State Lawmakers Take on Funding for Rail Project in Special Session
The Hawaii State Legislature convened for a special session to hash out funding for the City and County of Honolulu’s rail project that is expected to cost $8.2 billion.
As of press time, the state Senate passed Senate Bill 4 that would generate $2.37 billion in bailout funds for the rail project. The Senate voted 16-9. Senate Bill 4 crossed over to the House where it passed the House committees on Transportation and Finance, and awaits a full House vote.
If the Senate and House reach an agreement and SB 4 is signed by the governor, it would raise the statewide hotel room tax by 1 percentage point for 13 years to raise $1.04 billion, and would extend the half-percent general excise tax surcharge on Oahu for another three years to raise another $1.32 billion for rail.
The rail project has faced public outcry and criticism for its runaway costs. The estimated cost in 2014 was $5.26 billion but current estimates have it closer to $10 billion to complete.
Mayor Kirk Caldwell estimates that even with the State bail out money proposed by the Senate, the rail project would still need about $600 to $900 million more.
“If in fact the numbers do prove to be correct and we do not face a shortfall, I will breathe sigh of relief,” Caldwell said. “Otherwise we’re going to be faced with things I don’t want to have to do. Raising real property taxes is something I don’t want to do. Having our bond ratings slip I don’t want to see. And most of all, I don’t want to cut down on the core public services that we provide to the City and County of Honolulu and the taxpayers.”
Representatives from the tourist industry expressed opposition to Senate Bill 4’s 1 percentage point increase (to 10.25 percent) of the transient accommodations tax (TAT), fearing that the increase could scare off visitors.
Neighbor islands elected officials also opposed the bill saying that their islands should not have to pay for the Honolulu project.
The state emergency funding for the rail project failed earlier this year in the 2017 regular session.
Other areas regarding Rail funding to be explored this special session:
*The current method of collecting the hotel room tax remains the same. It is collected statewide and goes directly into the general fund, not to the island where it is collected. Each county receives a specified amount of the tax regardless of total amounts collected. Raising the tax does not change that amount.
*Permanently increase the counties’ share of the TAT from its current $93 million base to $103 million.
*Reduce the State Department of Taxation’s administrative fee on the GET surcharge from 10 percent to one percent.
*Require a state run audit of the rail project and annual financial reviews.
Currently, the GET surcharge is automatically transferred to the city on a quarterly basis without any oversight. This bill will change that practice to ensure accountability and transparency by having the Comptroller review and approve the expenses before the City and HART are reimbursed. It also establishes better internal control and ensures that waste and fraud does not occur.
House Speaker Scott K. Saiki (Kakaako, Downtown) said the $2.378 billion funding shortfall package will fund the rail project through Ala Moana and will not jeopardize the $1.55 billion in federal funding.
“By working with our colleagues in the Senate, the Legislature has come up with a concrete plan to fund the rail project that will reduce the overall costs while shifting some of the regressive tax burden away from our residents, who are struggling to make ends meet,” Saiki said. “This plan will not have a direct impact on neighbor island county budgets.
“We have taken a long look at the rail project and have heard the concerns of residents during our joint public hearing on rail funding this month. This is a critical infrastructure project for Hawaii. We are not giving the City a blank check but instead insisting on audits and financial reviews and expenditures to provide complete transparency for our taxpayers.”