TO: Budget Committee of the Honolulu City Council FROM: Natalie Iwasa, CPA, CFE 808-395-3233 MEETING: Monday, November 9, 2015 SUBJECT: Bill 23 County Tax Surcharge – OPPOSE HART’s Numbers Are Not Reliable CD1 Reporting Requirements - Support Aloha Councilmembers, Thank you for the opportunity to provide testimony regarding Bill 23, which would extend the general excise surcharge tax for five more years. I support additional reporting requirements but oppose the tax extension for the reasons I’ve previously stated. My testimony today will focus on HART’s numbers. HART’s Project Balance – June 2012 FFGA, Presentation 12/18/14 & Update 10/15/15 During the budget committee’s special meeting on October 21, 2015, HART included a “Project Balance” in its slide presentation. (Refer to pages 3 and 4 of my testimony.) The following questions should be asked of HART related to this slide:

Why are listed “Total Project Costs” for December 18, 2014, presented in a manner that they do not add up to $5,763? The difference is $310 million, which is the GET projected shortfall of $100 million and FTA 5307 funds reduction of $210 reduction. Please see my suggested presentation, which clearly separates revenues from expenses.

Updated contingency costs for October 15 total $539 million. In prior budget meetings, contingency amounts of ~ $800 and $650 million were discussed. What were the contingency amounts used for?

What happened to the $100 million “GET Projected shortfall” in the October 15 update? Is that included in the $299 Unallocated contingency? If so, is the contingency too low?

Are costs listed for October 15, 2015, reasonable, given what we know to date?

HART’s Quarterly Cash and County Surcharge Revenue Report as of June 30, 2015 In response to Resolution 12-188, CD1, HART provided council communication DC-720. (Refer to pages 5 - 8 of my testimony.) The following questions should be asked of HART regarding this report:

Natalie Iwasa Testimony Bill 23 Page 2

GET surcharge revenue through FY 2015 is reported as $1.52 billion. The amount HART reported to the public in its HART Facts – August 2015 for July 1, 2015, ad was only $1.47 billion. Why is there a difference of approximately $50 million?

Expenditures to date through FY 2015 are reported as $1.637 billion. The “Amount Expended” per the HART Facts – August 2015 ad is only $1.581 billion. Why is there a difference of approximately $57 million?

Why does the HART Facts – August 2015 ad indicate a beginning balance as of December 2009, but the amount shown equals surcharge revenue through FY 2009, i.e., June 30, 2010?

Why does the HART Facts – August 2015 ad show a total contingency budget of $502 but only $7 “Committed” and $0 “Expended” when “Baseline FFGA Project Contingency Budget” was $643.6 million with “drawdown” amounts as noted on page 14 of the Project Management Oversight Consultant’s report for September 2015?

HART’s Table A-1, Capital Plan Cash Flows @ 4% GET Surcharge Growth Rate HART’s updated financial plan includes a cash flow projection. (Refer to page 9 of my testimony.) The following questions should be asked of HART regarding this report:

Why are projected “All Other” funding sources shown as only $6 million when the total received through June 2015 was already $10 million ($9 million interest and $1 million miscellaneous)?

Why is the Net Current Change in column 1 shown as ($105) when it foots to ($106)? HART should establish a policy regarding rounding and use it consistently to avoid these footing errors.

Why are total expenditures to date only $1,512 million when the amount reported in response to Resolution 12-188, CD1, was $1,637 million and the amount reported to the public in the HART Facts – August 2015 ad was $1,581? (Note again the $1 million footing error.)

Frankly, I gave up at this point. Please also take a look at the debt service costs (interest and fees) in relation to other reports and verify other numbers reported to you. Bottom line on all of this is that HART’s numbers are simply not reliable. That goes for ridership, job creation and ride times. Please hold the mayor and HART accountable for the information they are giving to you and the public. Good decisions cannot be made when we are given poor or incorrect information, and please vote “NO” on the extension.

