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The Money Train

How public projects shape our economic future.

(page 2 of 6)

Key County Project


Photo: Courtesy of City and County of Honolulu

Honolulu High-Capacity Transit Corridor Project

City & County of Honolulu

Cost:  $4+ billion

Construction Timeline: Groundbreaking planned for 2009; first segment operational in 2012; full 20-mile buildout by 2017, with projected spurs to Airport, West Kapolei, Waikiki and UH Manoa.

Description:  Undoubtedly the largest public works project in state history, Honolulu’s rail project would stretch 20 miles from Kapolei to Ala Moana Center. Guideway design and construction would be awarded in five different contracts, allowing more contractors to bid and participate. Contracts range from $20 million to $350 million and include equipment procurement, construction of yard and shop facilities and construction of transit stations. Request for Proposals were expected by the end of summer.

Even as the residential sector declines, revealed by drops in new residential building permits and home sales, 2008 is still a great year for the construction industry.

But if energy prices remain high and the credit crunch doesn’t sort itself out, the pressing question is how construction will fare over the next several years? Experts say that, as in the 1990s, the answer lies in how much money will be spent on public projects, of which light rail heads a substantial list that includes port improvements statewide, a massive University of Hawaii West Oahu campus and even new federal facilities such as a National Security Agency facility.

Bar none, rail will have the most impact, one way or another.

If rail doesn’t go through, “We’d be looking at a situation developing along the lines of 1994 through 1998,” Boyd says. If it does go through, you could see steady construction for 10 years or more.

 

Seeding Growth

“I think a lot of the experts and business leaders in town are anticipating a pretty rough next two or three years,” says Bill Kaneko, president and CEO of the Hawaii Institute for Public Affairs. “A traditional and I think a very good way to be able to address that is through public construction.”

The number of government contracts has been high over the past four years. According to UHERO, in 2004, the federal, state and county governments awarded nearly $1.4 billion in contracts. It dropped to $725 million in 2005, but rose to $854 million in 2006 and $869 million in 2007. With the slowdown in private construction, contractors have noticed.

“[Contractors are] starting to sharpen their pencils and getting a little bit more aggressive in how they’re bidding jobs. Three or four years ago, contractors just wouldn’t bid on work because they had too much work,” says Kyle Chock, executive director for the Pacific Resource Partnership, an offshoot of the Hawaii Carpenters Union which examines market trends facing the construction industry.

Public projects serve a number of purposes, but, in Hawaii’s case, mostly catching up. The state Department of Education has a load of repair and maintenance issues to deal with, as does the University of Hawaii. Aloha Stadium is also getting a $185 million repair upgrade to sustain it through 2030. The disastrous Waikiki sewage dump into the Ala Wai Canal made it clear that Oahu’s sewers could no longer handle their loads. In response, the city has increased its capital improvements budget every year, allocating $831.5 million for fiscal year 2009. Nearly 11 percent of the total budget went to sewer work alone.

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