Council OKs bonds to keep rail work running

Construction of Honolulu's beleaguered rail project likely will proceed past January, now that it's squeaked out a sixth, pivotal City Council vote required to float bonds and help keep the work on track.

The Council's 6-3 decision on Wednesday, which hinged on Councilman Trevor Ozawa's swing vote, authorizes up to $350 million in city general obligation bonds for rail. Those funds will help cover the contracts to build the system as far as Middle Street, and future general excise tax surcharge dollars are expected to eventually repay the bonds.

Without that authorization Wednesday, work on the transit system's elevated concrete pathway and its stations would have stalled at Aloha Stadium in early 2018, and the rail agency overseeing construction, unable to pay its bills, would have started shedding staff and trimming its operations to a bare minimum this August, project officials said.

Furthermore, the Council vote sends to rail's Federal Transit Administration partners a critical message of steadfast support for rail despite its multi-billion-dollar budget deficit and uncertain future, they added.

The Honolulu Charter requires six of nine Council members -- instead of the standard majority of five -- to vote to approve a bond-related measure on its final reading.

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The 20-mile project to Ala Moana Center remains in a precarious state. It hasn't complied with the terms of its $1.55 billion federal funding deal for the past year or so, and the FTA has demanded a financial plan to address rail's budget crisis next month, Honolulu Authority for Rapid Transportation Interim Executive Director Krishniah Murthy told the Council on Wednesday.

However, critics of the project and how it's been managed testified that rejecting the bonds would have forced HART to more aggressively pursue cost-saving measures.

"I cannot ask constituents to co-sign a loan for rail when there's not enough money to pay" for the entire system, Councilwoman Ann Kobayashi said before joining Council members Ernie Martin and Carol Fukunaga in the dissent.

Martin said he's been unable to get even $4 million in bond funding for new light fixtures at Waialua District Park, which is in his district. He said he worries how the bonds for rail might affect bonding for other needed city improvements.

Ozawa, whose district includes East Honolulu and Waikiki, read a prepared statement Wednesday before switching from his previous "no" vote to a "yes." He said that he's "troubled" how rail has "lurched from one crisis to another" but that "the other alternatives (to bond funding) are fraught with worse challenges."

He said he also would need assurances that the bonds won't cover major construction past Middle Street because the city lacks the funds to complete that final stretch.

Council members Ron Menor, Ikaika Anderson, Joey Manahan, Kymberly Pine and Brandon Elefante joined Ozawa in voting to authorize the bonds.

HART officials said they'll return to the Council next month to ask for the specific amount they need from the $350 million authorization.

Rail officials say they have enough money budgeted to eventually cover the bonds. The project's construction costs are simply outpacing rail's general excise tax revenues, which expire in 2027.

While the situation is essentially a cash-flow problem and not tied to the larger, long-term budget deficit that the project faces, it nonetheless provided an opportunity for rail opponents to testify against the project and its skyrocketing costs.

"The most compelling argument right now for continuing with rail is because so much money has been spent," University of Hawaii law professor and outspoken project opponent Randy Roth told the Council on Wednesday. Costs are dramatically higher than what the city estimated in 2008, and if the public knew the price would soar so much it wouldn't have approved the transit project, he said.

The city has incurred nearly $2.7 billion in total rail costs so far, according to HART's May report. Rail officials currently estimate the project will cost about $10 billion, including its financing.

HART has estimated it would cost more than $2 billion to tear down what's been built and cancel contracts. On Wednesday, Anderson, defending the 20-mile project, said city property taxes would have to cover those cancellation costs and in the end "the city gets nothing."

Anderson and Roth sparred for more than 10 minutes Wednesday, debating across the Council dais and the testifier's lectern.

Anderson maintained that the GET surcharge still remains the best option to pay for rail -- and that it's particularly better than using property taxes because a larger pool of local residents, combined with island visitors, pay the surcharge.

Roth, however, countered that there was no good way to pay for rail at such a large cost, claiming that city leaders prefer the GET surcharge because it's less noticeable to taxpayers than a property tax bill.

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