Project BalanceFFGA:

June 2012[A]

Project FinancesNet FFGA Revenue Total’

Project Capital CostDebt Financing Costs

Total Proect CostProiect Balance

Value M’s$5,163

$4,948$215

$5 163$0

Presentation Made:December 18, 2014

[B]

Current Update:October 15, 2015

[C]Project FinancesNet FFGA Revenue Total’ $5,163

Project Capital Cost $4,948Debt Financing Costs $215

GET Revenue from Extension2 $1,524FTA 5307 Funds Reduction $210Lawsuits and.DelayClàims $190

Utility Relocations $120Project Enhancements $130

Construction Cost Escalation•• $240Additional Debt Financing Cost $95

Allocated Contingency $240Total Proect Cost $6,178

Unallocated Contin enc $299Project Balance $0

‘Net FFGA Revenue is net of $193M Project Cash Balance andnet of $11OM in added revenue for Public/Private contributionsfor Pearl Highlands Transit Garage.2 GET Revenue from Extension. Pending City CouncilConsideration.

Slide 4Slide 5Slide 6Slide 7Slide 8

Slide 12Slide 13

Slide 13

HONOLULU RAIL TRANSITww’~v HONOLULUTRANSIT ORG

PROJ ECT HZ~~THONOLULU AUTHORITY — RAPID TRANSPORTATION

‘Net FFGA Revenue is net of $193M Project Cash Balance.

Project Finances Value M’sNet FFGA Revenue Total’ $5,163

Project Capital Cost $4,948Debt Financing Costs $215

GET Projected shortfall $100FTA 5307 Funds Reduction $210

: Lawsuits and Delay claims $190Utility Relocations $50• Project Eancenents $75

• Construction Cost Escalation $45Allocated Contingency -. $240

liotal P.roect €ost $5 763

Value M’s Slide Ref:

Pro ect Balance Adustment $9101 Net FFGA Revenue is net of $193M Project Cash Balance.

NATALIE IWASA TESTIMONYSPECIAL BUDGET MEETING 11/9/15

Project Balance Project BalanceDecember 18, 2014 December 18, 2014Suggested Presentation Suggested Presentation

Value ValueValue Value

Project Finances (Millions) Project Finances (Millions)

Gross FFGA total revenue 5,356$        Gross FFGA total revenue 5,356$    

Required ending cash balance (193)            Required ending cash balance (193)       

Net FFGA revenue 5,163          Net FFGA revenue 5,163     

Projected GET shortfall (100)            Projected GET shortfall ‐         

Reduction FTA 5307 Funds (210)            Reduction FTA 5307 Funds (210)       

Projected surcharge extension revenue 1,524     

Revised projected net FFGA revenue 4,853          Revised projected net revenue 6,477     

Project capital cost (4,948)         Project capital cost (4,948)    

Debt Financing (215) Debt Financing (215)Debt Financing (215)            Debt Financing (215)       

Lawsuits and delay claims (190)            Lawsuits and delay claims (190)       

Utility relocation (50)              Utility relocation (120)       

Project enhancements (75)              Project enhancements (130)       

Contruction cost escalation (45)              Contruction cost escalation (240)       

Allocated contingency (240)            Allocated contingency (240)       

Additional debt financing cost (95)         Additional debt financing cost (95)         

Revised projected project cost (5,763)         Revised projected project cost (6,178)    

Unallocated contingency (299)       

Projected costs over revenue (910)$          Projected costs over revenue ‐$        

What happened to $100 surcharge shortfall?

I-I~’A~TRECEIVED

CITY CLERK INREPLYREFERTO:C & C OF HONOLULU CMS-APO0-01439

HONOLULU AUTHORITY for RAPID TRANSPORTATION l19~’~~jDaniel A. Grabauskas

EXECUTIVE DIRECTOR AND CEO

October 20, 2015

The Honorable ErnestY. Martin, Chairand Members

Honolulu City Council530 South King Street, Room 202Honolulu, Hawaii 96813

Dear Chair Martin and Councilmembers:

Subject: Resolution 12-188, CDI, Requesting Information Relating to the Deposit andShort-Term Investment of General Excise Tax Surcharge Revenues

BOARD OF DIRECTORS

Donald G. HomerCHAIR

Damien T.K. KimVICE CHAIR

George I. AttaMichael D. FormbyFord N. Fuchigami

Tern FujiiColleen Hanabusa

William “Buzz” HongTerrence M. Lee

Ivan M. Lui-Kwan

Pursuant to the City Council Resolution 12-188, CDI, the following is the Honolulu Authority for RapidTransportation’s HART quarterly report to the City Council for the quarter ending June 30, 2015:

1.

