 Welcome to Moving Hawaii Forward. I'm your host Tim Apachella. Each Tuesday we examine traffic and transportation issues and see what alternate solutions may be possible to address our growing traffic nightmare. Last week Scott Wilson, spokesperson for the Honolulu Transit Task Force, was our guest. He made a convincing argument for the case to bring rail down from the elevated guideway and onto the street level. Specifically, he proposed to have the rail cars run at grade level from Middle Street to Alamoana. Since we barely scratched the surface of that Task Force report, I wanted to give this report the time and attention it deserves. A few days ago, both the mayor's office and heart dismissed the contents of the report. Mayor Kirk Caldwell called the conclusions in that report as wishful thinking. The report did go into specific detail as to what changes would be necessary and the associated costs to convert rail cars to travel on the street. The bottom line is the Honolulu Task Force group claims that they can reduce the overall cost of the rail project by $3 billion. Additionally, yesterday another report written by Randy Roth and Cliff Slater was published in the Civil Beat. The report looks at the estimated rail ridership numbers Hart used to convince the public and the city council that an elevated guideway rail system would alleviate traffic from East Kapole to Alamoana Center and should be the preferred system to vote on. These estimated ridership numbers became chiseled and granite and have not changed. The report shines a light as to how those ridership numbers are just plain wrong. So this afternoon I'd like to talk about numbers, cost numbers. I would like to talk about estimated ridership. And to begin with that, I'd like to show my first screenshot please. There are three kinds of lies, dam lies, excuse me, lies, dam lies, and statistics. Mark Twain wrote that many, many years ago. I'd like to take that exact quote and try to transform it and apply it to the rail project. There are three types of lies, low project cost estimates, higher ridership projections, and third, over-inflated consultant reports that validate lie number one and lie number two. But you know, lie is a very strong word. My mom was very clear. She said there are many four letter words you're not going to use. And believe it or not, liar was one of them and hate. She said they're terribly hard and very, very strong words. So what do we say when we're looking at this rail project and we don't want to use these words? Incidentally, the media now is starting to use these words as it pertains to certain administrations that are now in place. I've never seen it before, but we used to use words such as falsehoods, in my favorite, alternative facts, misrepresentations, strategic misrepresentations, or do we just go back to say lies, damn lies, and the statistics? Let's take a look at the second slide, please. Back in the day, there was a mayor of San Francisco, his name was Willie Brown, and he was the mayor for San Francisco for many years. He retired, and in 2013, he became very, very candid in an interview he was having with the San Francisco Chronicle, and he told it like it is, and I'm going to go through some of his quotes on this because it's fascinating, and I think it really does apply to how we look at our project here. News that the trans-bay terminal is something like 300 million over budget should not come as any shock to anyone. I suppose we could say news that we started off at $4.6 billion, and now we're at an estimated $10 billion should not come as a shock to anyone. Well, it is. Then he said we always knew the initial estimate was way under the real cost, just like we never had a real cost for the central subway, or the Bay Bridge, or any other massive construction project, so get off it. Perhaps he was having a bad day with a reporter. But the quote that really, really focuses in on how I see this project is when he said the following. In the world of civil projects, the first budget is really just a down payment, and if people knew the real cost from the start, nothing would ever be approved. Our first down payment technically was $4.6 billion, and here we are at $10 billion, so maybe he knows something that the rest of the voters didn't know. And then last but not least, he said the idea is to just get going, start digging a hole, and make it so big there's no alternative to coming up with money to fill it in. Well, we certainly are there. We are certainly at a point where we're past the point of no return. We can't go back, and we dug a very, very big hole, and we are now in the thick of it. So I'd like to take a look at the next slide, please. This was a few days ago when Mayor Kirk Caldwell was trying to convince the legislature that it's such a great idea to take the half percent general excise tax that is now in place and actually has a sunset date and make that a half percent GET tax in perpetuity, which is to say there is no end date. So here's a quote about him talking about the incentive to extend that tax. The legislature is very upset. I'm equally upset, but to this point it's not about looking backwards and trying to blame and say, I'm angry. We've got a problem. How do we come up with a solution that benefits everyone, and I think part of the solution is sharing of the surcharge. Well, I can see why he's upset. You know, Mayor Caldwell actually did serve in the administration under Mookie Hanneman, and so really from the ground