P3 Options for Honolulu Rail Transit Project/HRTP
By: Doreen M. Zankowski, Esq.
The Aloha state will soon be calling for qualified P3 firms. The $8.26 billion Honolulu Rapid Transit Project (HRTP) is moving again — no pun intended! The HRTP, when finished, will be an automated, 20-mile elevated transit line, capable of moving 100,000 daily riders between Kapolei on the western side of O’ahu via the Honolulu International Airport and Pearl Harbor. It will continue through downtown Honolulu and Ala Moana to Waikiki Beach and the University of Hawaii at Manoa.
On behalf of Honolulu Rail Transit, JLL conducted an assessment of potential alternative finance and delivery structures for the remaining elements of the HRTP. JLL’s study concludes that public funding is necessary to bridge the $2 billion capital funding gap. After analyzing many delivery options, including design-build-finance (DBF), design-build-finance-maintain (DBFM), design-bid-build, and design-build-finance-operate-maintain (DBFOM), and a P3 approach, the conclusion is that a design-build-finance-P3 is the way to go. JLL has cautioned the public authority that the P3 approach will not, however, result in any project development investment, but it will cover the gap portion. The private partner will provide gap financing during construction, and will be paid back after the rail system is operating and generating revenue. The gap financing will give Honolulu Rail Transit greater cost and schedule certainty. Once the system is generating revenue, the private partner can be paid back with the appropriate interest costs.
The HRTP has been underway for some time — construction began in 2012. The study by JLL was to identify the most efficient way to complete the project. Namely, the $132 billion Section 4 “City Center Guideway and Stations” (4.2 miles across 8 stations from Kalihi to Ala Moana Center Station), the $315 million Pearl Highlands Transit Center, as well as fund and maintain a system-wide O&M program.
To date, construction of stations were bid by sections (there are 4 sections), using design-bid-build and design-build contracts. The guideways were bid out by section using design-build contracts. To date, sections 1-3 are under contract. And, Ansaldo holds a 5-year Core Systems O&M contract.
According to JLL, capital costs currently are estimated at $8.2 billion — which includes a 65% increase since 2012. The full rail line is scheduled to be opened in late 2025 — a greater than 7 year delay).
The Ohana (family) in the Aloha state recognize the limited P3 experience in the state, so putting together the best team is key. Hats off to a great start with team members JLL, EY and HDR.