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‘Perfect storm’ for rail an opportunity, HART board member says

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During Keli‘i Akina”s “Hawaii Together” program on Monday, Joe Uno of the Honolulu Authority for Rapid Transportation candidly explained why he thinks the way-behind-schedule Honolulu rail project is ready for a new direction.

Echoing a point he made recently in a commentary in the Honolulu Star-Advertiser, Uno urged that HART consider a “Plan C” for the rail project, especially since it has no contracts at the moment to extend the project further than its current stopping point just shy of Middle Street. 

“I think it’s a real opportunity for us to take a pause,” he said. “Right now there’s already a transit station at Middle Street. There may be opportunities there at Lagoon Drive also. … Like I said, we’re at a real inflection point on the project. It’s a perfect storm, things that just come together — the pandemic, the slowdown in the money, and the riderships.”

In terms of the HART board itself, Uno lamented that despite having 14 members, only nine can vote, yet, “The quorum is such that we count all 14 as a quorum, so a majority is seven plus one.”

“When you only have nine voting members, two members can veto anything,” he said. “That’s hard math to wrap your head around sometimes, but it became clear to me that that was really a source of dysfunction for us. Two members are basically a majority; they can veto anything, just two votes.”

The complete transcript is below.

4-12-21 Joe Uno with Keli‘i Akina on “Hawaii Together”

Keli‘i Akina: Aloha, and welcome to “Hawaii Together” on the ThinkTech Hawaii broadcast network. I’m Keli’i Akina, president of the Grassroot Institute and your host today. Well, if you live anywhere on the island, and perhaps anywhere in the country, you know that the major public works project here in our state is the building of a fixed rail system all the way through Honolulu, on the island of Oahu. It’s headed by a group called HART, the Hawaii Authority for Rapid Transportation. I am delighted today to have somebody who has some great insights into the project and who can answer questions that are probably on your mind.

He’s Joe Uno. He’s the president of his own company and principal estimator at J. Uno & Associates. He’s also a member of the Honolulu Authority for Rapid Transportation. I want to make it clear at the start that he’s not here in his capacity as a board member, but as a private citizen. Anything he says is only attributable to him and his own opinions. 

Maybe you’re asking this question that we all have: What’s next for Honolulu’s overbudget and behind-schedule rail project? Joe, well, we’re going to ask him what he has in mind.

The cost overruns are so vast at this point that redirecting the project may be an option worth looking at. Transparency and accountability are also needed to better evaluate the project’s next steps. Joe, so glad for your expertise and your willingness to serve on the board, and [to] be with us today. Welcome to the program.

Joe Uno: Thank you. Thank you, Dr. Akina. Glad to be here. Thank you for the opportunity.

Akina: Well, Joe, although you’re only a member of the board for perhaps less than two years, a year and a half or so, you’ve had an introduction to the HART project from the inception, at the beginning. Tell us a little bit about your relationship to the project.

Uno: That’s an interesting story. Back, I think it was in 2008, I testified before the City Council’s transportation committee. At the time — I’m a professional cost estimator — I looked at the 600-page cost estimate that was prepared at that point. I was reporting to the council that the estimate at that point was $3.6 billion, and it was far, far below what it should be. It should have been updated to over $7.5 billion at that point, back in 2008. 

I was quickly gabbled off the desk for that comment, I think by Chairman Nestor Garcia at that point, “Thank you, Mr. Uno, and next.”

[laughter]

That was a real quick testimony.

Akina: It might be surprising to some that you’ve ended up on the board. Now, you come to the board with quite a bit of credentialing. You’re in cost estimation in terms of construction. I got a question I want to ask you: What are we dealing with, with the rail? Are we dealing with a transportation project, or ultimately now, are we dealing with a construction project? What kind of background do you bring to that?

Uno: That’s really interesting. It’s an interesting question because I’ve come to the conclusion that it’s neither a construction project, it’s not a transportation project, but it’s a political project. Right now, it’s all about politics. 

When you turn it into a political project, it loses any semblance of reason that one might use as a metric to chart the progress or make decisions, decisions based on cost-benefit ratios, decisions that are based on true, updated, ridership projections and the like. 

