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  • Key Rail Contractor Tangled Up in Fraud Allegations in Hawaii Courts

    · By Bob Porterfield and Nick Grube

    A business deal brokered more than 10 years ago during a clandestine meeting at an Italian restaurant in Hawaii Kai has set the stage for a bitter legal dispute that today embroils a Honolulu rail contractor in allegations of fraud, deception and profiteering.

    The legal skirmish centers on a disintegrating business partnership between Su-Mo Builders, an obscure construction company located in Kalihi with about 20 employees, and Nan Inc., a well-known Hawaii corporation recently awarded its second multimillion-dollar contract for work along the city’s 20-mile elevated commuter rail line.

    It’s a messy confrontation being played out in two different courtrooms with the warring parties accusing each other of lying, cheating, self-dealing, cooking the books, shortchanging subcontractors and attempting to deceive the federal government in obtaining millions of dollars in contracts.

    The accusations have illuminated the often murky, complex and profitable world of the U.S. Small Business Administration’s 8(a) Business Development Program for small, economically disadvantaged companies predominantly owned by women and minorities.

    The program allows for the awarding of no-bid federal contracts and other preferential treatment and enables small firms to form joint ventures with bigger, more established companies to bid on even larger contracts.

    Nan became one of the largest general contractors in Hawaii with the assistance of a federal program designed to help small and disadvantaged businesses get access to lucrative government contracts.

    Cory Lum/Civil Beat

    Nan became a construction giant through participation in the 8(a) and other SBA programs. Although it ended its participation — or “graduated” —

  • Rail Operating Costs: A Looming Financial Crisis That Will Cost Taxpayers Billions

    · By Bob Porterfield and Nick Grube

    Editor’s Note: Civil Beat has spent months examining financial records relating to the Honolulu rail project. “Off Track” is an ongoing series that explores what’s happening to the taxpayer money that is going into the biggest public works project in Hawaii history. 

    If Gov. David Ige signs legislation authorizing the Honolulu City Council to extend GET  surcharge collections for another five years, it is unlikely the additional revenue will be enough to insure the financial viability of a commuter rail system facing increasingly serious financial problems.

    A review of HART financial projections submitted separately to state officials and city council members during the debate over a bill to extend the surcharge suggests that billions of dollars will be needed to pay for operating the 20-­mile railroad once it gets up and running.

    Since the bill extending the surcharge prohibits use of the tax money to pay for operating costs, HART officials may have to find another municipal money tree to shake.

    Although the recent legislative debate focused on HART’s need for additional funds to cover a shortfall currently estimated at $900 million on a project already behind schedule, it appears state lawmakers overlooked – or ignored – the  huge amounts of money that will be required for operations and maintenance.

    Honolulu officials still don’t how they will pay for the operations and maintenance costs of a city rail system that is already over budget.

    Cory Lum/Civil Beat

    According to HART’s projections, between 2019 – when HART now hopes to begin  limited operation

  • Robert ‘Bobby’ Bunda Stepping Down from HART Board

    · By Nick Grube

    Honolulu Authority for Rapid Transportation board member Robert “Bobby” Bunda is stepping down to spend time with his family, according to an agency press release.

    Bunda, a former state legislator, has been on the HART board of directors since September 2011, and was appointed to a five-year term in 2013.

    The board, which oversees the city’s $6 billion rail project, will begin searching for a replacement in July when it puts out a call for nominations from the public. Bunda’s last day is June 30.

    Here’s what Bunda had to say in a written statement:

    “The experience I have gained as a member of the HART board has given me a deep sense of appreciation for my colleagues on the board and for the entire HART team, all of whom work hard each day to make the project successful. The one thing we never get back is time. For that reason, I have chosen to spend more time with my family.”

    Robert Bunda’s last day on the HART board of directors will be June 30.

    Honolulu Authority for Rapid Transportation

     

  • Inside the Rail Checkbook: More than $1 Billion Spent but Few Details to Go Along With It

    · By Nick Grube and Bob Porterfield

    Editor’s Note: Civil Beat has spent months examining financial records relating to the Honolulu rail project. “Off Track” is an ongoing series that explores what’s happening to the taxpayer money that is going into the biggest public works project in Hawaii history. 