level to this day we've gone from the down payment of $4.6 billion to now a projected cost of $10 billion. Not only is Mayor Caldwell upset, but I think every taxpayer that's going to foot this bill is equally upset. But what gets me is, in the quote, he said, we need to come up with a solution to everyone's benefit. Who's everyone? I mean, I can't imagine if the benefit is to every taxpayer that comes around and has to pay this debt. So let's examine who everyone is when he says everyone will benefit. Is it the legislature? Is it money to the state to fill up some of the shortfalls that are occurring right now that's in the newspaper right now? Is it to add additional dollars to the Department of Transportation Highway Fund? Is it to shore up as a proposal for a particular bill right now is to maybe take some of that GT money and fund it for schools since there's shortfall for school funding? Is it to get the city council off the hot seat because they've gone along and approved these tax increases all along? They've increased the GATT and they've extended the tax dates and they've supported that. They've supported the elevated guide rail system and that basically is a Cadillac system. They've supported it all the way along. So does it benefit them that we can come up with this shortfall that we have for the rail program right now? Does it support and benefit his own office? As I said, Mayor Kirk Caldwell has been on the ground floor on this since day one. He knows that we came in with a $4.6 billion. He knows that we have cost overruns. And so does this extension of the GATT tax get him out of this hot seat? So let's look at the numbers because I don't think the taxpayers are the direct recipients of the extension of the GATT tax. I think the taxpayers are kind of holding the bag. So we're going to take a look at kind of the history of the rail budget. In 2006, as I said, as Mayor Willie Brown said, we have a down payment of $4.6 billion. And in 2006, the Federal Transit Administration committed $1.55 billion and that was to help the seating county get this rail project going. In addition to that, we had a half percent general excise tax and we approved that for 15 years to run from 2007 to 2022. Then, fast forward four years later in 2010, the estimation of the cost of the project went up to $5.4 billion. Things can progress from there and 2014, we have gone up to $6.5 billion. Fast forward one year from there and the state legislature with the recommendation of the mayor's office, we did in fact extend the general excise tax in additional five years. So now we are funding it from the 2017 level to 2027. So it seems like bad things happen in one year increments. So in September 2016, we then increased the cost estimation to $8.6 billion and then December 2016, it accelerated to $9.5 billion. I think what's going on is that right now, the cost estimate is $10 billion. And I think Mayor Kirk Caldwell has actually stated it is at least $10 billion. I'd like to just take a look at a report from an audit from the city. And this was an audit report and the audit report is from the city and county of Honolulu. And it was produced by Edwin Young, who is the city auditor. And April 15, 2016, one point was made that really caught my eye and it says the following. And the audit results were recommending a number of improvements on how to be more efficient with the rail project and billing and looking at contractors' invoices and things of that nature. So absent the improvements, we anticipate additional cost overruns will occur. More specifically, project cost estimates, details, methodologies, cost assumptions and unsubstantiated and project managers are not managing actual costs against their budgets. So what the auditor is saying is there's mayhem running at City Hall or excuse me at heart as this project is moving forward. If we look at the Honolulu Task Force report and that was produced in January 2017. And by the way, this report can be found on the website savagingtherail.com. The authors of this report was Douglas Tilden. Douglas Tilden was hired as the first architect that was beginning to work on the rail project. He quit after one year after his criticisms and recommendations were completely ignored. I would too if I saw a train wreck coming, no pun intended about the rail, but if I saw a train wreck coming and you are doing your job, your fiduciary job as a consultant and trying to raise some red flags and those red flags are being ignored and dismissed, I suppose I would quit or be happy to get fired a year later anyway. So the other author is Scott Wilson. Scott was on our show here last week. He's an architect and has been for many years, has had his own firm and for many, many years he has been recommending and trying to advocate for bringing a rail system on a street grade level. And since 2009, he's been the chair of the Task Force and that occurred up to 2012. And the important part of this report is that the cost of $10 billion isn't even still the full cost. And I'd like to get to those exact costs after this commercial break. So I'm Tim Appichella, this is Moving Hawaii Forward and we'll be right back. I'm Bill Sharp, your host of Asia Review. Watch us every week, every Monday afternoon for exciting up-to-date information and analysis about contemporary affairs in Asia. Hi, I'm Stan Energyman and I want you to be here every Friday. Noon, thinktechhawaii.com, watch the show. Be there. I pity the fool who ain't. My name is