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As costs increase, the construction schedule slips and the bank accounts dwindle, officials still maintain that running half a railroad is better than nothing. The sooner trains begin zipping down part of the tracks, the better; because taxpayers need to see something for their money.

From the beginning, city officials recognized that the sooner they could showcase moving trains, the easier it would be to gain continuing taxpayer support for spending the billions that Hawaii’s most expensive public infrastructure project would cost — and the additional hundreds of millions of dollars people would have to pay in future operating subsidies.

Now, with Honolulu’s rail project at least a year behind schedule, currently $1.4 billion over the original cost estimates, and the City Council  peering over HART’s shoulder amid intensifying public debate, officials appear committed to their plan for limited commuter service when the rails reach Aloha Stadium.

As a result, the contract to build and operate the train system with Ansaldo — recently sold and soon to be renamed Hitachi Rail Italy —  includes intermediate operating periods where limited service would be provided on sections of the project where construction has been completed.

HART Executive Director and CEO Dan Grabauskas says that plan still makes sense, even under current circumstances, because it will give people the opportunity to familiarize themselves with the system. It might also benefit those living in Central and West Oahu who want to avoid getting in their cars or boarding a bus.

“If we’re done and could operate I think there will be some pressure to open,” Grabauskas said. “The experience of other places that have been in that position is that the public says, ‘Can we get on board? We want to try it. We want to start using it.’ But that will be up to the mayor, the City Council and our board of directors.”

HART officials say that if interim operations were cancelled it would save an estimated $60 million per year until the full 20-mile system began operations.

But a consultant hired by Mayor Kirk Caldwell last summer, to give Honolulu Hale a “fresh set of eyes” on the project, has suggested HART officials reconsider those plans. He also urged the agency’s board of directors to pay closer attention to what’s going on, to start working closer with HART’s staff and even to consider having contractors themselves show up at board meetings to report on their activities.

Michael T. Burns, the former head of both the San Jose, California, Santa Clara Valley Transportation Authority and San Francisco’s Municipal Transportation Agency, and rail transit systems in Philadelphia and Boston — the old stomping grounds of Grabauskas — said he’d advise a second look at interim rail service.

In a series of three reports to Mike Formby, director of Honolulu’s Department of Transportation Services and a HART board member, Burns outlined several initial observations of HART operations and offered suggestions for possible adjustments in planning and budgeting.

One recommendation “encouraged” HART to undertake a comprehensive review of interim service plans. Burns said he believed there would be financial and other benefits to focusing on building the entire project first and starting revenue service operations when the full 20-mile system from East Kapolei to Ala Moana Center was finished.

“Ramping up to run an interim service, including construction, operational, safety, training, etc. required to support activities that are necessary for revenue service, would undoubtedly, in my opinion, take focus away from completing the ultimate project,” Burns said. “I would also expect that there would be potential cost savings by not phasing the project and focusing on the entire project.”

HART officials say that if interim operations were cancelled it would save an estimated $60 million per year until the full 20-mile system began operations.

Burns suggested HART undertake a serious analysis of the costs versus benefits of any interim operations. As the project construction schedule continues to slip, “the date of interim service and full service compress and get closer together,” he said. “Given projected delays, the focus should be on building the entire project in the shortest possible time.”

However, if HART ultimately decides to stick with an interim operating plan, Burns said terminating transitional service at Middle Street rather than Aloha Stadium would be preferable, because the Middle Street transit center would provide access to Honolulu International Airport, Navy facilities and other transit services. But if interim service to Middle Street couldn’t be started “significantly earlier than full service to Ala Moana,” then HART should fall back on the Aloha Stadium strategy.  

Burns said that while terminating at Middle Street “clearly would have more value than Aloha Stadium,” he believed that providing interim service for paying customers at the stadium would require additional planning for connections to other forms of public transit.

Providing interim service also would give Ansaldo (Hitachi) the opportunity to see if its system actually works and would let HART see sooner whether the various components needed for safe operation have been integrated properly. Before one paying passenger can set foot on HART’s railcars, federal regulations and the agency’s contract with Ansaldo require a rigorous testing period of at least 30 days.

Everything considered, Burns said, there will always be tradeoffs. But “given projected delays, the focus should be on building the entire project in the shortest possible time.”

