Civil Beat Conclusion: Honolulu Rail Report ‘Shoddy,’ ‘Biased’ — and Right?
Editor’s Note: After three months of work, a state consultant in early December released a report reviewing Honolulu’s financial plan for its proposed $5.5 billion rail project. Civil Beat evaluated the key differences in four earlier articles:
Today we publish our conclusion. A discussion of the topic has already begun.
Just because something is “shoddy” and “biased” doesn’t mean it’s wrong.
Case in point, the independent financial report on Honolulu rail project that was blasted by Mayor Peter Carlisle. Consultants warned the project could cost taxpayers an additional $1.7 billion over the next 20 years. Carlisle derided the finding and questioned the integrity of its authors.
But a Civil Beat investigation of the study and the city’s own financial projections determined there’s good reason to believe taxpayers could be on the hook for more than they have been led to believe.
To some degree, however, Civil Beat found that Carlisle was right.
IMG’s Mistakes
It’s reasonable to be concerned about potential bias by the consultant that produced the report, Maryland-based . Civil Beat broke the news that Tom Rubin, one of the members of the team that worked on the analysis, is a well-known rail critic. IMG Chairman Steve Steckler said he didn’t know about Rubin’s position on rail and didn’t think it mattered because Rubin wasn’t hired to opine on the topic.
Still, it seems an overly broad and unfair accusation to say the entire 116-page, $350,000 report commissioned by former Gov. Linda Lingle is “biased” based on the participation of one rail critic. IMG has other consulting contracts, including one with the , and the firm needs to be seen as objective, independent and unbiased in order to stay in business.
Carlisle’s remark that the report is “shoddy” also has some merit. Civil Beat uncovered a $227 million error in IMG’s characterization of the city’s cost construction projections.
Civil Beat also found that IMG inflated costs for operations of the transit system over the next 20 years. The consultant failed to account appropriately for two big factors — hours of operation and miles traveled.
IMG said it would have avoided some mistakes if it had received more cooperation from the city. The city said it did help IMG and provided all available information. The two sides have traded barbs since the report was released in early December.
Here at Civil Beat, our purpose isn’t to merely pass along each side’s claims. Instead, we want to help taxpayers understand their potential liability before the shovels are in the ground.
We found that, despite its shortcomings, the IMG report did provide a valuable service to the community because it raised important questions and highlighted a few key ways in which the city’s proposal is optimistic to the point of being unrealistic. In particular, the city overestimates the prospects of two main revenue sources.
City Flaws
IMG evaluated the city’s model for projecting general excise tax surcharge revenues and determined that no 15-year period since 1990 has seen consistent growth like the rail financial plan is counting on between now and 2023. Civil Beat revealed that despite Carlisle’s statement to the contrary, rail revenues have already fallen off the pace.
IMG also took aim at the city’s ambitious plans to receive more than $400 million in federal bus grants in the next 20 years, including more in many years than any city has received in recent history. And though IMG’s figure — about $250 million less — was completely arbitrary, it struck Civil Beat as more realistic than the alternative because it was at least in the same ballpark as historical grant funding.
Those problems are serious enough without opponents needing to exaggerate the cost of the project. While the size of the city’s $5 billion operating budget for the next 20 years could appear scary, the figure includes money to operate TheBus in addition to rail. So it’s not a matter of deciding between zero and $5 billion. TheBus will have to be supported either way.
Raising Good Questions
Both the city’s financial plan and the consultant’s assessment of it that Civil Beat reviewed were based on old data. Some new information has come to light since the financial plan was updated in August 2009. The recession has been longer and deeper than economists expected at the time, leading to a decrease in tax revenues. At the same time, the city could benefit from lower contract bids from work-hungry construction firms.
The truth about the cost likely lies somewhere in between the two flawed analyses, so there’s a distinct possibility that Honolulu taxpayers are going to have to chip in hundreds of millions of dollars more than city has said.
Civil Beat’s analysis focused on the items IMG put a dollar amount on, but the consultant raised other questions as well. An important one was whether ridership projections are credible. Those numbers are critical because they have serious revenue implications and also speak to the value of the project to those who would use it and those who would pay for it. Ultimately, IMG voiced its doubts about the city’s optimism but left the numbers alone.
The consultant wasn’t asked whether Honolulu should go through with the project and didn’t offer any opinion on that matter. (Neither has Civil Beat.) The project could be worth it at twice the cost, or not worth it at half the cost. But it’s a conversation that should continue — with honest, accurate numbers.
Ultimately, there might be only one way we’re going to really find out how much rail is going to cost. Building it.
Now that Hawaii Gov. Neil Abercrombie has given his approval to the Final Environmental Impact Statement, the Federal Transit Administration is going to take one last look at the finances as it mulls the city’s grant proposal. Rail planners expect an announcement on federal funding in early 2011.
Honolulu Hale has the chance to revisit its financial projections between now and then. If it does, we’ll see whether it tempers its optimistic expectations.
