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While P3 is a relatively new project delivery method in the United States and therefore not familiar or well-understood by all, it is good for the Honolulu Authority for Rapid Transportation to help educate the public about public-private partnerships, and how a P3 will benefit Honolulu’s rail transit project.

HART analyzed P3 as a global best practice for large infrastructure projects such as the rail project, and, together with expert advisors, concluded that it will deliver more budget and schedule certainty in completing the City Center guideway and stations portion of the project, as well as the Pearl Highlands Transit Center and Garage, and long-term operations and maintenance.

Prospective P3 partners will, over the next several months, perform significant due diligence to assemble fixed-price construction bids including significant private financing, as well as operations and maintenance bids. Under this approach, more certainty of construction costs is achieved.

While HART ridership forecasts show more than 120,000 passenger trips every weekday on the rail system, the P3 partner chosen via the public procurement process now underway will not receive any fare box revenue. Its ability to make a profit under the P3 is not at all linked to ridership.

‘Availability Payments’

The P3 partner will receive milestone construction payments from HART for about one-third of its construction costs and will finance approximately two-thirds of the construction costs from private sources during the five-year construction period of the City Center and Pearl Highlands Garage and Transit Center.

They will not begin to be paid back their debt, through a mechanism called “availability payments” made from the project’s available public sources of funds, until the construction is completed and the train is operating at the required performance and quality standards. In this way, more budget and schedule certainty is achieved and taxpayers get a higher quality product.

The P3 partners do not set or collect fares, do not go “bust” due to poor ridership, cannot raise fares, or “extort” payments from the city. And the rail system doesn’t “flop” or lose money every year. There is a social policy that isle residents will subsidize the cost of public transportation.

P3 partners get paid back their debt based on performance and quality achievement.

Users of the system will pay to use it, and the balance will be borne by the city’s tax base. P3 partners get paid back their debt based on performance and quality achievement.

And based on that performance, all project debt will be paid back by 2031, the same as in the original plan matching the sunset of general excise tax and transient accommodations tax funding, and certainly not extending “far into the future” as some of those opposed to the project suggest (“HART’s P3 Plan Another Bad Sign For Rail,” Nov. 14).

Since at least January 2017, HART has been managing its project budget of $8.165 billion with stronger project management, using a rigorous risk management process, and now also by taking on global best practices such as P3. The latest project financial plan shows that there is in fact adequate funding available to the project to complete the project even to a higher project budget than the Federal Transit Administration recently requested.

P3 is not “privatization,” but rather, a partnership, whereby the public sector focuses on the outcomes it desires while the private sector develops solutions to deliver those outcomes.

The project remains in public ownership with fares determined and controlled by the public sector, and other social requirements on how the rail system should be managed and operated subject to public hearings and public decision making.