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A top executive with the Honolulu rail authority is projecting the collapse of state tax collections during the pandemic could cause the huge train project to take a $450 million hit as Hawaii’s economic shutdown and gradual reopening wipe out excise and hotel tax revenue that the city has been counting on to help finance rail.

The near-term cash shortage is so severe that Honolulu Authority for Rapid Transportation Chief Financial Officer Ruth Lohr on Thursday raised the possibility the city might have to deliberately slow the progress of rail construction in the months ahead to ensure that HART has the cash it needs to pay its bills as they come due.

Both Lohr and HART Executive Director Andrew Robbins described Lohr’s projections as “conservative,” but they may also be an early warning of more financial problems ahead for the $9.2 billion project.

The city signed an agreement with the Federal Transit Administration in 2012 that called for the elevated rail line and 21 stations to be built for $5.2 billion, but the state has been forced to step in twice since then with financial bailouts for rail. The plan in 2012 was to finish the 20-mile project by this year, but the latest target for completion is March 2026.

Lohr did not make public the details of the analysis that showed a total impact on rail of about $450 million. She said that “we are still working on the total impact, and will be working with the chair of the board as well as the chair of the project oversight committee to come up with the models to give more total overall impact and sort of analysis for the project.”

When asked about the $450 million estimate, Robbins replied that “what Ruth is trying to do is to come up with a projection about what our total funding shortfall may be due to COVID, and that’s a tough thing to do.” COVID-19 may surge and wane, and the rail authority will continue to collect excise and hotel room taxes for years to come, Robbins said.

“They’re just projections, and she tends to be on the conservative side,” he said. “No one really knows, so we’re just trying to predict it. It could be higher, could be lower.”

HART has been collecting $65 million to $70 million every three months from a half-percent general excise tax surcharge levied on Oahu to help fund the project. it would also receive about $18 million each quarter in hotel room taxes.

But Lohr’s on Thursday suggest HART may actually collect only $32 million to $51 million per quarter in excise taxes in the year ahead, and just $3.6 million to $9 million in hotel room taxes per quarter.

If those new projections are accurate, HART would collect something on the order of $160 million less this fiscal year than would have been anticipated based on its projections last fall.

Adding to the rail project’s financial troubles is a decision by the FTA to withhold $744 million in federal funding until HART demonstrates it can actually complete the project. The FTA has been waiting to see the outcome of the bidding process for a public-private partnership, or P3, contract that HART plans to award later this year.

That contract will involve an estimated $1.4 billion for construction of the last four-mile segment of the elevated rail line through the city center, and involve billions of dollars in city funding to maintain and operate the rail line for the next 30 years.

The deadline for the P3 bidders to submit their proposals to the city was Thursday, but the city will not release details of those  proposals or identify the bidders until it has finished evaluating the submittals, which is expected to take about a month.

The FTA is waiting to see the outcome of that bidding because the agency wants to be sure the bids are affordable for HART and the city.

HART, meanwhile, is hoping the FTA will be satisfied with the outcome of the P3 bidding, and has developed financial projections that assume the FTA will release the first $100 million in federal funding to HART in September.

Robbins said that “we certainly are projecting that we’re going to start to receive federal funding before the end of the calendar year because we intend to award the P3 contract.”

If that $100 million in federal money does not come through for any reason, “we run into an issue with our cash flow by the end of the year,” Lohr said.

A spreadsheet she presented to the board showed that without the federal funding, HART would have a negative cash balance of more than $8 million at the end of December, and a shortfall of more than $43 million at the end of January.

HART can do short-term borrowing of up to $350 million, but Lohr said that option would be exhausted by December if the federal funding doesn’t arrive. One bright spot is that the city is expected to issue bonds early next year to provide an injection of cash for HART by February, which would help with the near-term cash flow problem, she said.

“With that said, the impact of not getting or receiving the $100 million does put us into a very difficult situation as of the end of the year,” Lohr said. “We wouldn’t be able to do anything with our cash, pay bills, without having some sort of other cash flow to make up for that.”

Lohr stressed that she uses a very conservative cash flow analysis, and noted that the tax collections for the last quarter of last fiscal year turned out to be $64 million, which was considerably higher than she had projected.

Board member Glenn Nohara asked Lohr what the plan is for the rail authority if it actually ends up with a negative cash balance.

She replied that HART officials have discussed with the FTA that “we have to make sure that we’re planning ahead, because you can’t all of a sudden decide in November that we have to slow progress on the project in order to make sure that we can pay our bills because we’re running low on cash. That’s something that has to be planned for ahead of time, which is exactly why we present and look at these types of exhibits.

“What unfortunately would have to start happening is, we’d have to start pulling back on production, because those are our largest invoices,” she said.