Honolulu will soon pay a high price for relocating a major bus maintenance facility without correctly anticipating all the associated costs.

The city set up the bus yard in Halawa about 30 years ago with a $4.6 million Federal Transit Administration grant, then moved the bus work to Pearl City in 2001.

Now the city must reimburse the FTA with up to $35 million — more than six times the facility's original cost — because the site is no longer used for public transit work that the grant was tied to, and the property's value has skyrocketed.

The debt is to be paid off over two years, with the final cost determined by a formal appraisal of the FTA's interest in the site, currently estimated at $35 million.

City officials had assumed earlier that they could transfer the federal interest in the Halawa property to the new site.

In 2002, more than a year after the bus yard was relocated, the city formally asked for permission to transfer the federal interest, records show.

But the FTA replied that it was not possible unless the Halawa property was sold.

The city didn't come up with an alternative plan — or pay back the money — so "we are left holding the bag," said Bill Brennan, Mayor Mufi Hannemann's spokesman.

He blamed the situation on "mismanagement" by former Mayor Jeremy Harris' administration.

"The Harris people failed to get prior approval for the move," he said.

The debt is not expected to impact the city's plan to soon request more than $1 billion from the FTA to help pay for a major new mass transit system, Brennan said.

FTA officials in San Francisco and Washington did not respond to inquiries last week.

The Halawa debt resulted from a chain of events that started when the state began redeveloping the area around Kaka'ako Waterfront Park, according to city officials.

The city had operated a main base yard for road-repair equipment and various city vehicles on nearby state land since the 1920s, but the yard stood in the way of the redevelopment.

After nearly a decade of delays and increasing state pressure, the city began moving its equipment and workers to the Halawa site in 2001.

But the move "had a domino effect" on other facilities, said city Transportation Director Melvin Kaku.

'AN OPPORTUNE TIME'

To make space in Halawa for the equipment and workers displaced from Kaka'ako, the city moved its bus-maintenance facilities from Halawa to Pearl City.

It made strategic sense to spread bus maintenance out as transit operations were expanded and upgraded, Kaku said.

"It was almost like an opportune time, because there was land that became available," he said. "It was felt that this was in the best interest of the city."

In 1998, when Hannemann was a City Council member, he inquired in writing about the possibility of being required to pay back the federal money, city records show.

REQUEST AFTER THE FACT

Harris administration officials replied that there should be no problem because they planned to transfer the FTA's interest in the Halawa yard to the Pearl City facility.

But they didn't formally request to do so for three more years, and the FTA subsequently rejected the plan, records show.

The Halawa site is now used as a base for road maintenance, vehicle repair and other responsibilities. It would be far more expensive to move those operations elsewhere so the land could be sold, or to return it to use as a bus yard, according to city transportation officials.

Hannemann is asking the City Council to authorize spending $20 million to start the repayment next year. The estimated $15 million balance would be paid the following year.

The money would be raised by selling bonds, so the final cost to taxpayers would be higher after years of interest payments.

Council Chairwoman Barbara Marshall said she was "stunned" to learn of the outstanding bill and would seek additional information about how the decisions were made.

"It sounds horrendous," she said of the cost.

Councilman Gary Okino, a retired city planner, said that paying the FTA appears to be the most cost-effective option now.

"The fact is, we had no choice," he said. "When the state kicked us out of (Kaka'ako), it triggered a lot of things. For some of the alternatives, the cost was huge. That's why we deferred the move for so long."

Reach Johnny Brannon at jbrannon@honoluluadvertiser.com.