Richard Emory, host of Condo Insider. More than a third of Hawaii's population live in some form of association. And our show is all about educating board members and owners about their responsibilities and obligations and providing solutions for a great association. You can watch me live on Thursdays, 3 p.m. to 4 p.m. each week. Aloha. I'm Tim Appichella, your host for Moving Hawaii Forward. And before the commercial break, we were talking about rail costs. And one of the things that I find very interesting in the Honolulu Transit Task Force report is the fact that this rail project, at only one-third completed, has over its budget by 76 percent. And so at this stage of the game where that one-third of construction was really just mostly on agricultural lands. It's been complex once we get into Pearl City, but for the first third, I hate to say it, but the easy part has been completed. And if the easy part's been completed at 76 percent over cost, what does that say about the second third and then the third third? So in this report, I find it interesting that they took a very simplistic approach, easy to understand approach, and they just say, well, if the first third was 76 percent, and then we assigned the second third to 76 percent, and we assigned the last third to 76 percent, that equals 228 percent. So 228 percent of the initial 5.4 billion, or actually it would have been 106 percent of the 4.6 billion. Remember that down payment of 4.6 billion. We're way over. So if you take 5.4 billion and 228 percent, that equals $12.3 billion. That is certainly a great, a much higher number than Mayor Kurt Caldwell's $10 billion. So we may not see the end of this yet, and that's what I think concerns me. And I have a funny feeling it's going to concern a lot of taxpayers here in the state. Well, excuse me, on Oahu, because right now mostly it's Oahu that's paying for this rail project and it's coming out of our pockets. So if the first third was as easy as it appears to be, let's look at what's going to happen to the last five miles. We're going to be in a situation where construction is going to be going along the waterfront. It's going to be a high water table. You're going to have unstable coral soils. So I'm sure the Geotech reports have pointed that out that you're going to need increased concrete and substantial footings to be cast and installed. And further than that, you're going to have the issue of continuing with businesses that are going to contend with that last five miles of rail line. And certainly where you're going to have noise impacts, sound impacts, you're going to have closures. How is that going to affect their business? Similar to what we saw in Pearl City, some business were doing quite poorly as far as trying to get customers to come in, because parking and access to their front door was absolutely horrendous. So we have the businesses contend to with the last five miles. We're going to have to deal with the issue of preservation of historical findings, i.e. burial sites. How many along the way will we find and to what degree does that, and rightly so, will that delay the project and increase costs? And then last but not least, lo and behold, someone forgot to talk to HECO along the way and talk about how we're going to replace or remove some of the electrical lines along Dillingham. So those are just a few items that we're going to contend with in those last five miles. And I'm wondering if the assumption of 76% for that last third is even close. I'm afraid it's not. Let's talk about what the actual cost to the taxpayer is going to look like. Slide five, please. I call this the real-cost sharing formula. And this kind of looks at the amount of money that's been collected thus far from the general excise tax. And it is from the beginning of when the tax was collected. Remember it was that extra half percent, and it was raised. And so from the time it started to 2016, excuse me, we have a revenue that's been generated of $2.1 billion. So how does that translate to people who have already paid that tax? It's not that they're going to pay it, they've already paid it. So you take $2.1 billion and you divide it by a million residents. And right now Oahu probably has about $977,000. But it was just going to round up to a million residents on Oahu that's paid this excise tax. So that comes down to $2,100. And then we're going to reduce that a little bit further because if you think about it, tourists that come to our state and to our island here, they're actually paying, for everything they buy, they're paying the general excise tax as well. So it's estimated that about 30% of that should be subtracted from what already has been paid from residents of this island. So 30% of $2,100 is $630. So lo and behold, you take the $2,100 minus $630, and each individual from the time the get tax has been implemented, that half percent to the end of 2016 is $1,470. Now, if you're a family of five, that's going to equate to $7,350 that you've already paid. I hope you didn't realize it because you paid it. And so this perception that Hawaii's so expensive, oh my gosh, it's so expensive. Well, it is expensive and it is an embedded cost that excise tax is embedded. It shows up in everything, whether you buy a car, you sell a home, everything you buy has an eventual gradual push to that excise tax. And family of five has paid over $7,000 for it. So let's recall Mira Caldwell's statement that we played a little bit earlier. And that was, let's find a