Honolulu to Cover Up Overruns with PPP

Oxford has added a new word to its English dictionary: hammajang, which means something is “all messed up.” The word comes from Hawaiian pidgin, which is appropriate considering how messed up Honolulu’s rail project has become. Originally expected to open this year at a cost of less than $3 billion, the current projected cost is more than $9 billion and, since they don’t have funds to complete it, it probably won’t open until 2026 at the earliest.

The latest news is that the FTA has subpoenaed the Honolulu Authority for Rapid Transit (HART) for inside documents to find out what is going on. Meanwhile, HART wants to form a public-private partnership to build the last four miles. The private partner would raise the funds for construction and, when it is completed, would operate the entire 20-mile rail line. In exchange, the city would pay the private partner hundreds of millions of dollars a year for 30 years.

No one thinks the private partner will be able to save taxpayers any money or operate the trains more efficiently than HART itself. Instead, this scheme will save HART from having to raise the funds to finish the line itself. The city can’t afford it; the state can’t afford it; the feds won’t pay any more than they have already promised. So get a private partner to borrow the money — a debt that won’t appear on HART’s books — and simply repay the private partner out of future tax revenues.

This is called an “availability-payment” partnership and it is, basically, a scam. The other kind of public-private partnership, called “demand risk,” puts all the risk on the private partner, which builds the project, operates it, and pays for construction and operation out of tolls, fares, or other user fees. Demand-risk projects have been successful all over the world, but availability-payment-type projects are really just a way for governments to circumvent legal debt limits.

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Meanwhile, President Trump has tweeted that he wants California to return the $3.5 billion that the federal government gave the state to build high-speed rail, since California isn’t finishing the project. That’s pretty unfair because the state wouldn’t have begun construction if the federal government hadn’t given it an incentive to do so by offering the money in the first place.

Similarly, Oregon and Washington spent close to $200 million, $140 million of which came from the federal government, planning a $3.5 billion highway/light-rail bridge across the Columbia River and finally decided it was too expensive and cancelled it. Now even fiscally conservative Republicans are saying the states should start planning a bridge again or they will have to repay the federal government its $140 million. These kinds of policies force state and local governments to waste tax dollars finishing worthless project so they don’t have to repay the federal government’s contribution.

Whatever Honolulu does, it’s hammajang, but if it can get away with not repaying the federal government, skipping the last four miles is probably the solution that will cost taxpayers the least amount of additional funds.