Honolulu City Council holds off on $26M bond for rail

The Honolulu City Council on Wednesday voted to hold off passing a measure to approve the sale of $26 million in general revenue bonds to help finance the city’s $9.2 billion, 20-mile rail project.

Officials with the Honolulu Authority for Rapid Transportation and the city Department of Budget and Fiscal Services said that despite the project’s money woes, which have been compounded by a projected drop in general excise and hotel room tax revenues due to COVID-19 impacts, the delay in the bond issuance won’t create new problems for the construction schedule.

In response to questions raised by Councilman Brandon Elefante, city Deputy Budget Director Manuel Valbuena said that while the Federal Transit Administration is requiring the money to be brought forward as a condition of a 2018 recovery plan required of HART, there’s no critical urgency to approve the bond issuance.

Valbuena said the FTA is not requiring the city approve the bond before June 30 and that the reason Resolution 20-144 was before the Council on Wednesday was because the city is already seeking approval for an unrelated $475 million bond meant to fund nonrail-related projects.

The city will save about $40,000 in financing costs “if we put it all out in one package,” Valbuena said. The schedule calls for the bonds to be issued either at the end of this month or the beginning of next month, he said.

HART Executive Director and Chief Executive Officer Andrew Robbins concurred that the agency has until the end of fiscal 2021, on June 30, to come up with the bond funding to fulfill the FTA obligation.

But that’s not to say HART isn’t concerned about its cash flow in the midst of the pandemic-induced economic downturn that’s expected to reduce available revenues by at least $100 million in the coming year.

“It would have been a nice thing” to have the bond issuance approved Wednesday, Robbins said after the meeting. “But it’s definitely not a necessity.”

The FTA has been withholding the release of $744 million, just less than half of $1.55 billion the agency set aside for the project, pending the outcome of HART’s effort to secure a public-private partnership arrangement with a third-party to finish the last leg of the East Kapolei-to-Ala Moana line.

Robbins reiterated to the Council that HART and the city Department of Transportation jointly intend to select a P3 partner by late August or September.

Robbins also said that just like municipal transit projects in other major cities, including New York and San Francisco, that have run into pandemic-caused lower revenue forecasts, HART is making a pitch to the FTA for further financial assistance, or at least an early release of at least some of the $744 million that’s owed.

“We’ve made the case with the FTA that we’ve been progressing the project quite diligently, we’ve met all our other conditions related to the recovery plan,” Robbins said. “We’ve made our case to have some kind of advance, if you will, on that first draw. FTA was very understanding.”

Robbins added, “But at this point, there’s no commitment.”

Council Budget Chairman Joey Manahan requested the delay on the vote and asked that the resolution be sent back to his committee for further work.

Manahan said he wants to ask HART more questions, noting that any further deliberations on the resolution are likely going to give the Council its last opportunities to weigh in on the selection of a P3 partner.

“We should wait a couple of weeks to see how the P3 bids will impact the overall rail financing,” Manahan said. “We want to make sure it falls within the current financial plan and doesn’t extend beyond it.”

He noted that the long-term shortfall caused by the pandemic is estimated to be as much as $450 million over the life of the project.

“Our first set of bonds that we’ve floated come due around 2030 and there’s still no solid plan … for HART to pay us back for the bonds we’ve floated for them up until now,” Manahan said. “And with that $450 million shortfall I’m just afraid … the city subsidy will be on the hook for that.”

Manahan said he wants to hold a special meeting “to be able to kind of hash out all of these issues” and get a better long-term forecast of transient accommodation and general excise tax revenues.

Elefante and colleagues Kym Pine and Heidi Tsune­yoshi said they share the same concerns.