The Economics of a Failed Honolulu Rail Project

BY PANOS PREVEDOUROS -- Recall that in 2008 when we voted for rail and 50.6% said yes, the cost of the rail was $4.6 Billion. Now sewers alone are costing us $4.5 Billion.

Now compare items (1) and (2) below to get a sense of the mayor's desperation.

(1) MUFI HANNEMANN

(Wed., July 14, 2010)—Mayor Mufi Hannemann today said he is very pleased that Congressman Jim Oberstar, chairman of the U.S. House Committee on Transportation and Infrastructure, yesterday publicly referred to Honolulu’s rail project as “the premier transit project in the entire country.”

(2) ACTUAL FEDERAL TRANSIT ADMINISTRATION ASSESSMENT

We are listed in Preliminary Engineering for 2011:

-No money for Honolulu this year.

Read Page 139: BARELY passable overall MEDIUM rating.

-Capital Costs gets a Low rating.

-Operating Costs etc. gets a Medium-Low rating.

Capital Cost Estimates, Planning Assumptions, and Financial Capacity: Low

· Assumptions regarding growth in GET revenues and Section 5309 bus discretionary funds are optimistic compared to historical experience. Financing costs appear to be understated.

· The capital cost estimate is considered reasonable.

· The financial plan show the City has little ability to address funding shortfalls or cost increases.

-The GET surcharge revenues that will be applied to project-related debt service provide very slim Operating Cost Estimates, Planning Assumptions, and Financial Capacity: Medium-Low

· Assumptions regarding state operating subsidies and growth in rail unit operating costs and bus and paratransit operating costs are optimistic compared to historical experience.

· The operating cash flow assumes a balanced budget, with no accrual of an operating surplus or reserve.

Panos D. Prevedouros, PhD is a Professor of Civil Engineering at UHM and Honolulu Mayor Candidate. He can be reached at 63-PANOS (637-2667) or at Panos.Prevedouros@Gmail.com

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