Time to get real about rail

By Keli'i Akina, Ph.D., President/CEO Grassroot Institute, June 25, 2022

Boundless optimism may be a great trait in a friend, but it’s not what you need when you’re dealing with billion-dollar projects and long-term cost projections.

From the beginning, the folks in charge of the Honolulu rail project have been relentlessly sunny in their projections. It was sold to the public on the promise that it would only cost about $4 billion, that it would be completed by 2019 and that the general excise tax surcharge associated with it would end by 2022.

By the time the Federal Transit Administration got on board with an agreement to contribute $1.55 billion, the expected cost was $5.12 billion.

Now, with the FTA still holding on to $744 million, the projected cost is approximately $12 billion. The last completion date we were given was 2031, and the GET surcharge has been extended to 2030.

In yet another display of optimism, the Honolulu Authority for Rapid Transportation has submitted its 2022 recovery plan to the FTA, as required to secure the rest of the promised federal funds. Not only does the recovery plan state that the project can be finished for $9.93 billion, it also is generous in its ridership estimates and its projections of future revenue from the general excise and transient accommodations taxes.

In addition, the plan is vague about how certain aspects of the rail, such as the Pearl Highlands garage or the completion of the rail to Ala Moana, will be accomplished.

If you take off the rose-colored glasses, the recovery plan raises more questions than it answers.

In fact, two prominent rail critics — current HART board member Natalie Iwasa and former board member Joe Uno — have submitted their own letter to the FTA expressing their concerns about the recovery plan.

Iwasa and Uno catalog many of the technical faults with the way that revenue projections, cost estimates and ridership numbers have been calculated.

For example, their letter notes that the data used by HART to calculate annual growth rates in the GET and TAT did not take into account anomalous changes caused by legislative action in 2017. Based on calculations that account for those variables, Iwasa and Uno determined that HART overestimated its revenues from those taxes by at least $200 million through fiscal 2030.

In a similar way, Iwasa and Uno find issues with the recovery plan’s revised completion cost. They rightly point out that the rail has a history of underestimated costs and that the plan finds “savings” by:

>> Inflating the costs saved on the Pearl Highlands garage.

>> Overlooking the cost of delays and future legal settlements.

>> Not accounting for the current spike in inflation, which likely will increase its costs.

The trend of overly optimistic projections continues with the rail’s future ridership numbers. As Iwasa and Uno point out, HART’s ridership projections at one point would have been high for a city five times as big as Honolulu.

Actual ridership on recent rail projects around the country is about 59% less than predicted, but HART claims that mass transit ridership will increase by nearly 60% over pre-pandemic levels.

Iwasa and Uno explore several other problem areas, from the loss of public trust to operations and maintenance costs and environmental issues.

They ask why there has been so little discussion of options and alternatives, and that the FTA investigation these problems rather than simply approving HART’s recovery plan.

In a separate letter to the FTA, my colleague Joe Kent at the Grassroot Institute expressed similar concerns. He said the recovery plan has “overly optimistic assumptions about revenues, ridership and costs, and that this could saddle local taxpayers with unstated liabilities in the future.”

He pointed out that, given its track record of ballooning budgets and delays, HART’s projections should be treated with extreme skepticism.

There are a lot of people who are willing to just throw money at the rail until it’s done … and then, presumably, keep throwing money at it to keep it going regardless of who it is serving or how much it costs.

But in the end, taxpayers are going to be the ones who foot the bill for HART’s optimistic budget-busting.

I say we deserve more transparency and accountability in how the rail goes forward from here. I hope the FTA listens to the concerns of Iwasa and Uno, the Grassroot Institute, the Outdoor Circle and others regarding the projected costs, revenues and ridership of the wildly over-budget and behind-schedule Honolulu rail.

Perhaps this will be the moment when we will finally be able to have a real, fully transparent debate about the project’s future.

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PDF: Iwasa-Uno report