UPDATE April 15, 2016: Full Text: Honolulu Audit Report on Rail
Dear Mayor Caldwell April 11, 2016
I wish to inform you of my decision to resign from the Honolulu Authority for Rapid Transportation (HART) effective today. My enclosed letter to Council Chair Ernest Martin outlines the detailed considerations in coming to this decision. As you well know, the HART Board needs an effective and constructive working relationship with both the City Administration and with the City Council. Hopefully, by my departure, as the Council Chair promised, the communications and appreciation for the many accomplishments of the HART staff will indeed strengthen. Too often in politics, the focus becomes shooting the messenger of unpleasant news rather than collaboratively working on solutions. Thank you for your guidance and giving me the privilege to serve the people of our great City and your steadfast commitment to improve the lives of the citizens of the City and County of
Honolulu.
Mahalo nui loa,
Donald G. Horner
HART Board Chair
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Dear Chair Martin and Councilmembers: April 11, 2016
I have carefully reviewed your April 7, 2016 letter to Mayor Caldwell, requesting the resignation of Honolulu Authority for Rapid Transportation (HART) Executive Director Daniel A. Grabauskas and my resignation as a HART Board member. First, as you have stated, these are matters for the HART Board to consider. Director Grabauskas, like any City employee, deserves a fair and professional evaluation. His yearly performance evaluation is currently underway via the Human Resources Committee, under the able leadership of Chair Damien Kim. The Committee will conduct a proper review of his performance and a final report with employment recommendations is scheduled for the June 16th Board meeting. Dan has faithfully served our City for four years and has chosen to allow his evaluation results to be made public. The process examines how effectively Dan has performed in accordance with his specified duties dictated in the City Charter as well as thirty-six specific annual priorities that were Board assigned last year (April 27, 2015). Again, these are public documents. In the evaluation, the Committee has access to numerous audits/reports including the many comprehensive Federal government oversight reports as well as a professional independent full financial audit as required by the Charter, and additional reports from Michael Burns, a Rail consultant hired by the Administration.
Your letter referenced yet another report which has not been released, from the City auditor. This was cited as one of the rationales for Mr. Grabauskas' dismissal. The Board looks forward to receiving this Report and as with all City audits, an accompanying set of responses from HART as required by the Auditor on April 14, 2016. Your letter chose to cite specifics of this draft report which apparently implies an additional aggregate $348 million is required to fund the Pearl Highland station complex and additional Hawaiian Electric Company, Inc (HECO) utilities. Respectfully, I would point out these costs were addressed in the October 15, 2015 Project Cost Update (October 2015 Update) which was formally presented to Council and discussed during the public deliberations of Bill 23. This October 2015 Update specifically allocated $130 million for Pearl Highlands and offered a proposal that HART pursue a public private partnership for the balance to reduce project costs. In terms of utilities, the October 2015 Update included $120 million for utilities relocation costs for the remaining two East segments including the undergrounding of utilities along the Dillingham corridor. The West side utilities as outlined in HART monthly progress reports and our Risk Reports have been an ongoing discussion between HART, the City, and partner HECO. The design locations of the Westside guideway were established prior to Mr. Grabauskas' arrival. Safety is a major priority for the Board and our Director. The Board has been assured that the guideway locations are in full compliance with all Federal and State safety requirements along the entire West guideway. As you referenced, HECO did inform HART in 2013 after the West guideways were designed, permitted, and contracts awarded, that they have internal safety guidelines that are more stringent than government safety requirements.
HART's Deputy Director Brennan Morioka is working closely with HECO and making progress to find an equable solution that is in best interest of taxpayers and HECO. As was stated during the Bill 23 public discussion, HART's October Update had proposed the use of contingency funding for these future costs.
Lastly, your letter singled out my performance as a HART Board member and used the term "mismanagement." Frankly, the letter came as a surprise since we had met a few days earlier, and your concern was not discussed. Chair, I respect your difficult decision. However, the City Charter established the authority with ten Board members. As you well know, the majority are volunteer, non-paid members. The bylaws call for various committee heads and a chairperson and vice chairperson to be elected by the Board and to serve for a one year term. Nine members are equal in terms of voting, oversight, and policy responsibilities. The chair has no additional authority or leadership responsibilities above any other member and certainly has no managerial duties. The chair's primary job is to administratively conduct Board meetings.
My voting record and conduct as a Board member are a matter of public record and support the fact that I have fully performed my fiduciary Board responsibilities. You further cited a loss of faith in HART leadership because at a recent public Council meeting, I declined to "promise" that future projected funding is sufficient to cover all project costs. This was characterized as a reversal ("about face") of prior testimony during the Bill 23 discussion. A fact check of my testimonies, will confirm that I made no reference to any change to the October 2015 Update which was used during the Bill 23 deliberations. In my non-political, business background, there is a distinction between a projection and a personal promise. If that distinction was poorly communicated, I do apologize.
