82nd International Atlantic Economic Conference

October 13 - 16, 2016 | Washington, USA

Financing the Honolulu Rail Transit Project: Value capture and economic impact of rail on real estate in Oahu

Saturday, October 15, 2016: 9:40 AM
Jason Levy, Ph.D. , West Oahu, University of Hawaii - West Oahu, Kapolei, HI
Peiyong Yu, Ph.D. , Economics, University of Hawaii - West Oahu, Kapolei, HI
Oahu’s notorious traffic congestion, limited land mass, growing population and attempts to diversify the economy require innovative public transit solution to promote the state of Hawaii’s plans for sustainable growth. The America’s first fully driverless rail transit project is currently under construction in Oahu, Hawaii: Honolulu Rail Transit (HRT) project, is also known as the Honolulu High - Capacity Transit Corridor Project. By 2030, nearly 70 percent of Oahu's population and more than 80 percent of the island's jobs will be located along the 20 - mile rail corridor. However, the project is controversial. Pro rail advocates argue that rail constitutes an essential component of Hawaii’s sustainable future initiatives and transit-oriented, high density, mixed use development plans. On the other hand, those against the HRT feel that an above-ground rail system is not cost-effective (the project already over budget and behind schedule) and will exacerbate traffic congestion and increase pollution. As of July 2016, the rail project is in trouble due to the escalating costs: the price tag for rail is now estimated at $8 billion or more. Hedonic price models are used to quantify the impact of rail on land and property values;  it is shown that mass transit creates land and property value in Oahu.   It is proposed that a developer or the land owner would have the "option" to pay a fee in exchange for the public transportation improvements and enhanced zoning ("up-zoning"). This additional revenue could be used to offset some (or perhaps all) of the cost of HRT.