City's rail rendering
City's rail rendering

Editor’s note: This testimony by Michael Asato will be presented at the Honolulu City Council Meeting on Wednesday, June 6, in regards to Bill 37, FD1, CD1 (2012) — AMENDING ORDINANCE NO. 01-28. He is referring to the city’s plan to construct a $5.3 billion elevated steel on steel rail project from Kapolei to Ala Moana Center.

Good morning Councilmembers.  I am Michael Asato testifying as a private citizen.

At the May 23 Committee of Legislative Matters meeting, Councilmember Breene Harimoto argued that the vote on Bill 37 is about whether you are for or against rail [video, 2:42:42].  I respectfully disagree.  The vote on Bill 37 is about the Council carrying out its legislative fiduciary duties of fiscal responsibility and risk oversight.

Specifically, is Honolulu Rail ready for HART to exit Final Design and apply for a Full Funding Grant Agreement (FFGA) for the FTA to execute? — or is the true purpose of rail not to build it but rather ransack the $500 million cash rail fund in election year 2012[1] by submitting a sham FFGA application that the FTA should not execute?

At risk will not only be tearing down what Councilmember Ikaika Anderson called a “monument of embarrassment” but also from the six-time refinancing of city’s 270-day commercial paper facility a general obligation bond exposure that Councilmember Romy Cachola calculates to be $2.7 billion [video, 1:17:10 to 1:19:34] with no means to repay — except because City Ordinance 2007-001 prohibits financing rail capital costs with property taxes, would have to go back to the state and ask for an extension of the GET rail surcharge.

In what appears to be brazen malfeasance is that until recently HART has not made available the full version of the October 2011 Program Management Oversight Contractor (PMOC) report on its website [338 pages, 9MB download], instead providing even the HART Board Committee on Project Oversight [see p. 2 of 12/08/11 meeting minutes] a version that did not disclose any of the risks identified in the Project Risk Register [42 pages, 1 MB download].  Put another way, until recently HART has withheld vital information necessary for the City Council and the HART Board to carry out their fiduciary duties of risk oversight.

Perhaps one explanation for withholding this vital information is the following “significant” project risk items in the PMOC’s Project Risk Register [Acrobat pp. 325-326]:

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Takeaways on the meaning of “significant” here are:

  • Cost Impact > $10 million (highest impact)
  • Probability Rating > 90% (near certainty)
  • Schedule Impact (to mitigate risk): between 3 to 6 month delay!

Note the issue date of August 2011 which means that HART could have mitigated these significant risks well before asking the FTA in December 2011 to proceed with the “cheaper-to-build-and-teardown” construction now in progress — indicating that it should never have started.  For an analysis in which not mitigating these significant project risks right now could lead to the “unforeseen circumstance” of an engineering change order in the design of the City Center guideway foundation which in turn could lead to a massive cost overrun wherein the city’s commercial paper facility will need to be tapped, please see appended my May 17 HART Board testimony.  In a nutshell, in applying for an FFGA in 2012, HART is planning to exit Final Design without a final design of the City Center guideway foundations (and more incredulous issued an RFQ for the City Center guideway segment design contract in January 2012 but in not requesting an appropriation for FY2013 means these “significant” risks will not be addressed until FY2014 at earliest).

The PMOC’s risk assessment is important because the PMOC works for the FTA, and is tasked under FTA Oversight Procedure 52 – Readiness to Execute FFGA to recommend whether Honolulu Rail is ready for the FTA to execute an FFGA.  Given that these “significant” risk items could be mitigated with only a 3 to 6 month schedule delay — and its criterion of “high likelihood of staying within budget and schedule through construction” cannot be satisfied without a final design of the City Center guideway foundations — the PMOC should not be recommending that Honolulu Rail is ready for the FTA to execute an FFGA in 2012 (and ergo the FTA should not be executing an FFGA in 2012).

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In closing, the “significant” project risks identified by the PMOC are like a bright red warning light on an automobile dashboard telling the Council and the HART Board to pull over and stop.

HART is carrying out either recklessly incompetent project management, general engineering and risk management — or brazen malfeasance in which the true purpose of Honolulu Rail is not to build it but rather ransack the $500 million cash rail fund in election year 2012 by submitting a sham FFGA application that the FTA should not execute.  Either way Council should VOTE NO on Bill 37 because Honolulu Rail is not ready to execute an FFGA in 2012, clawback whatever remains of the taxpayers’ $500 million cash rail fund for redeployment to higher societal priorities, and use its subpoena power under §4-4.7 Revised Ordinances of Honolulu to investigate what is either reckless incompetence or brazen malfeasance.

[1] $500 million cash rail fund [» $417M beginning balance + $174M interim year collection [link] – $95M ending balance] estimated from HART’s September 2011 Financial Plan:

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