At the Council meeting, I also pointed out that the project's primary cost increase drivers are not coming from a lack of HART's management of cost controls, change orders, work in progress, or excessive administrative costs but, rather revisions to construction cost growth rates for the remaining 55% of future construction, as well as, reaching agreement with HECO on estimating the final costs of utilities relocations. I fully appreciate these upward growth rate revisions which are based solely upon construction market conditions have been frustrating for policy makers as well as the public. As was required in Bill 23, HART is working on an update to the Full Funding Grant Agreement financial plan that will be coordinated and submitted to the Federal Transit Administration. By then the first major bid packages should have been open and these estimates will be based upon actual bids verse forecasts. As the HART chair over the last eight months, I fully take responsibly for any shortfalls in communicating these realities.
Finally, I regret not having done a better job in communicating the remarkable hard work and accomplishments of the HART team. We have a highly talented staff. Soon the public will experience the grand opening of the Rail Operations Center which will be the most advanced in the USA. And, trains will soon be actually rolling. We should be proud of their efforts. Rail is happening because of their dedication and will prove to be a significant benefit to thousands of our island residents for many, many years by increased mobility, improved infrastructure, and better housing inventory.
Chair Martin, thank you for your final paragraph that states "the Council is prepared for the hard road ahead and is more than willing to continue working closely with HART and the Administration to build rail better." That is a very encouraging promise and if by me stepping down will move the project in that direction, I am very pleased to oblige. Please note a copy of my resignation letter to the Mayor is attached. My days of "government service" have come to an end and it's been a learning journey and a privilege to serve. Hope to see you in the district on the North Shore.
Mahalo Nui Loa,
Donald G. Horner
HART Board Chair
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Dear Mayor Caldwell, April 7, 2016
Thank you for the copy of your letter to Board Chair Don Homer requesting a meeting to discuss the seriousness of the situation at the Honolulu Authority for Rapid Transportation (HART). I certainly agree that such a meeting is in order and unfortunately, may be long overdue. It is clear that despite repeated assurances, reports and presentations made by HART officials, the rail project is plagued by uncertainty and drastic steps are needed to restore public confidence, control costs, and complete the project in a timely and efficient fashion.
I feel compelled to write this letter for several reasons. The first is based on testimony by HART Board Chair Don Homer and CEO Daniel Grabauskas before the Budget committee on April 5, 2016. At that hearing Mr. Homer, after previously stating during public deliberations of Bill 23 that the General Excise Tax extension would be sufficient to cover the cost of the project, said he cannot promise that the city will have enough money to pay for the work. That is a stunning about face that further undermines my faith in HART's leadership.
Second is a March 14, 2016 letter from the Hawaiian Electric Company (HECO) detailing problems with utility relocation (attached). In his letter, HECO project manager Stewart Chong reiterates HECO's position that the guideway and stations cannot be built until their facilities are relocated and that de-energizing power lines to allow construction could delay work on the project for months and up to a year. I find it very disturbing to learn that HECO's concerns over clearance issues were first raised three years ago and yet the guideway has been built too close to the utility poles on Farrington and Kamehameha Highway for workers to safely maintain and repair them. HECO warned HART of these issues in a March 8, 2013 letter that was apparently ignored by HART's design and construction contractors. Mr. Chong also points out that bid packages for the Airport and City Center segments do not stipulate that clearance issues must be resolved prior to guideway construction. Mr. Grabauskas was recently quoted in a Honolulu Star Advertiser article saying "We don't control utilities, and we have to follow what they impose." A miscommunication of this magnitude is not only costly, it is unacceptable.
Finally the City Auditor is scheduled to release its report on HART's management of the project next week. The Council has been anxiously waiting for the audit results in the hope that problems identified and suggested remedial actions can assist in cost containment efforts. Preliminary information indicates that HART's financial and subsidiary plans are unreliable and outdated and additional cost overruns and shortfalls are likely. Moreover, construction of the Pearl City Highlands transit center, parking garage and H-2 ramp will add no less than $250 million to the project cost and resolution of the HECO utility relocation issues could add another $100 million. All told, we are presently facing another shortfall of at least $348 million which could climb higher than $800 million.
With mounting evidence of mismanagement and out of control costs, immediate consideration must be given to a reorganization of the HART board and taking the difficult step of asking for the resignations of both the HART Board Chair and CEO. It is not without regret that I am compelled to suggest this, but it is clear that we need a leadership team capable of moving this multi-billion project forward, beyond its current level of project management proficiency and above its persistent financial uncertainty. When certain members of the HART Board of Directors approach me with their concerns of being kept in the dark on a number of rail-related matters, it is certainly time for change.
