The Honolulu City Council approved a five-year extension of a 0.5 percent general excise tax surcharge Wednesday to help cover cost overruns and lost revenues on the $6.6 billion rail project that’s currently under construction.
But the tax extension, which will push the sunset date for the rail surcharge from Dec. 31, 2022, to Dec. 31, 2027, comes with several restrictions, the most significant of which is a $1.1 billion spending cap on new revenues collected.
The cap is one of several measures the City Council approved to keep better tabs on the rail project, which was initially estimated to cost $5.2 billion.
Another will require the Honolulu Authority for Rapid Transportation to release the names of all contractors and subcontractors working on the rail project, as well as details about how much they get paid.
Council members have long said that before they approved the extension they needed more assurance from HART that it was doing all it could to rein in increasing costs on the project.
Officials have estimated that the five-year surcharge extension will raise from $1.2 billion to $1.8 billion.
“The general public is demanding accountability,” City Council Chairman Ernie Martin said during Wednesday’s meeting. “At the end of the day they’re expecting us as decision-makers to hold those who should be held accountable very accountable to the project itself.”
The council’s cap allows up to $1.1 billion to be spent on building the 20-mile route from East Kapolei to Ala Moana Center and debt financing. The rest of the money can be used for contingency, planning future route extensions, developing infrastructure around rail stations to support affordable housing and Americans with Disability Act accessibility improvements along the route.
Honolulu Mayor Kirk Caldwell, an ardent rail supporter, is expected to sign the council’s tax extension bill into law. He issued a statement late Wednesday afternoon thanking the council and stating, “Generations of Oahu residents, young and old, will benefit from today’s decision.”
One of the concerns with the cap was how the Federal Transit Administration would react to limiting spending on the project. The FTA gave the city a $1.5 billion grant in exchange for its promise to build the full 20-mile, 21 station rail system.
Agency officials worried that if HART didn’t get all the money it had asked for through the GET surcharge extension that the city would not be able to complete the project under the terms that it agreed to.
In fact, the FTA even threatened to withhold up to $500 million in grant money should the city not pass the five-year tax extension with enough funds to pay for the project’s looming shortfall.
HART Executive Director and CEO Dan Grabauskas said Wednesday that FTA officials were satisfied with the $1.1 billion cap because it provides enough flexibility to move forward.
He said the next step is for HART to update its financial plan for the project and get FTA sign-off before more federal money is released, a process that could be completed in April or May.
HART delayed issuing its final round of construction contracts for the city center portion of the project while the council debated extending the tax. Grabauskas said the delay likely cost the project $7 million to $9 million.
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