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CITY COMMITTED TO STRENGTHEN RAIL FINANCIAL PLAN
(Tues., Jan. 31, 2012)—
In its December 29, 2011 letter approving entry into the final design phase of the rail project, the Federal Transit Administration (FTA) declared the Honolulu Authority for Rapid Transportation (HART) financial plan to be “sound,” but also asked that the plan “further strengthen” its demonstration of financial capacity to handle unforeseen revenue shortfalls or cost increases, prior to receipt of the federal funding agreement. Carlisle met with FTA Administrator Peter Rogoff in
City Council Chair Ernie Martin concurred with the Mayor’s decision to seek a line of credit to further strengthen the rail project’s financial plan as well as address any remaining FTA budget concerns. “A provision like this would be similar to the current requirement for City Council approval to float general obligation bonds to cover the cash flow for rail construction,” said Martin. “This makes sure the public has the opportunity to comment before any borrowing ever occurs. Moreover, it is designed to come into play only in the event of catastrophic circumstances such as a natural disaster over which we have no control.”
Proposed legislation will be drafted and submitted to the Honolulu City Council for public hearing and action. Provisions contemplated include requiring City Council approval before any borrowing from the line of credit may occur to pay for rail in the highly unlikely event a draw on the line is ever necessary.
“The City has consulted with its bond counsel and underwriters, and determined that simply establishing a line of credit, given the City’s fiscal health and circumstances, is prudent,” said Department of Budget and Fiscal Services Director Mike Hansen.
“A strong bond rating is critical to assure the City’s ability to borrow for capital projects at the lowest rates,” said
Another contemplated provision would allow for a memorandum of understanding between the City and HART making HART responsible for all costs associated with establishing the line of credit, or borrowing from it, as well as the debt service and debt itself. “In the same way that HART is now responsible for any financing included in its financial plan, this makes sure any line of credit, just like any bonds floated by the City for HART, is paid in full by HART,” said Hansen.
HART Finance Committee Chairman Don Horner, who participated in the January 18 meeting between
According to the financial plan approved by the FTA, the City’s rail project is projected to cost $5.17 billion. Revenue sources include $1.55 billion in federal funding and a GET surcharge passed by the Hawaii State Legislature and Honolulu City Council in 2005.
Media contact: Louise Kim McCoy, Mayor’s Office, 768-7798.