I don’t look at it as a transportation project or a construction project anymore. It’s all about people’s political ambitions, I think. As such, I think, like I said, it has a completely different metric now.

Akina: Well, I can see, Joe, why you wanted me to point out clearly that you’re not speaking as a member of the board but in your own private capacity. 

For much of the public, there’s been this ongoing love-hate relationship with the rail, with strong pro-rail voices and strong anti-rail voices. How do you account for this high level of conflict in our community?

Uno: Well, I’m not sure I can speak to that very well. I do know that because there’s a lot of money involved and the public deserves to know the truth about the rail — about how it’s financed, about what our future indebtedness is going to be. 

Civil Beat recently did a poll and only 18% to 20% of the people thought that there was transparency and honesty in the city government. That means 80% do not believe that there’s transparency. I think HART is probably one of the biggest elements to that distrust right now.

Akina: That’s quite a staggering number of people who don’t have faith or confidence that we’re getting the message that the government should be giving us. Why, ultimately, do you think that is? You mentioned earlier politics, but does it go beyond politics? Does it go into the way institutions are operated?

Uno: Yes, again, it’s hard for me to speak to that, but I do know that it seems that since I’ve decided that it is a political project that things start to make a little more sense now.

 I’m wondering why aren’t people talking about this? Why won’t they allow us to think about or consider a Plan C? Why aren’t we going to get updated ridership, especially in the face of all of this change that we’ve been through in the last year, through the pandemic and the coming changes, the disruptive changes that are going to come in the form of transparency. The transportation is going to be so disrupted in the next few years.

In the next decade, we probably will have autonomous cars, you and I. I think I’ve probably bought my last internal combustion engine car. I may have bought my last car because in the future, we’re just going to be able to have ride-sharing. That’s going to replace a lot of cars and be more efficient and safer for people.

Akina: Well, I’m glad you’re talking about the disruption that technology can bring, which often leaves in the dust old technologies. Let me just ask you this question, based upon your observation here: Why have we made such an investment in a rather old technology — the rail system — in light of upcoming new technologies like autonomous vehicles?

Uno: Well, I’m not sure that’s a fair assessment because back when we did decide to go through with this project, it probably was going to be a good project. It had ridership projections that were done until 2018. It was supposed to be finished three years ago and those ridership projections, they said that it was going to reduce traffic by 2%, so people were all in. They thought this was a good idea: Reduce traffic and take on the project. 

But here we are, 2021, and we’re not projected to finish for another decade. That’s if we’re fortunate, we’ll finish in 2031. We went from $5 billion at the beginning to now we’re at $12.5 billion. We have $3.5 billion that we don’t know how we’re going to fund.

Akina: What have you seen as a board member? Again, you’re speaking only from your personal, private vantage point. What have you seen as the biggest challenges for board members? Some have come and gone. You recently have been added to the board; you replaced John Henry Felix. As a board member, what kind of challenges are being faced?

Uno: Well, one of the big challenges that a lot of people don’t know is that we have a quorum challenge. The quorum challenge stemmed from — we had originally nine voting members and one nonvoting member. Then, as a result of Act One, where we got the extension of the GET and the TAT from the state Legislature, they added four more board members, all nonvoting. That makes a total of 14 board members, 9 voting and 5 nonvoting. The quorum is such that we count all 14 as a quorum, so a majority is 7 plus 1. When you only have nine voting members, two members can veto anything.

That’s hard math to wrap your head around sometimes, but it became clear to me that that was really a source of dysfunction for us. Two members are basically a majority, they can veto anything, just two votes. 

We asked the Legislature this past session, we asked for some relief in terms of, we wanted them to clarify: How should we count these four members. Should all 14 be voting members, or should we go back to 9 voting members and so a 5-4 decision would be a majority? 

It didn’t make it out of committee. They left out this crazy dysfunction, they just left it on the boards for us. Going forward, at least until the next session, and until the city charter can be amended, we have this dysfunctional quorum issue, and it’s a real problem.

Akina: Well, that’s a real management problem, especially in light of the significant decisions that have to be made, sometimes often very, very critical. 

