Hawaii lawmakers want the counties to put “more skin in the game” instead of just coming to the state year after year asking for more money, especially when it comes to Honolulu and funding for its increasingly expensive 20-mile rail project.
Sen. Jill Tokuda and several other lawmakers grilled Honolulu Mayor Kirk Caldwell for more than two hours Monday after mostly breezing through the pleas coming from Maui, Kauai and the Big Island.
She looked at equal turns astonished and frustrated as Caldwell made his urgent pitch for the Legislature to pass a bill that would make permanent the 0.5 percent general excise tax surcharge the state collects for the county to build its 21-station rail line from Kapolei to Ala Moana Center.
“It’s been like a shifting sands situation that no one can figure out or interpret or read,” said Tokuda, who chairs the Ways and Means Committee. “We need to know how much you actually need.”
The project’s cost has ballooned from $5.2 billion in 2012 to $8.2 billion, according to the Honolulu Authority for Rapid Transportation’s latest estimates.
Unlike two years ago when Caldwell came to the Legislature asking for help to cover a $910 million shortfall, the mayor made no promises as to how much the state’s biggest public works project may ultimately end up costing Oahu taxpayers.
“I can’t tell you for sure what it’s going to be,” he said.
Some estimates peg it at $9.5 billion, and lawmakers did not hesitate to round up to their own expectations of $10 billion or higher.
In 2015, the Legislature gave Honolulu the power, through its City Council, to extend the GET surcharge for five years, which it did. But city officials say that’s not nearly long enough now and they have the federal government, which has approved a $1.5 billion grant to help build rail, breathing down their necks to secure additional funding by April 30 to see the project to completion.
“What happens here between now and the end of April determines the fate of rail,” Caldwell said, calling it “critical” for the Legislature to take action. “I’ve put my political career on the line.”
Tokuda endeavored to get a handle on just how short the city is this time. She pressed Caldwell and HART Project Director Sam Carnaggio on the roughly $1.3 billion contingency fund that’s built into the $8.2 billion overall estimate, asking if it’s truly for unexpected costs or if it will all end up being needed.
If it’s truly for contingencies, Tokuda said, considering how much tax money is already to be collected, the city should only be short $300 to $400 million.
And assuming that’s the case, she floated the idea of closing the gap by having the state stop taking its 10 percent cut of the surcharge and just leaving funding for contingencies up to the city, which might serve as a better motivator for officials to control costs.
The city’s primary revenue generator is property taxes, which are among the nation’s lowest. But Caldwell favors funding the project with the general excise tax, which is effectively a sales tax, because roughly one-third of it comes from tourists.
Caldwell apologized to lawmakers and assured them that he would explore other revenue options and work to give them firmer numbers.
“It’s been a difficult, difficult journey with huge problems and unknowns, but for every step we take there’s fewer unknowns,” he said.
The mayor noted there are only two contracts left to award, which will cover the last 4.8 miles of the project and one transit center. The estimated cost for those two contracts is estimated at $2 billion, and Caldwell said he hopes bids will come in lower.
Caldwell is asking the City Council to approve new proposals to raise the fuel tax, vehicle weight tax and parking fees to raise $65 million to help cover the costs of public transportation, which for now is the bus system. He also plans to propose increasing bus fares, but not just yet.
“We’re putting money and skin in the game,” he said.
Increasing the fuel tax by 3.5 cents per gallon would raise $10 million, increasing the weight tax by 1 cent would generate $50 million and doubling parking fees to $3 per hour and extending the time of paid parking to 9 p.m. from 6 p.m. would add $5 million, Caldwell said.
The mayor estimated the annual cost to run a combined rail and bus system, starting in 2026 when rail comes online, to be about $400 million.
In a statement Monday evening, Honolulu City Council Chair Ron Menor said the mayor’s proposals need to be considered “cautiously.”
“The members of the Council must carefully balance paying for an integrated bus and rail system, which the voters approved, with what our constituents can afford,” Menor said. “I would also like to point out that the Mayor and the Council will be considering these proposals to increase taxes and fees on Oahu residents because key legislators have insisted that the City needs to put more ‘“skin in the game.’”
The “skin in the game” comments also arose when lawmakers heard from the neighbor island mayors about giving the counties a larger share of the 9.25 percent transient accommodations tax that the state collects.
The state capped the amount the counties receive at $103 million to split among them. In the past, the counties each received a percentage of the overall TAT collections. With the visitor industry on track for another record year, the state has reaped the benefits as the counties’ amount remains flat.
Sen. Kai Kahele told Hawaii County Managing Director Wil Okabe, who was representing Mayor Harry Kim, that he thinks the counties deserve more hotel tax money but need to put more “skin in the game” instead of just relying on the state.
Kim has committed to not raising taxes, Okabe said, adding that even if the Big Island only got a few million dollars more it would definitely help the county.
Okabe identified homelessness as one of the biggest issues facing Hawaii County, which he said has the highest rate per capita. He said it’s evident in the higher need for free or reduced school lunches and other social services, even though its a less visible problem compared to Oahu.
“It’s not like in Kakaako where you can see the homeless on the street,” he said. “They’re living in forests and areas where you can’t see them.”
Read Kim’s written testimony to state lawmakers, along with that of Maui Mayor Alan Arakawa, Kauai Mayor Bernard Carvalho Jr. and Caldwell, below.