Feuding over the future funding of Honolulu’s rail project, normally confined to behind-the-scenes negotiations, broke out into the open Wednesday at a crowded legislative hearing.

Sen. Lorraine Inouye and Rep. Sylvia Luke spent the better part of 45 minutes in a testy back-and-forth argument about how far to extend the general excise tax surcharge to provide additional funding for a rail project that is far over budget and far behind schedule.

Inouye wants the GET surcharge to run 10 additional years until 2037, while Luke wants it to go only two years beyond its 2027 sunset date. Their differences reflect sharp disagreements among Senate and House leaders about rail funding and whether the surcharge extension should be used to fund other transportation projects.

Their dispute played out in front of the majority leaders of both chambers, the news media, Honolulu Mayor Kirk Caldwell and officials with the Honolulu Authority for Rapid Transportation.

Chair Senator Lorraine Inouye speaks Co Chair Rep Sylvia Luke, co chair Henry Aquino and Rep McDermott. 26 april 2017
In an unusually candid exchange, lawmakers clashed at length about controversial legislation to extend the Honolulu rail tax surcharge. Cory Lum/Civil Beat

Indeed, the Legislature had taken the unusual step of sending out a media advisory for the conference committee on Senate Bill 1183.

On that count, credit lawmakers for allowing some transparency on a process that is usually closed to the public.

Extending The Surcharge

As a conference committee co-chair on the rail tax, Inouye summarized the key points of her proposed conference draft of SB 1183: In addition to extending the surcharge, 80 percent of the money would go to Honolulu for rail construction (the figure is currently 90 percent), while 19 percent would go to the State Highway Fund and 1 percent would go to the state Department of Taxation to administer the tax.

The city would also have to lift its ban this year on prohibiting use of city money for the project (something Luke also wants, and something city officials are moving toward doing). The other three counties would be given the option of imposing a GET surcharge to pay for their own transportation projects.

Luke’s co-chair, Rep. Henry Aquino, immediately took issue with Inouye’s draft, known as a CD 1.

Chair Sylvia Luke and co chair Henry Aquino look at their single copy of documents presented to them as more copies were being made. rail funding meeting. 26 april 2017
Reps. Henry Aquino and Sylvia Luke look at a copy of Sen. Inouye’s proposed draft for the rail tax bill. Cory Lum/Civil Beat

How could the Senate have moved to the latest version of SB 1183 when it had previously agreed to a draft that called for not extending the GET surcharge past 2027 at all and instead returning to the city the 10 percent “skim” that the state takes for administrative purposes?

The two positions, he implied, were so different.

Aquino also wanted to know how much revenue the 10-year extension would generate.

“As far as we’re concerned, we are not going to stop the rail. That is the position of the Senate.” — Sen. Lorraine Inouye

Luke quickly chimed in, expanding on Aquino’s concerns and raising the heat at the conference table.

Inouye reiterated what her draft would do, and said that the purpose of a conference committee is to have exactly the type of discussion that the conferees on SB 1183 were having.

The senator emphasized that all 20 miles of the rail line must be built, that it was good for jobs and that it was in the best interest of future generations to have the option of riding the rail.

“As far as we’re concerned, we are not going to stop the rail,” she said. “That is the position of the Senate. That we will not stop the rail halfway.”

Chair Senator Lorraine Inouye gestures while speaking to right, Co Chair Rep Sylvia Luke after Luke asked some questions about the language of the measure. 26 april 2017
Sen. Lorraine Inouye wants the Legislature to extend Oahu’s rail tax surcharge, but she is encountering resistance from House leaders Cory Lum/Civil Beat

Luke accused Inouye, and by extension the Senate, of unnecessarily burdening the poor and the elderly with higher taxes and diverting money from other important issues such as alleviating homelessness.

She also criticized Inouye and her colleagues for not having provided estimates of the revenue that should be generated from the extension —  something she had done for her own House draft.