Joe, we’re going to go to a break in a few minutes, but first I’d like to get your initial input on something which is so evident to many people: The rail costs have increased dramatically since the initial estimates, and they continue to rise. We’ve gone from $2.5 billion in 2006 to $12.4 billion today. Everyone expects that to go up also. What’s a major reason, before we go to the break, you can give us at least one. What’s a major reason for the rise in cost?

Uno: Well, just recently, as I’ve been on the board, it went up by a couple of billion just because I got on the board. [chuckles] I don’t want to blame myself for that, but in a way, I have challenged the professional staff at HART, and to their credit, they’ve come up with, I think, better, more realistic cost estimates and schedules. We have a wealth of historical data on what things should cost and how long they should take. Then, since Lori Kahikina came aboard, there’s been a lot more push for, I believe, a more realistic budget and schedule projections. I think that has a big part of it.

Another part was when we did the P3 process, we were able to gain some information that industry thought that the last four miles was going to cost $2.8 billion. The estimates at that point at HART, internal estimates were $1.4 billion. Right there we added $1.4 billion to the project, because we understood the reality was not $1.4 but was $2.8 billion. 

That’s one of the big reasons for the sudden increase, but I think Lori Kahikina is doing a really great job. They want to start to give us better numbers that they can actually meet.

Akina: Very good. When we come back from our break, I want to ask you about the cost of change orders, which have been plentiful during the history of the rail, as well as unanticipated costs that perhaps should have been. 

My guest today is Joe Uno. We’re going to be right back talking about the rail. I’m Keli’i Akina on ThinkTech Hawaii. Don’t go away.

[INTERMISSION] 

Welcome back to “Hawaii Together” on the ThinkTech Hawaii broadcast network. I’m Keli’i Akina talking with Joe Uno, a member of the HART Board for the Honolulu Rapid Transit. He is here in his private capacity and answering some important questions. 

Joe, the CEO, Lori Kahikina says the project will cost $12.4 billion and take another 10 years to finish. That’s another $3 billion, more than existing sources of revenue, including surcharges, borrowing and federal funds. Now that the costs have risen so fast, and with the news that we’re about $3 billion short, what are the options that HART has for funding and for completing the project?

Uno: We’re in a real pickle here. I think some people might be praying that we’ll get some of President Biden’s infrastructure money, but there have been opposing opinions on the viability of that idea. 

Typically, in a project like this, you would float some bonds and be able to finance the rest of the project. Right now without an extension on the GE and the TAT, which didn’t make it out of committee again this year, there’s no way to pay for another bond issue; in my mind, in my estimation, right now the GET and the TAT end in 2030. For us to be able to float more bonds, we’d have to have basically an indefinite extension on that GET and TAT tax. We don’t have that right now.

Then another issue that’s facing HART, relative to borrowing more money, is that the city has a limit on the amount of debt that it can take. I believe it’s something like 20% of the budget. We’ve already gone to the well once, and they’ve extended that, or increased that amount of debt just for HART. 

Not too long ago, the Truth in Accounting nonprofit put out a report that Honolulu was in the third-worst financial shape in the country. At that time, that did not include HART. That number didn’t include HART, and it didn’t include a $3.5 million additional shortfall. And I don’t think it completely included all of the unfunded liabilities. Those, as you know, Dr. Akina, those bankrupt other cities that don’t have a HART.

Akina: Well, we certainly have a challenge ahead of us if we continue with rail as originally conceived. You’ve come up with a different way of looking at rail. We call it Plan C. You’ve written about that recently. Could you briefly describe what you have in mind in terms of Plan C and talk a little bit about ridership?

Uno: I put forward in a letter to the editor two months ago, a Plan C. What I’m seeing is that, we’re at a real opportune time, a real inflection point on the project that the current contracts end at Middle Street, the current construction contracts end at Middle Street. We don’t have any design or construction contracts beyond that, east of Middle Street, at this point. 

Like we’ve talked about, we have this funding issue, we have what I believe are really, really outdated ridership projections, and even those ridership projections for 2018, some would say were absurdly inflated. So we have some real challenges with respect to ridership.

The other thing that I think I mentioned earlier was the rise and the opportunity of autonomous vehicles and a disruptive technology that will bring. That’s something that we’re on the cusp of the future here on that type of technology. I think ride-hailing and -sharing are going to really change things a lot for us. 

