract if that moves forward. And if the P3 doesn’t happen, we’ve got a stand-alone contract that we can count on for 13 years.”
HART has pushed back the awarding of a P3 at least three times since the original Sept. 30 award date. It is now scheduled for May 15.
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