Prevedouros: FTA Gives Rail “Low” Rating
The back-and-forth over the future of rail transit in Honolulu has gone on so long that some of the arguments stay the same, even when new information emerges. Take mayoral candidate Panos Prevedouros’ statement at a Hawaii Public Radio debate last week: “The FTA has given us a low rating for our financial plan.”
His claim is misleading.
In the from the Federal Transit Administration, released in January 2010, Honolulu gets an overall rating of “medium” for its project, including “medium” ratings for Honolulu’s capital finance plan and its operating finance plan. Each of the financial plans also had their own rated subcategories with one “low” rating among them.
The FTA uses six weighted criteria to issue ratings:
Cost-effectiveness: 20 percent
Transit-supportive land-use: 20 percent
Economic development: 20 percent
Mobility improvements: 20 percent
Environmental benefits: 10 percent
Operating efficiencies: 10 percent
Looking to the FTA’s most recent capital finance rating for Honolulu, there are three sub-ratings:
Agency Capital Condition: Medium
The average age of the city’s bus fleet is 9.2 years, which is older than the national average. The city has good general obligation bond ratings from three national firms.
Commitment of Capital Funds: High
Approximately 91 percent of funding — not including federal New Starts funding — is committed to the project. On a local level, funds are generated by a general excise tax surcharge. On a federal level, funds come from the American Recovery and Reinvestment Act.
Capital Cost Estimates, Planning Assumptions and Financial Capacity: Low
This is the area of the report to which Prevedouros was likely referring, but it’s still just a component of a greater “medium” rating. The report finds that even though estimates on the project’s capital costs are “reasonable,” financing costs appear to be “understated.” It also finds the city has given itself little wiggle room in the event of funding shortfalls and cost increases.
In Honolulu’s medium-rated operating finance plan rating, the subcategory covering operating costs was also the weakest area identified by the FTA:
Agency Operating Condition: Medium
The FTA cites that there have been no recent cutbacks to services, and an assets-to-liabilities ratio of 1.32 within the city’s public transportation fund.
Commitment of Operating Funds: High
All operating funds are considered committed, including federal funds, fare revenues and city budget funds.
Operating Cost Estimates, Planning Assumptions and Financial Capacity: Medium-Low
The FTA report finds the city’s assumptions on operating costs are optimistic compared to historic data. It also points out that the operating cash-flow assumes a balanced budget.
Some greater perspective on the ratings: Of the 14 projects in the preliminary engineering phase recommended for New Starts funding, eight (including Honolulu) had medium overall ratings; two had medium-high ratings; three had medium-low ratings and one was exempt.