I think that this is a real opportunity. We at HART should take the position that we are trying to build a multimodal public mass transit system. Let that sink in a little. A multimodal mass transit system includes buses, includes autonomous vehicles, includes the rail up until Middle Street, perhaps. I think it’s a real opportunity for us to take a pause. Right now, there’s already a transit station at Middle Street. There may be opportunities there at Lagoon Drive also. That’s a nice opportune place to get on the freeway and go down Nimitz from Lagoon Drive. 

Like I said, we’re at a real inflection point on the project. It’s a perfect storm, things that just come together, like the pandemic, the slowdown in the money and the riderships. Those are all coming together at the same time. It’s like that joke about God not sending a helicopter. [laughs]

Akina: It’s exciting to hear you talk about that. I’ve got my iPhone in my hand here, and just to imagine that the solution may begin here, and I may be taking three or four different modes of transportation to get me to my destination and back, but in a way that’s very efficient. That’s very forward-thinking. It really is the direction we are going. 

There are some other funding issues that you’ve raised, particularly with the federal funding. There’s a lot of confusion as to whether we’ll lose federal funding should we not complete the rail project all the way to Ala Moana, and we have the Full Funding Grant Agreement. Do you have some thoughts about that?

Uno: Yes. The Full Funding Grant Agreement, the city of Honolulu agreed with the Federal Transportation Authority that the complete system would go all the way to Ala Moana. For that, the grant agreement was $1.55 billion. The Feds have paid us $800 million, I believe, so far. There’s $755 million that is still to come. 

Right now, I characterize it as the boogeyman, because people trot that out and say that if we don’t go all the way to Ala Moana, we’re going to have to pay back the $800 million and lose the $755. I say, well, if you do the math, and if you say stop at Middle Street and you had to pay back the $800 million, wouldn’t that be a better solution than going into debt another $3.5 billion?

That’s over four times the loss. It’s in that vein [that] people have this aversion, what they call loss aversion, and they just don’t want to give up that money. But the actual truth of the matter is, I believe — and I don’t have this from the federal government at all — but I believe that the federal government, they also want to see a multimodal mass transit system for Hawaii, and for Honolulu in particular. I think that they would be willing to work with us. I don’t think that they’re going to sue us and get all the money back. I think, again, like I said, I characterize that as the boogeyman that gets trotted out all the time to scare people into thinking that we have to go all the way to Ala Moana — or else.

The math just doesn’t work out very well.

Akina: Joe, you’ve been very informative today. As we close, I’d like you to look at your crystal ball. Tell us, what do you see next for the rail? What do you [sound cut] will happen and how will citizens respond and communicate to their leaders?

Uno: Well, Doctor, the recent passing our master navigator, Chad Baybayan, really brought to the fore what he and Hokule’a and the Polynesian Voyaging Society have brought to Hawaii. I know I’m going out on a limb here, but they really brought an understanding of what is pono. I think that our leadership really needs to consider how we’re going to live pono. 

How do we make decisions based on not just our short-term gains of getting elected on the next round, who’s going to be governor next, or who’s going to be mayor next, or whatever? Those are short-term gains. If you follow Simon Sinek and his infinite game theory, you want to think longer term and not just short-term. I think that’s a key for our leadership.

With 80% not trusting the government, I think our elected leaders should take a real lesson from that. I think we owe it to our people, we owe it to our children and our grandchildren to do the right thing, to decide in a pono manner what is right for Honolulu. 

Because it’s a political project now, people need to speak up. They need to call their city council people, they need to call their representatives, they need to write letters, they need to write emails to them and let them know how they’re feeling. If 80% of the people are unhappy with the way things are going, that’s a big voice. It’s not a silent majority. It shouldn’t be a silent majority. If you want to see change happen, you have to make your voice heard.

Akina: Well, Joe, I want to thank you for that manao. We appreciate all you’ve shared today, and we look forward to learning more from you in the future. My guest today has been Joe Uno. We’ve been talking about the rail. You’re watching “Hawaii Together” on the ThinkTech Hawaii broadcast network. I’m Keli’i Akina from the Grassroot Institute. Until next time, aloha and e hana kākou, let’s continue to work together.

 

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