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The Honolulu Advertiser
Posted on: Sunday, November 5, 2006

Taxpayers' cost to run rail: over $120M a year

Reader poll: Which rail route is the best?
StoryChat: Comment on this story

By Robbie Dingeman
Advertiser Staff Writer

Honolulu city officials say operating costs for a proposed rail transit system would be subsidized by taxpayers the way TheBus is now at more than $120 million a year to help keep fares low.

Although city officials are banking on federal funds paying for the bulk of construction costs, the continuing costs to operate and maintain such a system would likely fall to the city and taxpayers over the long haul.

City officials have said they hope public-private partnerships would arise to help defray some costs, but critics say there's no guarantee of that.

Funding for the rail system would parallel guidelines for TheBus, which is required by the city to pay for a little less than one-third of its operating expenses with fares it collects.

A city-commissioned transit report released last week says that 29 percent of the operating expenses would come from fares, leaving the rest to come from what the report calls advertising and rental income, along with general fund and highway fund revenues.

Mayor Mufi Hannemann is backing a rail transit system that would cost between $3.6 billion for a 20-mile route from East Kapolei to Ala Moana Center, or $4.6 billion to build a longer 28-mile route that runs from Kapolei to the University of Hawai'i-Manoa.

That $3.6 million includes land and equipment acquisition, but increases to $4.5 billion when adjusted for inflation by the end of the financing period in 2022, according to the city's detailed alternatives analysis report released last week. The cost of the longer route increases to more than $5 billion.

The report now will be reviewed in a series of City Council hearings as elected officials scrutinize plans for the ambitious transit project, which has been called the most expensive public works project in the state's history.


The City Council has said it plans to choose a new transit alternative for Honolulu by Dec. 31, the day before a half-percentage-point increase in the general excise tax in Honolulu goes into effect to help pay for the new transit system.

Toru Hamayasu, the city's chief transportation engineer, also said that the city plans to make the fare to ride the new transit system the same price as riding TheBus. That currently costs adults $2 a trip or $40 for a monthly pass and $440 for an annual pass.

Hamayasu said the latest cost estimates cover design and construction, land acquisition, a yet-to-be-chosen technology as well as the trains, and operating and maintenance costs.

Lowell Kalapa, president of the Tax Foundation of Hawai'i, said people should be clear that any such transit system would be heavily subsidized by the general fund and other money because fares only pay up to a third of operating and maintenance expenses.

And because a rail system stays in one place, it must have buses help deliver commuters, which further pushes costs, he said.

"The subsidy has to be substantially more because you still need warm bodies to run the train. You need energy to run the train," Kalapa said. And even though city experts point to a train as more energy efficient because it likely wouldn't rely on gasoline technology, Kalapa said recent events show electricity comes at a cost to ratepayers, who in many cases also are taxpayers.

Kalapa wondered if Hawaiian Electric could provide the energy needed for such a system with existing power-generating capacity. "Without even a train, we're having blackout problems," he said.


In addition, Kalapa, who had opposed a tax increase for transit, questions some other cost projections.

"I think they've probably underestimated the cost of acquisition," he said.

Kalapa compared the necessary land acquisitions for rail through Honolulu with those needed for H-1 Freeway in the 1950s.

But people need to remember that also was a time when you could buy a house in urban Ho-nolulu for $20,000, he said.

Without a modern-day context and in today's volatile real-estate market, it's more difficult to come up with accurate land acquisition costs, he said.

Hamayasu said the city based its economic projections on the state's Council on Revenues reports to come up with estimates showing how the capital costs could be covered.

City officials concluded that a new half-percentage-point increase in the general excise tax dedicated to transit projects would likely raise just over $3 billion in today's dollars by the time it is scheduled to expire in 2022.

The city also expects to receive between $700 million and $1 billion in federal transit project startup funds, more than enough to cover the construction costs, including an estimated $200 million in loan interest that would be incurred during the construction phase of the project, Hamayasu said.

Including the interest, the construction cost of the 20-mile project rises to $3.8 billion, Hamayasu said.


Cliff Slater, a longtime rail opponent, questions the capital costs in the report. He favors managed lanes or toll roads and believes the report incorrectly tripled the expected cost of building such dedicated traffic lanes.

He said a similar-size expressway cost about $400 million, which he could see increase to $900 million but not to $2.6 billion. "They're way out of line," Slater said.

And on the rail option that Hannemann backs, Slater said some other figures are suspect or missing. For example, he said the report predicts that ridership will grow with population increase.

Slater said that isn't supported by recent experience. "That's a fundamental flaw in the whole thing," he said, pointing to statistics that show 8 percent of commuters riding the bus compared with 80 percent driving their own cars.

He also said other cities have found a need for security or transit police, which has not appeared in cost estimates he has seen.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.