    Taxpayers wanting an idea of what they’ll be riding in when Honolulu’s commuter rail system finally gets up and running can visit Kapolei Hale to examine an actual replica of the railcars city officials hope will be zipping across Oahu by the end of the decade.

    They won’t be able to get inside the car, however, as it’s cordoned off by orange and white construction barriers and a polite sign telling visitors to please not sit on the train. Instead, the shell sits in the cavernous open-air foyer of the municipal building collecting dust and occasional bird droppings.

    When it comes to spending billions of tax dollars to build a railroad, molding favorable public perceptions is important — and expensive. The Honolulu Authority for Rapid Transportation paid $63,714 just to have the model shipped from Italy and a few dollars more to decorate it with twinkling lights at Christmas.

    But the cost of giving the public a peek at the new railcars is pocket change alongside the millions being spent by HART and its prime contractors on public relations, lawyers, lobbying and scores of consultants adding their two bits on how the project should be managed, designed and built.

    A railcar is on display at Kapolei Hale as part of the city’s

  • Honolulu Rail Tax Extension Clears the Legislature

    · By Nick Grube and Anita Hofschneider

    The Hawaii Legislature approved a bill that would allow the Honolulu City Council to extend the general excise tax surcharge to fund the city’s rail project which faces a nearly $1 billion shortfall.

    House Bill 134 would also allow other counties to levy a half-percent GET surcharge, and gives the state “air rights” above the rail line and its stations.

    Despite tough public hearings throughout the session in which lawmakers grilled Honolulu Mayor Kirk Caldwell and top transit officials, the measure passed both chambers with strong majorities on Tuesday. The Senate vote was 21-4, and the House vote was 39-12.

    Mayor Kirk Caldwell sits in the House listening to lawmakers debate the bill to extend the GET surcharge.

    Cory Lum/Civil Beat

    House Finance Committee Chairwoman Sylvia Luke voted in favor of the tax, even though she voted against it in 2005.

    “I don’t like to make Kirk Caldwell happy,” she said on the House floor to a round of laughter. But Luke said she changed her mind about the bill because not passing the extension “would have significant financial implications that neither the state nor the county could afford.”

    Still, several lawmakers weren’t convinced.

    Sen. Gil Riviere from the North Shore said that he supports rail but he opposes giving the city a blank check with no accountability.

    As for the mayor, he said he’s grateful that the Legislature passed the bill.

    “I think with this extension we have sufficient money to complete the 20 miles with a pad in case we

  • Council Chair: No ‘Easy Sell’ for Honolulu Rail Tax

    · By Nick Grube

    Don’t be fooled by Tuesday’s vote at the State Capitol on an extension of Honolulu’s rail tax. The issue is a long way from being settled.

    Before the tax can be implemented it must get past Gov. David Ige’s veto pen and then be approved by the Honolulu City Council.

    It’s the latter that might prove most difficult.

    City Council Chairman Ernie Martin says he and his colleagues still have a lot of concerns about the lack of accountability and financial transparency surrounding the $6 billion project. Mayor Kirk Caldwell should not expect a rubber stamp of legislative approval.

    Honolulu City Council Chairman Ernie Martin plans to look closely at the city’s $6 billion rail project before approving a tax extension to help pay for it.

    Cory Lum/Civil Beat

    “It would be disingenuous for the mayor to think the council will be an easy sell,” Martin told Civil Beat in a phone interview Monday. “I think it will be just as difficult, if not more difficult, than the process he encountered at the Legislature.”

    Caldwell took his lumps over the last four months as he tried to convince state lawmakers to extend the 0.5 percent General Excise Tax surcharge for rail to help bridge a nearly $1 billion project shortfall.

    Many legislators were upset at being thrust into the position of approving a tax increase for a city project that had long been touted as being “on time and on budget.”

