Full Cost of Rail Proposal
is Staggering $6 Billion

HonoluluTraffic.com

The full costs of the rail proposal are staggering:

HonoluluTraffic.com has a new article containing a spreadsheet with the $4 billion initial estimate for building rail, upgraded 25 percent to $5 billion to allow for cost overruns, and adding reasonable estimates for bond interest charges and operating losses. When the tax expires, Honolulu taxpayers will owe $6 billion.

Here's the Summary:

Based on a sample of 258 transportation infrastructure projects worth US$90 billion and representing different project types, geographical regions, and historical periods, it is found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying. The policy implications are clear: legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts.

Other distinguished and authoritative people have warned about cost misrepresentations. Dr. John Kain, Chair Emeritus of Harvard’s Economics Department, wrote “Deception in Dallas,” Dr. Don Pickrell, Chief Economist of the U.S Department of Transportation’s Volpe Center, wrote what is known as the Pickrell Report, Dr. Martin Wachs, Chair Emeritus, Department of Urban Planning, UC-Berkeley, wrote “When planners lie with numbers,” and there have been many, many others. We have listed twenty of these studies in the footnotes to this article. We cannot say that no one has warned us about misrepresented costs.

Our spreadsheet contains no provision for capital costs of any kind beyond the initial costs. Nevertheless, it shows that when the additional ¹Ž2 percent GE tax expires at the end of 2021, we will have spent $2.6 billion on interest and suffered operating losses of just over $1 billion and yet we will still owe over $6 billion in outstanding City rail bonds. That is because the tax revenues from the ¹Ž2% GE tax are far less than the combination of bond interest and operating losses and so we will have had to issue additional bonds to cover this shortfall. The question is, as Mayor Hanneman is fond of saying, “Can we afford it?” and “Can we maintain it?”

November 2006 SB News

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