BY MALIA ZIMMERMAN – After hours of testimony and debate, the Honolulu City Council passed the controversial Bill 37 on third reading by a vote of 7 to 2.
The bill, which will become a city ordinance with the expected approval of Honolulu Mayor Peter Carlisle, will allow the Honolulu Authority for Rapid Transportation (HART) to borrow as much as $450 million in commercial paper for its planned $5.3 billion elevated steel on steel rail project, something the city administration, the head of the rail authority, the Federal Transit Administration officials said is needed to strengthen the rail’s financial plan.
City Council Budget Chair Ann Kobayashi and Council member Tom Berg voted against the proposal, while Council Members Tulsi Gabbard, Romy Cachola, Breen Harimoto, Nestor Garcia, Ikaika Anderson, Stanley Chang and Council Chair Ernie Martin voted in support.
The council chambers was packed with construction union workers holding signs in favor of the rail project and Bill 37.
Kobayashi, who is adamantly against the rail authority using city resources or credit to fund the rail, questioned Daniel Grabauskas, head of HART, and the city budget director about their plan to pay back the city taxpayers should they need to borrow the $450 million.
In the end, they could not present a repayment plan, and said they hope not to have to access the funding.
Originally, Grabauskas proposed using revenues from the farebox, but the rail’s operation and maintenance will be subsidized and not covered by ridership costs.
Kobayashi pointed out the city originally pledged to build the $5.3 billion elevated steel on steel rail without borrowing any funds or using funds other than GET revenue and federal funds.
But now the city will borrow up to $1.9 billion in city CIP funds, and use as much as $450 million in commercial papers, and $244 million from the bus and Handivan maintenance and repair fund to finance the 20-mile system.
In addition, Kobayashi said when the public voted to support the rail in 2008, the project was $3.7 billion and it would run from Kapolei through Salt Lake and to the University of Hawaii, but now it is $5.3 billion for just the first segment, which skips Salt Lake and ends far short of the University and Waikiki.
Kobayashi noted to build the entire rail system, from Kapolei to the University of Hawaii and Waikiki, will now cost taxpayers just over $9 billion.
Anderson and Gabbard, who spoke in support of Bill 37, said they felt there were safeguards put into place to ensure HART’s ability to get the money was fully vetted, including requiring the city to get a Full Funding Grant Agreement and come back to the council for final approval, before accessing the $450 million.
Grabauskas said the approval will keep the project on track, and he is confident existing revenue sources will cover all of the project’s costs.
Honolulu Mayor Peter Carlisle said he is “pleased to move this forward and join the city council in their continued strong support for Honolulu’s rail project.”
Rail opponent Cliff Slater, who runs HonoluluTraffic.com, said passage of Bill 37 “was one of the more dishonest acts of any Honolulu City Council.”
“It is quite simply an end run around the restrictions of the City Ordinance that prohibits the City using General Funds to pay for rail construction. When the cost overruns that we anticipate occur, HART will have to use those funds and then they will be paid for with City General Funds,” Slater said. “Of course, nothing will happen to those responsible, no heads will roll or pensions trimmed. The promise of “accountability” in government is a meaningless word.”
While Carlisle’s statements reflected his attitude that the rail project is a done deal, the elevated steel rail project, which is now under construction on the vacant plains of West Oahu, may never be completed.
Even with this one success for rail advocates, there are several factors that could stop the rail in its tracks.
There are legal challenges to the project, which include a state case claiming the project will negatively impact native Hawaiian burial sites that is pending before the Hawaii Supreme Court.
There also is a federal challenge, filed by Slater and 7 other plaintiffs, who claim the city’s Environmental Impact Statement is defective in several respects. That case goes before a 9th Circuit Court judge in August.
There are also the August and November elections. Former Gov. Benjamin Cayetano is running for mayor, in large part to stop the rail project from moving forward. Cayetano, who also is a plaintiff in the federal lawsuit, is challenging Carlisle and former City Managing Director Kirk Caldwell, both who are rail supporters. But Cayetano, who served in public office for nearly three decades and has never lost an election, has had the lead in the media political polls.
University of Hawaii Law Professor Randall Roth, who also is a plaintiff in federal lawsuit against the city and FTA, said: “The Council’s action is meaningless if we stop rail in court or Gov. Cayetano is elected. I believe both will occur.”
The issue of federal funding is also a factor in the rail project’s viability. U.S. Sen. Daniel Inouye, 87, who is Hawaii’s senior senator and the head of Senate Appropriations, is requesting some $1.55 billion in federal funding for the rail project, but the general election and state of federal finances also could impact the outcome.
There also is the issue of whether local funding will cover the cost of construction, operation and maintenance, particularly if there are cost overruns or if federal funding falls short.
As far as I can tell, Council is trying to make the best of a bad bargain. Rail contracts were prematurely locked in before we had fed $$. Now the rail will proceed, under Carlisle, with or without fed $$. The bill was necessary to prevent taxpayers from being on the hook for another $1.5 billion in rail costs. It was a mess from the get-go, under Hannemann’s administration. Now it’s a big messy ball that’s already rolling.
The rail authority will still have to come back to council to actually get the money and they’ll have to have a plan to pay it back.
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