2.

Interest earned on deposits and investments of County Surcharge revenue seeAttachment A;

The total amount of County Surcharge revenue collected from January 2007 to date, thetotal amount of County Surcharge revenue expended to date, and the total CountySurcharge cash balance on hand see Attachment A; and

3 and 4. All of the County Surcharge revenue received by HART are collectively invested through theCity’s investment program. As such, the information requested in Items 3 and 4 ofResolution 12-188, CD1, is included in the Cash Count Report for the Quarter EndedJune 30, 2015, submitted by the City Auditor and the Director of Budget and Fiscal Services.Please see attached Departmental Communication 655 2015.

If you have any questions regarding this matter, please do not hesitate to contact Ms. Diane Arakaki, ChiefFinani Officer, at 808 768-6156.

Daniel A. GrabauskasExecutive Director and CEO

Attachments

cc: HART Board of DirectorsMr. Roy K. Amemiya, Jr., Managing DirectorOffice of the City Clerk

DEPT. COM. 720

CITh’ AND COUNTY OF HONOLULU, Alii Place, Suite 1700, 1099 Alakea Street, Honolulu, Hawaii 96813Phone: 808768-6159 Fax: 808768-5110 www.honolulutransit.org

HONOLULU AUTHORITY FOR RAPID TRANSPORTIONQUARTERLY CASH AND COUNTY SURCHARGE REVENUE REPORT

AS OF JUNE 30, 2015Made Pursuant to City Council Resolution 12-1 88, CD1

Interest RevenueFY2007 $ 18,000FY2008 3,724,229FY2009 3,595,915FY2010 246,603FY2OII 329,693FY2012 240,270FY2013 310,594FY2014 325,874FY2015 239,997

$ 9,031,175

GET Surcharge RevernueFY2007 $ 48,424,383FY2008 169,113,552FY2009 160,855,727FY2OIO 157,555,320FY2O11 179,108,573FY2012 190,664,994FY2013 173,822,505FY2014 218,390,853FY2015 223,666,342

$ 1,521,602,249

Expenditures to dateFY2007 $ 310,285FY2008 25,962,676FY2009 54,205,206FY2O1O 99,126,584FY2O1 1 109,063,791FY2012 254,142,462FY2013 294,380,188FY2014 343,180,946FY2015 456,652,423

$ 1,637,024,561

Cash & cash equivalents on hand at June 30, 2015 $ 293,010,822

Attachment A

DID YOU KNOW? Trains will operate daily from 4 a.m. to midnight and will arrive at stations about every five minutes during peak travel times.

PROJECT REVENUE STATUSAs of July 1, 2015

Projectionsto Date1

Collected orCommitted to Date

Percentage(of projections)

REVENUE SOURCE:Project Beginning Cash Balance (Dec. 2009)General Excise Tax (GET) Surcharge2

Federal New Starts FundsOther Federal Transportation FundsInterest Income

TOTAL

(in millions)$ 298

3,2911,550

2142

$5,355

(in millions)$ 298

1,0911,056

49

$2,458

100%33%68%

2%–

46%1 - Projections to date from the June 2012 Financial Plan.2 - Total GET surcharge revenue collected since January 1, 2007, is $1.47 billion (includes $378 million collected before December 2009).

PROJECT COST STATUSAs of July 1, 2015

CurrentBudget1

Amount Committed2

AmountExpended3

Guideway & Track ElementsStations, Stops, Terminals, IntermodalSupport Facilities; Yards, Shops, AdminSitework & Special ConditionsSystemsVehicles

SUB-TOTAL*Right-of-Way (ROW), Land, Existing ImprovementsProfessional Services (e.g., Planning and Design)ContingencyFinance Charges

SUB-TOTAL*

TOTAL*

(in millions)$1,154

397115

1,029248191

$3,133$ 1981,117

502215

$2,031

$5,164

(in millions)$ 544

130114725232191

$1,936$ 93

1,04470

$1,144

$3,083

(in millions)$ 195

469

4662927

$ 790$ 85

70600

$ 791

$1,5811 - Current Budget reflects the June 2012 Baseline Budget with executed Budget Transfers.2 - Approved contract value. 3 - Portion of the work that has been paid.* All costs are rounded to the millions therefore subtotals may not add up to the amounts shown.

