Honolulu Rail Cost Escalation
by Panos Prevedouros, Fix Oahu
It is important to understand how much costs escalate in megaprojects. All these costs in bond-financed public projects are to be borne by the taxpayer. Oahu has fewer than 400,000 taxpayers so the possibility of a twelve billion dollar bill for a long rail line presents a staggering liability. Over $30,000 per taxpayer.
In 2005 Mayor Mufi Hannemann and his supporters went to the Legislature and asked for a temporary (20 year) 1% tack on to Hawaii's 4% general excise tax in order to develop a large rail system for an approximate cost of $2.7 Billion. The Legislature approved a 0.5% tack on to the GET in hopes that Federal Transit Administration and other taxes will cover the total. Here is the letter to The Honolulu Advertiser by Mayor Mufi Hannemann promising that the 20 mile system will cost $3 Billion.
In 2008 General Elections there was a City Charter Amendment asking the city to install a steel-on-steel fixed guideway system. The cost of the 20 mile system had grown to $4.6 billion and almost $1 Billion was the contingency funds. TheBus funds were not touched in 2008.
In 2010 outgoing governor Lingle procured a financial analysis report for the rail that she had supported, in light of the escalating costs of rail and the 2008-2009 fiscal crisis. IDG, a reputable financial and risk analysis consultant based in Washington, D.C., estimated that the 20 mile cost will be more likely $7.2 Billion.
Despite these facts, Governor Abercrombie signed off on the State EIS and Mayor Carlisle dismissed the financial report as "an anti-rail tirade."
In summer 2012 the City submitted its final application to the FTA for a Full Funding Agreement. In it, the cost of the 20 mile line has grown further to $5.17 Billion but contingencies have been reduced to about $600 Million and another $150 Million is "borrowed" from TheBus fleet funds. In other words, the 2012 cost estimate would be $5.7 Billion if they did not fudge the amounts and kept them at the 2008 level.
In May 2012 Councilmember Kobayashi asked HART to estimate the cost of the full 34 mile system from West Kapolei to the UH and Waikiki. HART's response was $9.03 Billion.
If we apply IDG's cost escalation of the 20 mile system to the 34 mile system we get $12.6 Billion. Hanneman's rail has ballooned from $3.6 Billion to $12.6 Billion!
Rail was a bad idea at a cost of $3 Billion. Now that the likely cost is three times higher, the choice is clear. People have made their choice quite clear by handing both mayors Hannemann and Carlisle their walking papers.