Pay More Attention To Business

Burns originally raised questions about how the rail system will function in his first report last August, after a visit to Honolulu. With the project divided into multiple contract groupings and a single core systems contractor, meshing the systems well is a concern, he said.

“Increased reporting to the Board on systems integration efforts is warranted,” he said.

A review of HART reports, Burns said, confirmed his sense the project was significantly behind schedule; but the way progress was reported left him “unable to reconcile” information on individual construction activities with HART’s Master Project Schedule Summary. “The result is an overall appearance of the project being close to schedule,” he said.

And Burns suggested board members could pay more attention to business.

“My quick assessment of HART Board meetings,” he reported, “is that they do not have a consistent theme of review and oversight of major project elements — schedule, budget, issues of concern, upcoming work, etc. The Board and the staff should work closer together to evaluate, analyze and address issues and solve problems earlier in their manifestation.”

Burns suggested allowing more time for discussion of budget and scheduling matters, and having contractors report on their performance to the board more often. Board members and staff should discuss schedule issues and action plans for more effective project management.

Formby said he and Caldwell have taken Burns’ suggestions seriously, and have begun pressing HART for more accurate information about the project’s finances. Formby added that it’s important to have such discussions in public forums, even if it’s uncomfortable, because there are too many taxpayer dollars at stake.

“He’s really helped as far as this move toward more transparency,” Formby said. “He was one of the initial people to tell us that other boards are much more open about discussing issues that are somewhat sensitive. You’ve got to be willing to do that.”

For instance, Formby has been openly critical of HART’s handling of a $110 million parking garage that was omitted from the project’s budget because it was based on a yet-to-materialize public-private partnership.

Until a private company strikes a deal to pick up the tab for the parking structure, Formby said that the $110 million cost should be clearly listed as a HART expense. That would give officials and the public a clearer view of the current financial picture. It would also send a message to future transit riders that the garage — which Formby says is a critical part of the project — will be built regardless of what deals are struck with private businesses.

Formby said the administration hasn’t taken an official stance on opening the first 10 miles of guideway to riders in 2018. There’s still a lot of analysis to be done before that can happen, such as finalizing fare-box amounts and various agreements with Hawaiian Electric Co. for electricity costs. There are also questions about whether certain infrastructure, such as off-ramps and parking garages, will be available for public use by the time the railway is ready for passengers.

“The administration and I think that if the system is up and running and would be a value to the people living in the corridor, then we would find a way to open it,” Formby said. “But there are still so many issues that haven’t been discussed yet … I’m just a firm believer that you have to do your homework. I don’t want to make a decision just because I would like to see people ride the rail to Aloha Stadium.”

Dollars And Delays

Whatever an updated analysis of interim operation costs and benefits may reveal, one of HART’s problems will be tackling public perception — for example, persuading frustrated motorists on Farrington and Kamehameha highways that many of the project’s current difficulties were created by the administration of former Mayor Mufi Hannemann long before HART ever existed.

Today’s cost overruns can be traced in large part to Hanneman’s haste in passing out contracts and giving the go-ahead for construction, while failing to anticipate, or simply ignoring, the potential for the lawsuits that ultimately stopped work in its tracks. While attorneys argued in court, construction costs escalated and contractors spent their time adding up the millions of dollars they would be paid in claims for the delay.

Had everything gone according to the schedule submitted for federal funding in 2012, trains would be running between East Kapolei and Aloha Stadium by next June. But so far, only five miles of the 6.8-mile West Oahu/Farrington Highway guideway from East Kapolei to Pearl Highlands has been completed, and construction is six months behind schedule. Work on the Kamehameha Highway guideway, a 3.9-mile section from Pearl Highlands to Aloha Stadium, is currently four months behind schedule and won’t be finished for at least two years, or in the alternative, won’t be finished until mid-2018.

HART has yet to award major contracts, including those for building the Kamehameha Highway stations, airport section guideway and stations and the City Center guideway and stations, which may be the most challenging part of the entire project. Those contracts can’t be awarded until the City Council approves a five-year extension of the General Excise Tax surcharge needed to pay for them.

