Rail officials now project that the $9.2 billion, 20-mile project will suffer an $80 million loss in state tax revenue as a result of the economic impact of the coronavirus outbreak.
That could force the Honolulu Authority for Rapid Transportation to borrow money to meet the shortfall in the budget, unless the agency can obtain funding from a federal economic stimulus package, Ruth Lohr, HART’s chief financial officer, told the Honolulu City Council Wednesday.
Meanwhile, HART CEO Andrew Robbins told Council members that bids for a public-private partnership to help finance the last phase of construction will need to be delayed until July.
The Federal Transit Administration has been withholding about $744 million in federal funding for the project until a public-private partnership, or P3 contract, is awarded for the final segment of the East Kapolei-to-Ala Moana line.
But the city and HART agreed to delay awarding of the multibillion-dollar contract after bidders said they need more time to prepare their proposals in light of the drastic turn in economic conditions.
Robbins said that HART’s April 22 deadline for P3 bid submissions has now been extended three months — until July 22.
The lost money from its general excise tax surcharge and hotel room tax dollars makes it more important that roughly $100 million of the $744 million allotment expected from the FTA come in soon, Lohr said.
“That is certainly going to put a strain based on the fact that we would then need to use financing in order to cover those cash flows,” Lohr said. “That puts us in a position where we will be having to then finance significantly more cash flow in order to keep the project from halting, which is certainly something that the FTA is not interested in, having to halt the project.”
“We don’t know yet what the stimulus bill would look like but that’s certainly something we’re hoping will be a way for us to kind of cover that gap,” she said.
The rail project should qualify for federal stimulus dollars because it boosts the construction industry, Lohr said.
“We definitely have a challenge because by cutting the capital budget, we would actually then be stopping work in certain areas which could then actually result in more costs because we’re delaying a contract that is currently happening.”
Lohr said that HART officials arrived at their lower revenue projections after reviewing the estimates provided to the state by the University of Hawaii Economic Research Organization. Her team members then calculated their own, “even more conservative reduction,” she said.
Asked by Council Budget Chairman Joey Manahan if HART was looking at cutting current expenses in next year’s budget, Lohr said the agency is. However, she said, a key spending bump is the anticipated move of the agency’s staff offices out of Alii Place, something HART needs to do.
HART spokesman Bill Brennan said about $3.6 million is being dedicated to the move. HART learned last August that its current lease would not be renewed, he said. A timeline for relocation as well as a new site have yet to be decided, he said.
Manahan said after the meeting that the HART update is concerning.
The Council is looking at 5% cuts in current expenses across all city agencies, with the exception of police, fire and medical services, Manahan said.
“If (HART officials) think that their budget is going to hold, I think they’re being overly optimistic,” he said.
In related news, Council members were told that the Caldwell administration anticipates receiving $387 million in cash soon for its share of the $2.2 trillion Coronavirus Aid, Relief and Economic Security package.
Gary Kurokawa, Caldwell’s chief of staff, said the city has spent between $3.5 million and $4 million so far in coronavirus-related costs. The costs include personal protective equipment for city employees and for cleaning supplies, but does not include labor or overtime, he said. A big share went toward cleaning solutions to sanitize city buses and handivans.
The CARES money also will go toward paying for more coronavirus testing and tracking in the community, Kurokawa said.
The various agencies have so far managed to find the money for those costs within their own budgets so the administration has not yet needed to tap into the city’s $120 million rainy day fund, Kurokawa said.
The city anticipates it will be able to obtain $90.8 million in federal transportation grants as well as an unknown amount of housing and human services funding, city Budget Director Nelson Koyanagi said.
The money has to be spent by Dec. 31, and cannot be used to pay for or reimburse costs for existing programs not related to coronavirus relief, Koyanagi said.
Koyanagi said he’s standing by his earlier position that the COVID-19 outbreak won’t have a huge impact on city revenue in the short term because it already has received a large infusion from real property tax payments that were due in February.
City officials are still analyzing the long-term impacts of the outbreak and closely monitoring the changing global environment, Koyanagi said. In the meantime, he said, the city is being “really careful” with its cash situation.