You have admitted that the rail project has placed your reputation on the line. On time and on budget has gone from an unrealistic goal to an impossible one. The goal of on time and on budget is no longer realistic as we are woefully behind schedule and in the red. Although the project has floundered, new leadership can help to get it back on track. I suggested a change in leadership on several occasions-at last year's Rail-Volution Conference in Dallas to Department of Transportation Services (DTS) Director Michael Formby, to HART Board Chair Don Homer in late 2015 and at a recent public hearing at Washington Middle School.
I sincerely hope that you will take these aforementioned reasons under consideration and follow my lead in calling for a change at the highest levels of HART's executive leadership and HART's Board of Directors. The Council is prepared for the hard road ahead and is more than willing to continue working closely with HART and your administration to build rail better.
Respectfully,
Ernest Y. Martin
Chair & Presiding Officer
Honolulu City Council
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Mr. Chris Takashlge
Deputy Director of Design & Construction
Honolulu Authority for Rapid Transportation
Subject: Addressing Working Clearance and Holdoff Requirements In the RFP for Airport and City Center Construction Projects
Dear Mr. Takashige, March 14, 2016
This letter Is to reiterate our concern that Honolulu Authority for Rapid Transportation's ("HART") Request for Proposals ("RFP" l to solicit bids for the construction of the Airport and City Center sections of the rail project must include explicit specifications relating to the clearance issues with Hawaiian Electric's Facilities.
Hawaiian Electric and HART Joint Clearance Task Force have been diligently collaborating to pursue resolution of the clearance Issues in the West Oahu- Farrington Highway ("WOFH") and Kamehameha Guideway ("KHG") segments. These clearance issues are the result of Hawaiian Electric's clearance requirements that were specified in the March 8, 2013 letter ("March Letter") not being met by HART's design and construction contractors. In the WOFH and KHG segments, the guideway is already built or nearing completion, thereby creating situations where Hawaiian Electric must perform maintenance and other necessary work with less horizontal working space than required for the safe and efficient operation of our Facilities.
Hawaiian Electric has concerns that, although HART previously represented to us of its intent to address the Airport & City Center clearance issues within the respective bid packages, Brennan Morioka verbally informed us that the bid documents do not clearly specify that the working clearance issues must be addressed prior to guideway construction. We are very concerned that this critical omission in the bid documents will cause bidders to incorrectly assume that the guideway and stations can be built prior to relocating Hawaiian Electric Facilities, and creating situations where the clearance requirements are not met. HART has indicated that the intent was to allow bidders the flexibility to come up with creative solutions to address the construction of guideway, stations, and relocation of Hawaiian Electric facilities.
We appreciate HART's intent. However, such creative solution by prospective bidders must still take into account Hawaiian Electric's clearance requirements. To that end, Hawaiian Electric's clearance requirements must be explicitly Included in the Airport & City Center design and construction specifications. HART has said that the final addendum for the Airport bid package was issued in February 2016. Hawaiian Electric strongly urges HART to consider issuing another Airport addendum to instruct bidders to address any existing and future clearance issues prior to construction of the guideway and stations.
Although the HART and Hawaiian Electric teams continue to explore options to reduce the working clearance requirements, Hawaiian Electric continues to stand by its position that the working clearance requirements In the March letter must be met. The Power Engineers study and numerous mockups were evaluated and all of those studies support the need to comply with Hawaiian Electric's requirements in the March letter.
Hawaiian Electric further requests that to the extent HART will need to rely on its construction contractors for the Airport and City Center sections to fulfill HART's obligations to Hawaiian Electric under the Design Agreements, that HART specifically flows down or incorporates HART's contractual obligations by reference in those construction contracts.
Hawaiian Electric also reiterates the length of time we need In order for Hawaiian Electric to be able to comply with HART's requests to de-energize our lines. Below are the minimum time periods for the advance notice we require to "holdoff' or deenergize our lines such that we have sufficient time to plan, coordinate, and de-energize our circuits with minimal impact to our facilities and other customers:
- 1 year for 138kV
- 3 months for 46kV
- 3 months for 12 kV
Please keep in mind that while we remain committed to honor HART's schedules, Hawaiian Electric will not be able to guarantee that HART's holdoff requests for specific dates will be honored as other conditions may arise that will prevent us from complying with HART's requested schedules (i.e. weather, emergency response, etc.). Please also be aware that should any of the holdoff requests impact any of the Navy's facilities, such requests will also be subject to the Navy's strict advance notice requirements. As such, unless HART complies with our notice requirements stated above, Hawaiian Electric will not be able to support HART's contractors' work schedules requiring our lines to be de-energized.
Should you have any questions or concerns regarding the above, please feel free to contact me at xxx-xxxx.
Sincerely,
Stewart Chong
Project Manager
Project Management Division
Hawaiian Electric