solution to everyone's benefit. Well, I question everyone's benefit. Everyone's benefit that just paid $300 that basically unbeknownst to them they've been paying. Is that the benefit that Mira Caldwell was referring to? I'm not quite certain. So if you're a family of five, and by the time this project is done, and that's based on $10 billion, now remember, we said, oh, this thing could go much higher than $10 billion. It probably will. So based on the $10 billion, if you look at the cost of this project from start to the very end, and that is the end to, I believe, Alamoana, not UH, and I may be wrong on that point, but I believe it's to Alamoana, the estimated cost for a family of five will be $25,000 and $25. Now, who knew this? Did we know that cost was going to be embedded out of a family's budget when we voted yes for this? Did we know that? Well, who knew it? Well, the types of Mayor Willie Brown knew it. Certainly, Mayor Movie Hanuman knew it, certainly because Kirk Caldwell worked with Movie Hanuman. Kirk Caldwell knew it, and he knows it today. And that's what concerns me, is that he's, for lack of better words, he's pandering to the legislature. He's trying to incentivize the legislature to pass this tax and put it in perpetuity with no end date, knowing full well that this cost or the cost of this project was way over from the very beginning. So let's then look at another aspect of cost, because it's not just a construction cost. There's also cost of revenue. And that is to say, to offset the cost of the project, we're going to bring in revenue. How are we going to do that? Well, we're going to have ridership. Okay, great. How much ridership are we going to have? Well, let's look at the numbers, because I find them almost, well, I find them hilarious, actually. I find them a little bit sad, yet hilarious. And what this chart represents is the cities which have a rail system in place, where you have it by population of millions and daily riders. And what you'll see there immediately is that the population which is similar to Honolulu, of a million or up to two million, and that would be San Jose, New Orleans, Salt Lake City, Buffalo, Honolulu, their actual ridership on their transit system is one third or half of what our projections of 116,300, that's the projection that Honolulu has used to say that's how we're going to pay for this thing, or partially pay for it. And I find those numbers a little bit offsetting, because in the final environmental impact statement, their consultant, Parson Brickerhoff, said that that ridership of 116,000 will be consistent, and that will happen. Unfortunately, Parson Brickerhoff has a really, really bad record of guesstimating, number one, cost of a project, and more importantly, cost of ridership. The Parson Brickerhoff used the San Juan in Puerto Rico as one of their closely associated projects that most likely mimicked the Honolulu Rail project. It was an elevated system, and interesting enough, that system was projecting 114,000. Well, lo and behold, San Juan only gets 27,000 ridership on their rail system, which is 76% less than what they had projected initially. So how is Honolulu going to come up with 116,000 as far as ridership? And I'm not certain they're going to. And that was the point of the report that was published in The Civil Beat. It was called, titled, The Impending Honolulu Rail Ridership Debacle. Again, the authors were Cliff Slater and Randy Roth, and it appeared on February the 13th, 2017, and it goes into great detail of why that ridership number is just not reality. So where do we go from here? What do we do? Let's just look at one thing here that raised the fares. That is one idea that transit agencies say, we're going to do anyway, because it's a brand new rail, so we're going to raise fares. Well, when you raise fares, people go, I can't afford that. I can't go on the rail. I just can't afford that fee. And then, so you have a shift that your initial ridership numbers, that retracts. And there you go, well, now we're not getting the revenue because we have less ridership. So you go into what is called in the transit world the depth spiral of fare increases. Every time there's a fare increase, less ridership. So you try to compensate for the loss of revenue, so you increase the fare a little bit more. Then there's more ridership that has been, that's not taking the rail or transit. So that's a real problem. And that is going to be a reality here if Hart continues to stay on the fact that they think they're going to get 116,000 riders on this thing weekly. I think that if you look at the Star Advertiser and Civil Beat, you're seeing a lot more articles about the extension of the half percent. I would encourage you to go to Civil Beat, read the article about the rail projections. I would encourage you to go and look at the Honolulu Transit Task Force report. And I would encourage you to talk to your representatives and say, hey, wait a minute, this thing is going to cost us a lot more than we ever believed. And I think by all of us trying to do that, we may have someone that actually will pay attention to us and maybe the state and the city council and the mayor's office will actually take a look at bringing the rail down to street level and saving $3 billion. By the way, that's the amount that we're over budget right now, $3 billion. So thank you for joining me this week and I appreciate it. We'll see you next Tuesday. I'm Tim Apachella and this is Moving Hawaii Forward.