In considering the cost of rail the Honolulu Mayor’s administration and the City Council are not taking into account all the costs of rail, just the construction, operation and maintenance costs. There are other costs as well.

To focus upon just one area, let’s look at the much vaunted Transit Oriented Developments (TODs) that are projected to develop around rail transit stations. The experience in other cities is that businesses will not build around these stations unless they are granted large tax breaks or subsidies for doing so.

Part of the reason for the original impetus towards TODs was that the federal government was lobbied to change the use of “transit” funds to include building and financing TODs if they support rail. Rail doesn’t attract development so governments offer big subsidies and these are what actually attract business. The problem for Honolulu is that the rail is going to be so expensive that there aren’t going to be any federal funds left over for subsidies so any such subsidies are going to have to come from the taxpayers of Hawaii. 

Not only will businesses not be attracted to TODs without substantial incentives but neither will residents. While rail advocates love to advance the idea that most people attracted to TODs will “get out of their cars” in reality this is not true. The vast majority of residents of TODs still use autos as their main means of transportation. Most TODs are built with limited parking so residents must be induced by other means. This means use subsidies to bring the price of housing down to attract residents.

Housing affordability is decreased by TODs because they are typically huge, expensive projects. In Atlanta rent and housing prices increase the closer one gets to a TOD development even though only a small percentage of the residents there actually use transit as their primary means of transportation. This decreases housing affordability in the areas of TODs.

Billed as “live, work, play” communities, TODs do not have enough residents to be self-sustaining in terms of customers or employment. Without substantial parking these communities wither and slowly die. Despite what rail transit advocates assert rail transit does not bring in enough customers on a daily basis to sustain these communities. Developers of TODs have learned to not build such projects unless substantial parking is permitted as well.

In order to build rail and the accompanying TODs on Oahu there is going to have to be substantial eminent domain condemnation of existing homes and businesses. This is going to further decrease housing affordability as the people displaced enter the housing market. In order to relieve the increase in housing unaffordability yet more government programs are going to be advocated to solve the problem. This is just another hidden form of subsidy created by the building of rail.

When advocates of rail say that it is the most cost effective solution it is because they ignore these and a host of other subsidies and peripheral costs but only focus on a narrow range of building and operation costs. If looked at objectively even these costs are greater than alternatives, especially High Occupancy Tollways that have been proven to be increasingly successful. And these latter are increasingly being built by public/private partner with decreased or even no cost to the taxpayers.

The hidden cost of subsidies cannot be known because they are an unknown future demand cost. If TODs here prove to be unpopular then the cost of the subsidies will rise. There is no way of knowing what they will ultimately be. The only thing we know for sure is that they will be more than anyone involved with rail will admit today.

Don Newman, senior policy analyst for the Grassroot Institute of Hawaii can be reached at: mailto:don@grassrootinstitute.org