    Under House Bill 134, the City Council must adopt an ordinance by

  • Civil Beat Poll: Most Voters Oppose Honolulu Rail Tax Extension

    · By Nick Grube

    Most Honolulu voters don’t want lawmakers to extend Oahu’s 0.5 percent general excise tax surcharge to help pay for the city’s cash-strapped 20-mile commuter rail line planned from East Kapolei to Ala Moana Center, according to the latest Civil Beat poll results.

    And half of those polled on Oahu still have negative feelings overall about the $6 billion project that’s struggling financially due to lower-than-expected tax collections, higher-than anticipated construction costs and legal expenses related to lawsuits.

    The statewide picture is rosier for rail given strong neighbor island support and a general feeling that voters on Kauai, Maui and Big Island don’t mind as much that Honolulu residents might have to pay more taxes.

    Rail construction is well underway, but most Honolulu voters still oppose the project.

    Cory Lum/Civil Beat

    “In some ways it’s one of the oldest stories in the book,” said Matt Fitch, executive director of the Merriman River Group, the company that conducted Civil Beat’s poll. “In general, people are somewhat favorable of rail, but they don’t want to pay for it. More to the point, there’s more support on the neighbor islands than there is on Oahu.”

    Civil Beat surveyed 780 registered voters April 7-9. The poll included landlines and cell phones, and has a margin of error of 3.5 percent. The margin of error for Oahu-only respondents is 4.2 percent.

    Statewide, 48 percent of voters oppose extending the GET surcharge for rail beyond its 2022 sunset to help pay for an estimated $1 billion project shortfall. Only

  • Now You Can Watch HART Meetings In Your Pajamas

    · By Nick Grube

    Talk about results.

    Last month, Honolulu City Councilman Trevor Ozawa pushed a resolution to boost transparency for the city’s $6 billion rail project.

    Specifically, he called on the Honolulu Authority for Rapid Transportation to broadcast it’s board meetings online or through public access stations.

    HART will join other government agencies in broadcasting its meetings through Olelo Community Media.

    Chad Blair/Civil Beat

    On Thursday, the city announced Olelo Community Media will begin airing HART meetings starting next week.

    This should make it easier for citizens to track decisions made by HART board members on a highly controversial project that faces a nearly $1 billion shortfall.

    In a press release, Ozawa said televising HART meetings “is a crucial first step in providing real transparency to this project.”

  • Secret Subcontractors: What Honolulu Rail Officials Aren’t Telling You

    · By Nick Grube and Bob Porterfield

    Hundreds of contractors and consultants working on Honolulu’s $6 billion rail project are raking in tens of millions of dollars in taxpayer funds, yet there’s little accounting of what they’re actually doing for the money.

    It’s a glaring oversight that state lawmakers and city council members are struggling to reconcile before approving an extension of a half-percent General Excise Tax surcharge that could last anywhere from five to 25 years depending on what shakes out at the Capitol.

    But even with calls for more transparency, the Honolulu Authority for Rapid Transportation has been reluctant to release information about how much these companies, which have been hired as subcontractors, are being paid.

    Subcontractors are companies or individuals who have separate contracts or other agreements with prime contractors to provide specific services or materials.

    For example, Glad’s Landscaping of Honolulu has a subcontract to perform tree work for Kiewit Infrastructure West Co., the prime contractor building the West Oahu Farrington Highway guideway section, while Ramtek Fabrication of Kapolei has a materials agreement with Kiewit to supply precast concrete structures.

    Construction equipment for Honolulu’s $6 billion rail project along Kualakai Parkway near Kapolei.

    Cory Lum/Civil Beat

    Dan Grabauskas, HART’s Executive Director and CEO says it’s not within his legal authority to know how much the project’s main – or prime — contractors are paying the subcontractors helping them complete work on the 20-mile rail line between East Kapolei and Ala Moana Center. Getting such information, he has said, would be based upon “voluntary” disclosure by

  • Senators Give Honolulu Rail ‘A Great Deal of Opportunity’

    · By Nick Grube

    The Senate Ways and Means Committee on Tuesday voted to extend a 0.5 percent General Excise Tax surcharge for Honolulu’s rail project another five years beyond its Dec. 31, 2022, expiration.

