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Saturday, September 22, 2018
Rail in Default? Feds Give HART 60-Day Warning
By Andrew Walden @ 2:52 AM :: 1635 Views :: Rail

The FTA is giving HART a 60-day warning of default. 

Here are the details from a September 21, 2018 letter to HART from FTA.

We have also provided the “Remedies” section of the 2012 Full Funding Grant Agreement for Honolulu rail. 

Key lines are highlighted.

  *   *   *   *   *

U.S. Department of Transportation Federal Transit Administration

Dear Mr. Robbins:   September 21, 2018

On June 29, 2018, the Federal Transit Administration (FTA) transmitted to you the Final Risk Refresh Report on the Honolulu Authority for Rapid Transportation's (HART) Honolulu Rail Transit Project. The report provided recommendations to HART for adjustments to scope, cost, schedule and project management activities to respond promptly to project risks. The report recommended a cost estimate of $8.299 billion (excluding finance costs), which is $134 million greater than HART's cost estimate of $8.165 billion (excluding finance costs). The report also recommended a Revenue Service Date of September 2026 compared to HART's forecast of December 2025.

The FTA directed HART to revise its Recovery Plan, including the financial plan, to reflect the report's recommendations as well as the final selection of a procurement strategy for the City Center Guideway and Stations (CCGS) segment. The HART has not provided the revised Recovery Plan, nor has HART committed to a date by which it will deliver the revised plan.

The FTA has exercised considerable patience since requesting in August 2015 that HART provide additional information about the project budget and schedule in light of then-apparent problems. The FTA repeatedly has highlighted the need for action while working with HART to identify potential solutions. However, HART's repeated difficulties with identifying cost savings or sufficient funding have led to significant, recurring project schedule delays and cost increases. An illustrative example is that a year after HART's previous financial plan dated September 15, 2017 identified $44 million in City of Honolulu funding for fiscal years 2018 and 2019, the steps to fully commit those funds remain incomplete.

Decisive and expeditious action is needed to prevent further cost escalation. First, FTA asks that a decision on the procurement method for the CCGS segment be made within 30 days of the date of this letter. Second, FTA asks that the revised Recovery Plan-with a financial plan sufficient to cover the total estimated project cost-be provided to FTA no later than 60 days from the date of this letter. Third, FTA asks that the $44 million identified in HART's previous financial plan of September 15, 2017 be fully committed towards the project within 60 days.

Absent receipt of a suitable and timely response, FTA may proceed with the remedies set forth in the Full Funding Grant Agreement for this project.

Please contact acting Regional Administrator Ed Carranza (415-XXX-XXXX) in PTA's Region IX Office if you have any questions. As a courtesy, I am also copying Mayor Caldwell on this letter.

Sincerely,

K. Jane Williams

Acting Administrator

PDF: Letter

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PDF: Full Funding Grant Agreement (2012)  -- (Remedies Sec 19 pg 12)

SECTION 19. REMEDIES

(a) Substantial failure of the Grantee to Complete the Project in accordance with the Application and this Agreement will be a default of this Agreement. In the event of default, the Government will have all remedies at law and equity, including the right to specific performance without further Federal financial assistance, and the rights to termination or suspension as provided by Section 11 of the Master Agreement, "Right of the Federal Government to Terminate." The Grantee recognizes that in the event of default, the Government may demand all Federal funds provided to the Grantee for the Project be returned to the Government. Furthermore, a default of this Agreement will be a factor considered before a decision is made with respect to the approval of future Grants requested by the Grantee.

(b) Under the provisions of Section 15 of this Agreement, "Project Management Oversight," and under the terms and conditions of the Master Agreement, the Government will review performance by the Grantee to determine whether satisfactory progress is being made to complete the Project. In the event that the Government determines that the Grantee is in breach of this Agreement, the Government may withhold its approvals of further funding and suspend drawdown of funds, (Editor's Note: HART drawdowns have been suspended for several years.) under the provisions of Section 11 of the Master Agreement, "Right of the Federal Government to Terminate," until any necessary corrective action, which may be required by the Government, is accomplished. Any breach of this Agreement that is not corrected within a reasonable period of time will be a default of this Agreement. The Government in its discretion may permit the cost of such corrective action to be deemed a Project Cost, provided that such cost is an allowable cost under the requirements of Section 9.c of the Master Agreement, "Costs Reimbursed," and so long as it remains within the limits of the Maximum Federal New Starts Financial Contribution set forth in Section 8 of this Agreement, "Limitations of the Federal Funding Commitment."

(c) In the event of a breach of this Agreement by the Grantee and before the Government takes action contemplated by this Section, the Government will provide the Grantee with ninety (90) days written notice that the Government considers that such a breach has occurred and will provide the Grantee a reasonable period of time to respond and to take necessary corrective action.

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UPDATE Sept 25, 2018: FTA tells HART to find extra $134M for rail

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