“All we’re saying is that, if you are going to propose something, at least be genuine and tell us exactly how much in taxes that’s going to cost.” — Rep. Sylvia Luke

At times, Luke jumped on Inouye in the same aggressive manner she used against Caldwell and HART leaders, who she has chastised for not having a better handle on rail expenses.

“All we’re saying is that, if you are going to propose something, at least be genuine and tell us exactly how much in taxes that’s going to cost,” Luke said.

Inouye said the numbers exist and she promised to share the data with the House by the end of business Wednesday.

There were frequent interruptions (“Let me finish,” Luke said at one point), and there were disagreements over interpretations of parts of Inouye’s draft. Luke, for example, suggested that it would allow Oahu taxpayer money to be used for neighbor island roads and highways.

Inouye said that wasn’t true.

Sen Jill Tokuda Sen J Kalani English look on as Chair Lorraine Inouye is questioned by Rep Sylvia Luke. 26 april 2017
Senate Majority Leader J. Kalani English, left, and Sen. Jill Tokuda listen to an exchange of words between Inouye and Luke. Cory Lum/Civil Beat

Luke and Inouye concluded by agreeing to meet again on SB 1183 Friday morning. But what happens now is anybody’s guess.

The House could offer its own conference draft, and the Senate could accept it or make a counteroffer. The House could also refuse the Senate’s draft and let the bill die, or the Senate could simply agree to the two-year extension in Luke’s version of the bill.

Senate Flexibility Vs. House Doubts

Even if SB 1183 were to die in conference, it could be pulled to the House and Senate floors for a vote — another rare procedure. It’s also possible that bill conferees could be replaced, but that would bruise a lot of egos and likely result in leadership changes.

Inouye made it clear that the Senate wants to keep talking. She even showed some of her cards, saying it was possible that the tax extension could go for a shorter time — maybe six years, for example.  She said she also was willing to forget about providing money for the State Highway Fund, but she admitted that it pained her to even consider that prospect (she is chairwoman of the Senate Transportation and Energy Committee).

Luke, chairwoman of the House Finance Committee, questioned whether senators were really united in support of Inouye’s draft bill, in particular, Jill Tokuda, who is Luke’s counterpart as the Senate Ways and Means chairwoman. Tokuda drafted the bill allowing only the skim money to be used for the rail, and to not extend the surcharge beyond 2027.

Tokuda is Inouye’s conference co-chair on SB 1183, but she sat silent during Thursday’s table deliberations. Two other conferees, Sen. Donovan Dela Cruz and Clarence Nishihara, did not attend.

Mayor Kirk Caldwell listens to Senator Lorraine Inouye during Joint Conference committee rail tax. 26 april 2017
Mayor Kirk Caldwell, right, was among those in the conference committee audience. Cory Lum/Civil Beat

As expected at the beginning of the session, the debate over the rail tax will go down to the wire. Friday at 6 p.m. is the deadline to conclude the conference committee period, and final votes on all surviving bills will happen next week before the session ends May 4.

After the meeting, Caldwell declined to meet with reporters waiting for his reaction. His communications director, Jesse Broder Van Dyke, said that the mayor went to a City Council meeting to testify on bills.

Federal Deadline Looms

HART’s interim executive director and CEO, Krishniah Murthy, told the media that the city is in contact with the Federal Transit Administration regarding a Sunday deadline to have a rail financial recovery plan in place.

Murthy said “it is a challenge,” but he said HART would be working through the “last minute” to complete the plan.

Murthy also said that the Senate draft of SB 1183 — that is, the 80-20 split on the skim and the 10-year GET surcharge extension — would not be enough to complete the rail project.

He said HART was working on the numbers, but that variables such as GET collections, market conditions and long-term bond rates make it difficult to predict how much money the tax extension would raise.

The rail project has so far cost $6.8 billion. It’s estimated that a total of $10 billion will be needed to complete construction.

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