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A lesson for rail transit


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POSTED: Thursday, October 08, 2009

Recent news about the Convention Center falling short of its economic projections reminds me of the lively debate over its site selection during the 1980s and early 1990s.

For starters, we knew then that the Convention Center would be a money loser. The public, though skeptical, sent a strong message in support of a convention center, if built at no cost to taxpayers. Based on this, as then-House Tourism chairman I proposed several creative financing plans and cost savings mechanisms as follows:

» Fort Armstrong (Kakaako Waterfront Park): This site, owned by the state, was formerly a dumpsite. To revitalize Kakaako, I proposed converting the property from fee simple to leasehold and granting air rights for developers to build hotel, condo and commercial space in exchange for a free convention center. In addition, the state as lessor would receive annual lease rent estimated at $7 million, which would have supplemented the operation, promotion and marketing of the convention center. This proposal did not materialize, since special interest groups preferred a site closer to Waikiki.

» Waikiki International Marketplace: As with Fort Armstrong, I proposed that the developer provide the state with a free convention center in exchange for an increase in height and density for the project. This idea became Act 96 of the 1988 Legislature. Unfortunately, Japan's economic bubble burst not long after, forcing the developer to withdraw.

» Aloha Motors site (Hawaii Convention Center):

I negotiated an agreement for the developer to build a convention center and give the state free lease rent in perpetuity that runs with the land in exchange for the right to build a hotel and commercial improvements at the site. The proposal did not materialize because special interest groups lobbied for a stand-alone convention center. This necessitated the purchase of land from the developer, a land swap and a bond float needed to construct the convention center.

In hindsight, the $650 million predicament now facing the state could have been avoided had we opted for any one of my three proposals. We simply missed out on a golden opportunity to have a convention center built at no cost to taxpayers.

So what lessons have we learned from the Convention Center?

The city is about to embark on the most expensive public works project in Hawaii history. The experiences and lessons from the Convention Center, I believe, are applicable to the city's rail project.

The following are instances where costs for the $5.4 billion rail project can be reduced:

» Landowner HRPT Properties Trust offered to assist the city in building a transit station in Mapunapuna. We should welcome help from the private sector, especially since dwindling general excise tax revenues won't be enough to pay for the project.

» Keeping the rail alignment on Salt Lake Boulevard, rather than the airport. The switch added $220 million to the overall cost. Worse, the draft environmental impact statement offers little explanation of the overly optimistic estimated daily ridership of 95,310.

» Starting the initial rail segment from downtown to Aloha Stadium, rather than from eastern Kapolei to Waipahu, is a no-brainer. This would reduce construction, operation and maintenance costs.

» A recent study by Kamehameha Schools showed that costs could be reduced by $1.7 billion if parts of the alignment were built at ground level rather than all elevated. Since the administration brushed this proposal aside, despite potential savings, the Council should hold a public hearing to determine its merits.

» A pending $917 million bond float, which would prove to the Federal Transit Administration that the city is financially capable of completing the project. This may be used in the final EIS to address the $500 million shortfall that the administration admitted to the FTA in its report dated May 1.

We need to be more judicious on this bond float since taxpayers will be paying more than half a billion dollars in interest alone over a 10-year period. I hope that the administration will be more forthright and realistic with its financial projections in the upcoming final EIS.

In light of the Convention Center experience, the administration, despite its desire to begin construction by year's end, should be willing to consider all options that could reduce costs for the project and not empty taxpayers' pocketbooks.

 

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Romy M. Cachola is a member of the Honolulu City Council, representing District 7, which includes Kalihi, Kalihi-Palama, Aliamanu, Foster Village, Airport, Salt Lake, and Lower Halawa.