    The vote on House Bill 134 indicates that lawmakers are supportive of helping the city complete its $6 billion driverless commuter rail project despite cost overruns and questions of lax oversight.

    But by limiting the extension to five years with additional caveats, the senators also showed that they don’t want to write a blank check to the city and the Honolulu Authority for Rapid Transportation without more assurances about how those taxpayer dollars are being spent.

    Sen. Jill Tokuda questions Mayor Kirk Caldwell about rail’s future operating expenses.

    Cory Lum/Civil Beat

    “First and foremost, the Senate is very clear that it wants to make sure that the job that was started is completed,” said Sen. Jill Tokuda, who chairs the Ways and Means Committee. “In terms of the information that we’ve been provided we feel that this is giving HART and the city a great deal of opportunity.”

    The bill will likely go to conference committee, where House and Senate members will hash out a final version. Legislation can dramatically change or even die during conference committee, which is conducted largely out of the public eye.

    Another proposal related to the GET, Senate Bill 19, appears to have stalled out in the House Finance Committee as there has been no hearing scheduled for the measure, meaning HB134 is the likely

  • Is Ige On Board With Extending Honolulu Rail Tax?

    · By Nick Grube

    Hawaii Gov. David Ige isn’t saying whether he will approve or veto any extension of a General Excise Tax surcharge that is being earmarked for Honolulu’s $6 billion rail project.

    But he does acknowledge that he’s worried an estimated $910 million shortfall in construction costs will continue to balloon. And he’s not sure taxpayers should be penalized for potential mismanagement.

    At an editorial board meeting with Civil Beat editors and reporters last week, Ige noted that until very recently rail project officials had assured the public that the project was on time and within budget. But a few months ago, Honolulu Authority for Rapid Transportation officials said the project was coming up significantly short of money.

    “There’s a big difference between on budget and on schedule and a $1 billion shortfall,” Ige said. “That’s a concern. An extension would essentially embrace the notion that if in fact the project was mismanaged from a financial perspective, that we are authorizing or condoning that activity.”

    Hawaii Gov. David Ige says he has many concerns about Honolulu’s rail project including the cost and how it will be paid for.

    Cory Lum/Civil Beat

    Although Ige supports rail, he’s skeptical about extending the 0.5 percent GET surcharge this legislative session.  The Legislature is considering two proposals that would keep the tax going beyond its Dec. 31, 2022 sunset date to pay for the growing deficit.

    Some lawmakers have expressed similar concerns over extending the GET surcharge and Sen. Jill Tokuda, who chairs the Senate Ways and Means Committee,

  • Tension Bubbles Between Honolulu City Council and HART

    · By Nick Grube

    Honolulu City Council members voted yes on two rail-related measures during a special meeting Wednesday, indicating their support for extending an island-wide tax hike to pay for estimated cost overruns on the $6 billion project.

    One measure would allow the Honolulu Authority for Rapid Transportation to issue bonds through the city to ensure there’s enough cashflow to pay for ongoing construction on the 20-mile rail line while other revenues lag. Officials have said that without this money construction could halt as soon as this summer.

    The other measure is a placeholder bill that was proposed in anticipation of the state approving an extension of the 0.5 percent General Excise Tax for rail. Bill 23, which passed first reading Wednesday, would simply replace the Dec. 31, 2022 sunset on the GET surcharge with another date should the Legislature and governor decide to act this session.

    Honolulu City Council Chairman Ernie Martin is worried about appearances at the Legislature, especially with a GET tax extension on the line.

    Cory Lum/Civil Beat

    But even with the pro-rail approvals, several council members expressed their angst over how the project has been managed over the years, from the politics of picking train stops to concerns about where the money has gone.

