Rail Investigation Police Operation Fact Finding

Rail Recovery Plan Likely to Miss Deadline; Could Project Hit $11 Billion?

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(Source: Khon2)

An August deadline for a rail recovery plan is unlikely to be met as the feds’ own numbers now raise the question: Could the project hit $11 billion?

The recovery plan will have to answer to the Federal Transit Administration how Honolulu intends to finish a projected $8 billion project with only $6.8 billion.

The chair of the Honolulu Authority for Rapid Transportation is also pointing to an $11 billion outside-chance FTA figure as something not to be dismissed.

Nationwide, city transit projects are no stranger to cost overruns. Even the FTA itself knows that cities tend to shoot low at first.

“FTA analysis,” according to the U.S. Office of Management and Budget, “finds that sponsors of new transit projects tend to underestimate project costs to gain more favorable ratings and to generate favorable public sentiment in the project development phase.”

From there, the bills pile on. Always Investigating has reviewed more than 90 federal “New Starts” grants over 25 years and found they averaged final price tags about 40 percent above their starting point.

Puerto Rico’s train was the biggest budget buster (ballooning from $1.25 billion to $2.25 billion) until Honolulu came along on track to be the most over ever dollar-wise.

But just how much over will it be, all told?

The feds have an oversight contractor called a PMOC whose duties include risk-modeling of cost and contingency every couple years. In 2012, the PMOC pegged the high range of the project at a possible $5.8 billion. In 2014, the risk model with contingency hit an outside $7.6 billion, and in 2016, it reported a high-end $10.8 billion.

Read the risk analysis reports: 2012 | 2014 | 2016

The FTA says such figures are “part of the risk modeling process to determine the appropriate levels of contingency for the project. It does not reflect the project cost estimate range, and it is not accurate to refer to the data as a worst-case scenario.”

But the HART’s chairwoman, Colleen Hanabusa, has this perspective: “In 2014, that model gave us the number we’re basically at — so we can’t ignore that.”

Nor, she says, should the nearly $11 billion in the latest model be brushed off as a possible price tag to Ala Moana.

“If the city decides that it has to look for additional funding of any kind, it has better look at this figure or we’re going be caught in exactly the same place we’re caught now,” Hanabusa said. “Six-point-eight billion is what we have, and we don’t have money for what we need to do. So what we need to do first, without worrying about the projections, is getting to the point where we have a recovery plan.”

The FTA is waiting for just that. Honolulu is only the 10th project in 25 years the FTA has put on a red-alert Recovery Plan process. The FTA told HART and Mayor Kirk Caldwell in writing earlier this month “we expect your recovery plan on or before August 7th.”

That plan may include pausing at Middle Street — about where the $6.8 billion in general excise tax and federal money run out. But how to get the plan on paper and approved locally in time to make the federal deadline is still up in the air.

“I’m under the impression that the conversations were they will be given an extension as long as we, city and county of Honolulu, come up with some form of a plan as to how we’re progressing,” Hanabusa said.

Hanabusa added that they’re aiming to at least outline by August a schedule for the planning.

The Honolulu City Council has to approve any proposed project changes, and the council chairman’s office told Always Investigating any resolutions about the recovery plan would be due before mid-July to get them on committee calendars in time to clear all the steps for the August 3rd City Council meeting.

“I don’t think they expect in this short period of time to see a full-on plan plan that sets everything out. It’s impossible,” Hanabusa said.

The city says their approach will ultimately amount to negotiating an amendment of the full funding grant agreement — how and if the city can keep the feds’ $1.55 billion for a modified project.

“What we’re trying to do with the FTA, with their blessing, is basically break apart the MOS (minimum operating segment) and say the first portion will be whatever the mayor and the council proposed,” explained city Transportation Director Mike Formby, “full build out to Middle Street, and if possible we’re going to go back and ask for federal funds for that second segment as well.”

The FTA told us all of the other cities put under recovery plans finished their originally promised segment lengths, but that “no FTA grantee has ever received additional New Starts funds beyond the amount committed in the FFGA for the scope of work identified in the FFGA.”

Always Investigating asked the city, what are Honolulu’s odds are of getting additional money for what could be a second segment if FTA has not done that before?

“We have to go in optimistic, so we can’t go in with a defeatist attitude, but you’re right, it’s not a trend in the industry,” Formby said. “What might happen is an existing project that’s out there might decide not to go forward, and then Congress might be faced with re-appropriating existing funds. In that case I think we have a very good argument that this project deserves more money.”

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Lance Luke has been in the construction industry for over 35 years. He is a former general contractor and worked as a construction and project manager for real estate development companies. Currently he owns an independent construction management company and is a sought out speaker and trainer for his expertise in the field. His expertise lends to a wealth of understanding of the current HART rails project.

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