Still in Planning, Ambitious Honolulu Rail Transit Project May be in Financial Trouble

Tax revenues fall short in paying for 20-mile system, connecting downtown with Kapolei.

Yesterday, the Honolulu Advertiser revealed that in May the city had reviewed the costs of its planned transit system and realized that revenues over a 13-year period would be short $500 million compared to previous estimates. The news came as a bombshell for proponents of the rail line, who have worked hard in recent months to defend the credibility of the project. It gives additional ammunition to opponents who still hope to prevent the project’s construction, and were able to harp on the city’s secrecy as evidence of corruption. Honolulu’s experience, however, is little different from that in most other American cities today suffering from the consequences of the recession.

Honolulu’s rail transit line, which was approved by voters last November, will connect East Kapolei with the airport and downtown on a 20-mile elevated route that will take 40 minutes to traverse. Serving the majority of the city’s major job and residential centers, the line will attract almost 100,000 daily passengers by 2030 and cost $5.3 billion to build; it will fully open in 2019. Around 30% of the project’s costs are expected to be covered by the Federal Transit Administration through the New Starts program, with the rest being paid for by a local 1/2¢ sales tax that was introduced in January 2007.

It’s on the revenue from that tax that the city’s transit troubles lie.

In the May document, the city acknowledged to the FTA that revenues were coming in far lower than initially assumed — $12 million a month, rather than the $16.5 million originally planned. This shortcoming is primarily the result of the recession; it has hurt Hawai’i particularly badly. By 2022, when the tax is to expire, the city will likely collect $500 million less than the $4.1 billion foreseen — that’s a huge chunk of the total needed for the rail line’s implementation.

The city has yet to admit that it lacks the funds to complete the rail line on time. The Advertiser report has been dismissed by both the local authorities and the FTA as out of date and inaccurate. The city has so far refused to update its financial plan, though construction will begin in December.

But all evidence suggests that Honolulu’s project will be significantly affected by the drop in sales tax returns currently being noticed by municipalities everywhere. Denver and Charlotte, among others, have had to delay or cancel elements of their capital plans. Honolulu will undoubtedly have to find new revenue sources or cut back on the size of the line. The report’s suggestions for solving the problem included increasing the federal share, reducing expenditures on buses, asking the airport or private investors for funds, creating a new tax, or extending the tax past 2022. The first and last options seem the most reasonable.

While the project itself is a good one — it will serve Hawai’i’s population well, and based on initial station designs, it will be a handsome addition to the cityscape — the local administration must be more transparent in its operations. It is not the city’s fault that sales tax revenues have come in below expectations. But it is the city’s fault that it has kept that fact secret from the citizenry. Looking for reasonable solutions to the problem, such as asking Washington for more money or delaying completion by a year or two, is the next step. But any advances should be made in public, not in secret reports.

Image above: Honolulu rail transit corridor map, from Honolulu Rail Transit