HART FACTS–AUGUST 2015

HART CEO Dan Grabauskas answers community questions about rail transit.

QUESTION:What types of security provisions will HART have on the train and at the rail stations?

DAN GRABAUSKAS:Security considerations include security patrols and closed-circuit camera monitoring of stations, trains, and park-and-ride facilities. Transit operations personnel will have both audio and visual communication with passengers. The elevated guideway, situated above ground-level hazards, provides an added measure of safety, minimizing the risk of vehicle collisions and pedestrian accidents.

HonoluluRailTransitProjectMonthlyProgressReport  September2015

14 | P a g e   

   

2.2  Project Budget (data as of Aug. 28, 2015)  

FFGA Project Budget = $5,121.7M  o Current Project Budget ‐ $4,455.7M o Current Project Contingency ‐ $492.9M o Project Finance Charges ‐ $173.1M  

Total Incurred Cost = $1,671.1M (37.5% of current project budget) o August 2015 Incurred Cost = $40.6M 

  

2.3   Project Contingency (data as of Aug. 28, 2015) Note: Contingency management and cost contingency details, including a breakdown of Project contingency drawdowns, are discussed in further detail in Appendix B.  

Current Project Contingency Balance = $492.9M o Contingency drawdown to date –  $150.7M (23.4% of baseline project contingency budget) o $7.8M contingency drawdown during August 2015. Please see Appendix B for more details.  Pearl Highlands Parking Structure/Bus Transit Center budget transfer to Project contingency under 

review   

Figure 5. Project Contingency Budget  

Project Contingency Budget 

Contingency  SCC Code  Budget ($M) Unallocated Contingency   90.01  $101.9 

Allocated Contingency  90.02  $540.1 

Allowances  90.03  $1.6 

Baseline FFGA Project Contingency Budget  90.01 ‐ 90.03  $643.6 

Contingency drawdown through June 2015 Report  90.01 ‐ 90.03  ($133.8)

Contingency drawdown July 2015 Report  90.01 ‐ 90.03  ($8.1)

Contingency drawdown August 2015 Report  90.01 ‐ 90.03  ($1.0)

Contingency drawdown September 2015 Report  90.01 ‐ 90.03  ($7.8)

Contingency drawdown to date   90.01 ‐ 90.03  ($150.7)

Current FFGA Project Contingency  90.01 ‐ 90.03  $492.9 

  

 

        

TotalIncurredCost=$1,671.1M

(previousreport=$1,630.5M)

CurrentContingencyBalance=$492.9M

(previousreport=$500.7M)

ATrACHMENT 3

Table A-i, Capital Plan Cash Flows @ 4% GET Surcharge Growth Rate

($ in miflions)

Beginning Cash Balance $298 $298 $293.0 $50.0 $50.0 $50.0 $50.0 $50.0 $50.0 $50.0 $50.0 $50.0 $50.0 $50.0 $50.0Project Funding Sources:

Debt Proceeds

ConstructionDesignROW/ UtilitiesProgram-WideHART! CityPlanning

Project Costs

Debt Svcs PrincipalDebt Service Interest

$1,379$310$140

($140)$0

$1,689

$0.0 $0.0$1,008.7 $1,075.6

$0.0 $0.0 $20.0$726.2 $672.6 $347.8

$40.0 $40.0 $40.0$245.6 $291.6 $291.1

$0.0 $0.0 $0.0 $0.0 $0.0$0.0 $0.0 $0.0 $0.0 $0.0$0.0 $0.0 $0.0 $0.0 $0.0$0.0 $0.0 $0.0 $0.0 $0.0$0.0 $0.0 $0.0 $0.0 $0.0$0.0 $0.0 $0.0 $0.0 $0.0$0.0 $0.0 $0.0 $0.0 $0.0

$40.0 $40.0 $40.0 $26.0$290.4 $289.3 $287.8 $10.8

$0.0 ($0.0) ($0.0) ($0.0) $142.5

GET.Federal GrantFederal 5307All Other

Total Revenue

$4,815 $1,091 $233.4$1,550 $411 $223.7

$0 $0 $0.0$6 $5 $0.5

$6,371 $1,507 $457.5

T CP (net) Max $3 CmVanable BondsFixed Rate BondsLess Issuance CostsTotal Debt Proceeds