    Councilwoman Ann Kobayashi, a long-time rail critic, was one of the more vocal members Wednesday, slamming HART and the city for being misleading with her about the project. Like many others, she was surprised to learn about a nearly $1 billion shortfall that now

  • Railing Against Honolulu’s $6 Billion Rail Project

    · By Nick Grube

    Honolulu Mayor Kirk Caldwell and his top transit official took their licks from a decidedly anti-rail crowd during a boisterous town hall meeting at Washington Middle School on Wednesday.

    While much of the frustration stemmed from the city’s desire to extend a half-percent surcharge on the General Excise Tax to pay for a nearly $1 billion project shortfall, many critics rehashed old concerns, including worry that rail is a financial boondoggle and won’t ease Honolulu’s worsening traffic congestion.

    But there was also a very real sense of mistrust among attendees, with several challenging the assertions made by the mayor and Honolulu Authority for Rapid Transportation Executive Director and CEO Dan Grabauskas.

    Mayor Kirk Caldwell, left, and HART executive director Dan Grabauskas fielded questions and comments from an audience made up mostly of rail critics.

    Cory Lum/Civil Beat

    In fact, one man who was videotaping the event on a cell phone stood up after the first written question from the audience was read aloud to Caldwell and Grabauskas. He doubted its authenticity.

    “This ain’t a town hall meeting,” H. Doug Matsuoka said to a crowd of more than 100 people. “This is a public relations event.”

    Only one man spoke out in favor of the project during the two-hour meeting, saying he didn’t understand all the “bellyaching.” He also wanted to know if more money could be spent to speed up construction and open the rail line sooner.

    RelatedGot a $700M Shortfall? Set the Cycle to ‘Spin’Dec 30At Least $1.25B Has Been Spent

  • Lawmakers to Hold Community Town Hall Meeting on Rail

    · By Chad Blair

    A community town hall meeting to discuss the rail project is scheduled for Monday, March 30, at 5:30 p.m. at Washington Middle School 1633 S King St.

    Honolulu Mayor Kirk Caldwell and Honolulu Authority for RapidTransit (HART) officials are expected to be in attendance.

    The meeting is being held by state Sens. Brickwood Galuteria and Les Ihara, state Reps. Scott Saiki, Della Au Belatti and Scott Nishimoto; and Honolulu Council member Ann Kobayashi.

    Mayor Kirk Caldwell at the Legislature on March 19.

    Cory Lum/Civil Beat

    Should be some fireworks generated at the meeting, no?

    The rail project has been in the news a lot lately, especially regarding efforts to extend Oahu’s general excise tax to help pay for the $6 billion project.

    I should clarify: $6 billion and growing.

    Read Civil Beat’s related editorial, Honolulu Rail: Big Questions Demand a Legislative Special Session.

  • Honolulu Rail: Big Questions Demand a Legislative Special Session

    · By The Civil Beat Editorial Board

    Ever been accosted by a pushy salesman demanding, “What would it take to get you into this car today?”

    That image comes uncomfortably to mind too often these days in the dialogue concerning the troubled, $6 billion (and counting) Honolulu rail project.

    In recent weeks and months, we’ve been treated to news of surprise cost overruns and revenue shortfalls totaling nearly $1 billion, troubling assertions by the agency managing the project that it’s not responsible for tracking costs of its hundreds of subcontractors and urgent calls from Honolulu Mayor Kirk Caldwell for the Legislature to pass an extension of the tax providing the lion’s share of project funding. Delaying the extension, we are warned, will only make things more expensive and moving ahead on the project more difficult.

    Time is running out! Act now to lock in at today’s rates!

    Honolulu Mayor Kirk Caldwell speaks before the Senate Ways and Means committee at a hearing earlier this month. Legislators’ requests for deeper information still haven’t been adequately met.

    Cory Lum/Civil Beat

    Requests from Caldwell and Honolulu Authority for Rapid Transportation Executive Director Dan Grabauskas to extend the General Excise Tax surcharge have earned widespread criticism from legislators and served as a catalyst for a recent flurry of proposed resolutions — to have the state audit the project, to seek cost-cutting measures, to look into the progress of the project’s completion and more.

    Legislators have also publicly wondered why the Honolulu City Council has been relatively quiet in its support for the