Rail Investigation Police Operation Fact Finding

HART Considers Federal Loan to Help Patch Rail Shortfall

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(Source: Khon2)

A loan from the federal government might help the city finish its rail project all the way to Ala Moana, but taxpayers would still have to repay the money, and exactly how much is still open-ended.

The Honolulu Authority for Rapid Transportation is talking to the feds about borrowing money from them for the first time, from the same program Puerto Rico used to bail out its train when its cost doubled: the Transportation Infrastructure Finance and Innovation Act (TIFIA).

The feds have told Honolulu to take a look, HART CEO Dan Grabauskas told lawmakers Wednesday.

“It does loan projects like us large sums of money,” Grabauskas said at a Honolulu City Council budget committee hearing Wednesday morning. “We are looking at it, see whether or not we can work some additional loan program, and present that to the council and to the community.”

TIFIA helped patch another island’s runaway train costs — Puerto Rico — which ended up borrowing as much from TIFIA as they had been granted from the Federal Transit Administration. It was something of a last resort, because the feds have never given grant money above the original pledge for New Starts projects, no matter how troubled their finances became.

“In terms of more money, we have made overtures to the federal government to say because of the special circumstances we have in Hawaii, because of the costs — we are the most expensive in the country, fastest growing in the country — is there anything that we can think about in terms of maybe increasing the federal grant share,” Grabauskas said. “To date they’ve said no.”

But how much of Honolulu’s billion-dollar-plus gap would borrowing from the feds cover? The biggest TIFIA loan to a project so far has been about $900 million in Texas.

About $1.4 billion is available over the next five years, but we found 11 other mainland projects have already submitted their letters of interest; none from Honolulu.

How taxpayers repay the low-interest loan remains to be seen.

As for other more certain borrowing, hundreds of millions in city bonds and short-term debt has already been authorized for the project, with the first city commercial paper draw of $20 million pushed from July to the fall, HART told the council.

“We have cash reserves that will last right now we think until September,” Grabauskas said, adding they intend to draw the “TECP” short-term commercial paper at that time.

There’s about a quarter-billion in prior years’ unspent federal grant money HART can submit eligible fed-matching invoices for, and after that no more federal funds until conditions are met.

FTA is holding on to the last half — $750 million — until a recovery plan and new financials are turned in and approved. FTA told the mayor it wanted the plan by Aug. 7. Caldwell asked for an extension until next summer; FTA has not yet responded.

“They are not going to cash-strap the city. They made that clear,” city transportation director Mike Formby told the council. “They support us. They’re a partner with us. We’re watching the burn rate to make sure we don’t reach a position where we’re waiting on a recovery plan and the money doesn’t come.”

HART announced Tuesday it is going into an $875 million contract for the stretch of rail guideway and four stations to Middle Street. The bids ranged up to $1.5 billion in the offer from Nan Inc. That’s the same contractor doing the utilities work on the same segment, and Nan is finding unexpected headaches along the way.

Scroll to page 54 for a sample of the issues, change orders, conflicts and non-conformance reports so far.

“They know of all the challenges,” said councilmember Ann Kobayashi. “So did the winner of this airport bid, is he aware also, and yet he submitted that low bid thinking that he can apply and he can ask for change orders?”

“All three of the three huis and companies that are participating were fully informed of all of the requirements that they had to fulfill,” Grabauskas said.

“So if that company that won the bid then asked for change orders, it would be hard to grant those change orders because they already knew these conditions existed,” Kobayashi said.

“Unless it’s an unforeseen circumstance,” Grabauskas added. “For the work that was specified in there, if they’ve estimated an amount of money and it’s not sufficient to cover the cost, then they’re liable to pick up that cost and that’s part of the advantage of having a design-build contract. If, however, it would be in the contract that says there’s a shared risk or there’s a risk, then they would be eligible, and they have to come forward and say in good faith we did not know and you did not know that was an aspect.”

More than $360 million in change orders has been shelled out on the project so far.Scroll to page 106 for a tally so far by contract.

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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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