Discussion over interim service and integration of the railroad’s core systems — what HART board chairman Don Horner calls “the brains and the trains” – will undoubtedly become more intense in the wake of Burns’ recommendations.

What, if any, savings HART might enjoy from scrapping interim service can’t be immediately determined.

Besides building the 80 railcars, and constructing the complex interconnected components to run them safely, Ansaldo’s $1.4 billion contract provides for an intermediate operating and maintenance stage consisting of several “defined operating periods associated with progressively expanded system segments that become ready for passenger service.”

At the time the Ansaldo contract was awarded, the first of those periods was expected to begin this month, when passenger service would start on the segment between the East Kapolei and Aloha Stadium stations. The second period would begin when passenger service was available between Aloha Stadium and the Middle Street Transit Center, initially expected to be in October 2017.

However, the initial operating period for passenger service between East Kapolei and Aloha Stadium has been pushed back to 2018. The second interim operating segment, to expand passenger service from Aloha Stadium to Middle Street, has been pushed back until 2020.

For these intermediate periods, Ansaldo would be paid $167 million. It would be paid another $339 million for the first five years of full operation from East Kapolei to Ala Moana Center, now delayed until at least 2021, and $317.6 million more for an optional five-year period, unless terminated by HART.

What doesn’t appear to have been clearly explained to the public at the time the contract was awarded was the fact that besides the $826.6 million penciled in for Ansaldo, HART would pick up millions more in other operating costs that included electricity, fare collection, station maintenance, security patrols and HART’s administrative expenses.

In pleading with the Legislature for an extension of the GET surcharge last spring, HART updated its projections to account for the delays in interim and full system operations, estimating core systems to cost $926.9 million between 2019 and 2031. HART’s additional O&M costs were estimated at $784.4 million, with $275.5 million earmarked for electricity to operate the trains and light the 21 stations.

“Most of us are preoccupied right now with trying to build rail. But certainly operations and maintenance is something we really should be discussing sooner rather than later because that’s a reality that’s going to hit us really hard and fast if we don’t.”

Where HART will obtain funds for interim operations, if it goes ahead with its original plan, remains an open question. The state law permitting Honolulu to extend the GET surcharge through 2027 limits the use of those funds to capital (construction) costs.

As the City Council wrestles with a decision on whether to implement the extension, it also will have to consider the future financial impact of actually operating a city-wide integrated transit system composed of both rail and bus service. Revenues from the tax surcharge extension will only pay for construction.

This will be particularly important if proposals to the Honolulu Charter Commission advocating creation of a single transit agency to provide rail, bus and Handi-Van service are placed on the ballot and approved by voters.

City officials clearly anticipated some form of taxpayer-subsidized integrated transit operations from the outset. They devoted part of the original financial plan to a discussion of municipal funding sources for a unified system once the trains started running. The original financial plan called for $5.9 billion in city subsidies between 2010 and 2030, with contributions to rail beginning in 2015.

With rail operating dates delayed, and using the original projections, total O&M costs for a unified transit system would require $6.85 billion between 2017 and 2030. The city would cough up $4.8 billion from Honolulu’s General and Highway Funds, which derive their revenues from property taxes, the state hotel tax, public service company tax, fuel tax, vehicle weight tax and public utility franchise tax.

However, financial projections submitted to the Legislature and the City Council last March contained no reference to potential subsidies for an integrated system, merely estimating the city’s direct subsidy for running the railroad between 2019 and 2030 at $947.5 million — a total that would only become apparent when lawmakers added up the numbers themselves.

Honolulu City Councilman Joey Manahan, who chairs the transportation committee, said there are still a lot of questions surrounding exactly how much it will cost to subsidize operations and maintenance of the rail line. Once rail is up and running, he said,  of the city’s budget will go toward paying for transportation subsidies for rail, bus and Handi-Van.

That’s a big hit, Manahan said, and it’s something he doesn’t think should be covered solely with property taxes and other city funds. Instead, he believes the city should seek another extension of the GET surcharge to help cover those costs, with discussions at the Legislature starting as soon as 2016.

“Most of us are preoccupied right now with trying to build rail,” Manahan said. “But certainly operations and maintenance is something we really should be discussing sooner rather than later because that’s a reality that’s going to hit us really hard and fast if we don’t.”