Total Project Sources

Project Uses:

$239.5$302.8

$0.0$0.2

$542.5

$141.3$251.7$76.0($2.7)

$466.3

$0$252

$1,127($9)

$1,370

$249.1$283.0

$0.0$0.0

$532.1

$43.5$0.0

$502.7($2.7)

$543.5

$0 $96.3$0 $0.0$0 $0.0$0 $0.0$0 $96.3

$259.0 $269.4 $280.2$215.2 $114.1 $0.0

$0.0 $0.0 $0.0$0.0 $0.0 $0.0

$474.2 $383.5 $280.2

$15.0 ($18.9) $67.6$0.0 $0.0 $0.0

$238.7 $309.9 $0.0($1.7) ($1.9) $0.0

$252.0 $289.1 $67.6

$291.4 $303.0 $315.1$0.0 $0.0 $0.0$0.0 $0.0 $0.0$0.0 $0.0 $0.0

$291.4 $303.0 $315.1

($45.8) ($11.4) ($24.0)$0.0 $0.0 $0.0$0.0 $0.0 $0.0$0.0 $0.0 $0.0

($45.8) ($11.4) ($24.0)

$245.6 $291.6 $291.1

$327.8$0.0$0.0$0.0

$327.8

($37.4)$0.0$0.0$0.0

($37.4)

$340.9$0.0$0.0$0.0

$340.9

($51.6)$0.0$0.0$0.0

($51.6)

$1,008.8 $1,075.6 $726.2 $672.6 $347.8$7,741 $1,507 $553.8

$4,555 $900 $615.9$187 $143 $31.6$511 $105 $106.6$346 $218 $21.7$190 $70 $19.0

$81 $77 $1.9$5,870 $1,512 $796.8

$354.5 $261.2$0.0 $0.0$0.0 $0.0$0.0 $0.0

$354.5 $261.2

($66.7) ($107.9)$0.0 $0.0$0.0 $0.0$0.0 $0.0

($66.7) ($107.9)

$805.7$7.7

$146.6$21.1$21.4

$1.4$1,003.8

$763.0$4.2

$109.8$20.7$20.0

$0.5$919.0

$290.4 $289.3 $287.8 $153.3

$23.2$0.0$0.0$9.0$7.9$0.0

$40.2

$0.0$0.0$0.0$0.0$0.0$0.0$0.0

Transfer to ReserveTransfer from ReserveOther Debt Service Fees

Debt Service

Reserves: net of interestTotal Project Uses

Net Current Change

Ending Cash Balance

$615.4 $600.4 $230.9$0.4 $0.0 $0.0

$43.0 $0.0 $0.0$18.7 $18.5 $18.5$19.4 $16.5 $16.2$0.1 $0.0 $0.0

$697.0 $635.3 $265.6

$0.0 $0.0 $16.6$29.2 $37.3 $45.6$0.0 $0.0 $0.0$0.0 $0.0 $0.0$0.0 $0.0 $0.0

$29.2 $37.3 $62.2

$0 $0.0 $0.0 $0.0$0 $0.1 $5.0 $16.6$0 $0.0 $0.0 $140.0$0 $0.0 $0.0 $0.0$0 $0.0 $0.0 $0.0$0 $0.1 $5.0 $156.6

$288 $0 $0.0$7,847 $1,512 $796.9

$120.5 $211.8 $217.8$45.0 $39.8 $33.3

$0.0 $0.0 $0.0$0.0 $0.0 $0.0$0.0 $0.0 $0.0

$165.4 $251.6 $251.1

$193 $293

$224.0$26.4

$0.0$0.0$0.0

$250.4

($105) ($5) ($243.0) $0.1 ($0.0) $0.0 $0.0 ($0.0) ($0.0) $0.0

$230.4$18.9$0.0$0.0$0.0

$249.3

$236.9$10.9$0.0$0.0$0.0

$247.8

$121.0$1.8$0.0

($140.0)$0.0

($17.2)

$50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $193

For Discussion Purposes Only