Construction is under way on Honolulu’s rail transit project.

LOS ANGELES — It may have taken decades for Honolulu to get its $5.2 billion elevated rail transit project off the ground, but the years of effort are paying off.

The pieces are falling into place for the 20-mile project that traverses Oahu, as struggles that included multiple environmental lawsuits aimed at halting the project appear to be behind the project.

Even uncertainty about federal funding doesn't concern Honolulu Authority for Rapid Transportation officials.

The project's federal funding comes through a full funding grant agreement with the Federal Transit Administration and is not threatened by federal budget uncertainties surrounding transportation funding.

It has continued to receive the $250 million annually agreed to in December 2012, said Daniel Grabauskas, HART's executive director and chief executive officer.

FTA signed an agreement with the City and County of Honolulu in December 2012 for a federal New Starts grant to provide a total of $1.55 billion in funding for the project over the next several years. Funding for fiscal 2015 was included in President Barack Obama's budget. That $250 million installment comes on top of the $250 million already appropriated for fiscal 2014 and $556 million in federal New Starts transit funds.

The federal government has always funded such agreements, so despite uncertainties involving projects dependent on matching federal funds, concerns surrounding the nation's highway trust fund are a non-issue for the authority, Grabauskas said.

That certainty stands in contrast to another Pacific city with transformative rail transit plans.

Ambitious funding proposals for Los Angeles County Metropolitan Transportation Agency mass transit projects have experienced some misses, preventing it from fully realizing plans to complete 30 years of planned projects in 10 years. Those misses have overshadowed successes that are transforming the car-centric city into one with mass transit alternatives bit-by-bit.

The ongoing drama in Washington D.C. over continued surface transportation funding could slow things down even more.

If the differences are not ironed out between the Obama administration's transportation bill and the Senate Environment and Public Works Committee's version by Sept. 1, it could mean no new projects could be funded in fiscal 2015.

The federal government has been extending MAP-21 legislation to subsidize the federal Highway Trust Fund, which is becoming depleted because gas taxes are no longer enough to keep it going. But Congress' highway bill and the Obama administration's are vastly different with only the summer left to bridge the gap.

According to LA Metro officials, the impact for them would be significant if the trust fund is depleted by September.

"We have $500 million in federal funds that flow to Los Angeles County," said David Yale, LA Metro's Managing Executive Officer - Countywide Planning & Development. "An interruption in that for any length of time of our federal funding would cause us to make tough choices between delaying projects and cutting back on service."

LA Metro has three different sales taxes for a total of one-and-three-quarters per cent on every taxable sale in Los Angeles County. That money is shared with municipal transit operators in the county, but also pays for Metro's bus service and rail and highway improvements.

"Those funds will carry us for some period of time, if there is a short-term interruption in federal funds," Yale said. "But the longer it goes, the worse it gets for us."

Thanks to local voters' approval of the Measure R sales tax in 2008, the authority was able to move forward on rail projects while other transit authorities were struggling, Yale said.

Los Angeles has been able to move some projects along, including the second half of the Exposition Line rail project that will connect downtown Los Angeles to Santa Monica in 2015.

But Metro's so-called 30-10 plan to use federal funding to accelerate more projects to completion in 10 years by leveraging federal funding has faced multiple hurdles. Federal funding for transportation projects - once approved nearly as a matter of course by politicians on both sides of the aisle - is no longer immune from efforts to reduce the federal deficit.

LA Metro has worked with federal lawmakers to try to craft financing mechanisms that are more palatable to the budget conscious federal government. But so far, only two parts of the three-legged stool needed to make the 30-10 concept a reality have been achieved, Yale said.

Like Honolulu, Metro reached an agreement for $1.25 billion in New Starts money for a Westside subway project. Next week, it will be signing its full funding grant for that project. The second piece was using Transportation Infrastructure Finance and Innovation Act loans, which were greatly expanded through MAP-21.

The third, and missing, piece is the proposal for America Fast Forward tax-credit bonds, which Los Angeles has not been successful in getting Congress to authorize.

"We are still working on that," Yale said. "It would provide a tax credit for highly-rated borrowers like Metro that would cover the interest cost of borrowing."

Through the program, Metro would pay the principal and the interest on the bonds would be paid for by the federal government.

The AFF tax credits are needed to accelerate the subway project; and the Metro board isn't keen on approving acceleration for that project if several other projects in other parts of the county aren't also accelerated, Yale said.

Add to that the uncertainty of obtaining matching federal funds at a time when the nation's highway trust fund is suffering funding problems and agreement on a raft of federal transportation funding is under fire.

Honolulu, in contrast, is moving forward with a less ambitious funding plan. HART's only federal funding is through the more secure New Starts program. There has never been a situation where the federal government has not come through on a full-funding grant agreement, according to HART officials.

In order to obtain the funding, Hawaii spent several years crafting a financing plan and securing approvals from FTA on the plan, as well as meeting federal environmental regulations.

Despite delays resulting from environmental lawsuits at the state level, HART expects to reduce the 13 months of delays resulting from the lawsuits, Grabauskas said.

It has more than 120 underground foundations and 90 columns completed; and is on track to open some segments in 2018 and the entire 20 miles of rail by 2019, he said.

The delays have resulted in planned bond issuance for the Honolulu project similarly being pushed out by 13 months. During the delay, HART was receiving the local general excise and use tax funding allotted for the project. It has been able to fund planned projects without having to borrow, which means it may be able to borrow lesser amounts than it proposed in the plan submitted to the FTA.

Grabauskas said he couldn't comment on how much borrowing HART might do, because HART's chief financial officer and the Honolulu mayor's chief financial officer are crafting a financing plan.

He anticipates that short or intermediate bonds will be issued at the end of 2014 or early 2015. In the plan submitted to the FTA, HART estimated it would issue $1.7 billion of general obligation bonds backed by project revenues, beginning in fiscal 2014 that would be repaid by fiscal 2023. Other borrowing would be done on a short-term basis in the form of tax-exempt commercial paper. The delays could result in different amounts and a slightly different structure, according to Grabauskas.

"We are looking at our cash flow needs and at how much we will receive from the GET (the local excise tax) and from federal sources," Grabauskas said.

A proposal will be presented to the city council by summer, he said.

"Even though we had a delay of 13 months, we are still planning a full opening for 2019," he said. "So we will be borrowing less money for a shorter period of time, because of the compressed construction schedule. That is driving how much we borrow and when."

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