The question of how to pay for Honolulu’s over-budget and oft-delayed rail system got a few answers Wednesday.

But they were not the ones that city and rail officials were hoping to hear.

Instead of extending Oahu’s 0.5 percent surcharge, which is set to expire a decade from now, in perpetuity, the House Finance Committee passed an amended version of the rail tax bill that falls well short of that.

Chairwoman Sylvia Luke announced that Senate Bill 1183 was amended to extend the surcharge for just two years beyond its 2027 sunset date. That would provide the city and its rail agency with $792 million more in revenue.

Mayor Kirk Caldwell and HART Interim Executive Director and CEO Krishniah Murthy were grilled by House Finance members on why rail cost projections were so inaccurate. Chad Blair/Civil Beat

Luke also said the state would adjust the amount of “skim” it levies on the surcharge, reducing it from 10 percent to just 1 percent. That would generate another $397 million which, combined with the $792 million, comes to just under $1.2 billion.

In Luke’s estimatation, that’s roughly the amount of money the city and the Honolulu Authority for Rapid Transportation need to finish the project.

Honolulu Mayor Kirk Caldwell, who recently told the House he would accept a GET extension until 2047, tried to put a good spin on the bill, saying it remains a legislative vehicle to continue discussing the issue.

But, after a hearing that began around 3:30 p.m. and did not conclude until after 10 p.m., a tired Caldwell could not hide his disappointment.

“It’s nowhere near what we need, obviously, so we would have to make up the difference at the city level,” he told reporters afterwards. “Of course, where you get that revenue from, it comes out of real property taxes. So, either we cut services or we raise real property taxes.”

‘Mistakes Were Made’

For the House’s part, representatives repeatedly expressed how difficult it was to justify to their constituents the ever-rising costs of the rail project.

Currently estimated to cost $8.2 billion to complete all 20 miles with 21 stations from East Kapolei to Ala Moana Center, the figure does not include finance charges. Total costs, depending on interest rates and tax collections, could balloon to $10 billion.

Legislators repeatedly grilled Caldwell and HART Interim Executive Director and CEO Krishniah Murthy on why earlier estimates for the rail line’s true costs were so inaccurate.

Luke reminded them that the Legislature in 2015 had extended the surcharge by five years, which she said amounted to as little as $900 million to as much as $1.5 billion in additional money.

Elaine Kam brought in a homemade sign to illustrate her many concerns with Honolulu rail. Chad Blair/Civil Beat

Caldwell said previous cost estimates were “a snapshot” at that time, and he said that he, like many people, struggle with the dramatic increases. But he insisted that the current numbers are more “certain” than the previous ones.

Murthy, speaking of the actions taken by the HART board before he joined it, said, “Apparently, mistakes were made.”

He explained that contracts in 2009, 2010 and 2012 were not “properly vetted” and lacked “clarity,” and so contained inaccuracies.

But Luke and her committee members weren’t satisfied with the answers they were getting, and on several occasions criticized city and HART leaders for not being adequately prepared for the hearing on SB 1183.

“This is the second time the state has bailed out the City and County of Honolulu and HART for the rail project,” Luke said in a statement. “The public and the Legislature has lost faith and confidence in their ability to provide an accurate budget estimate and control costs.”

Federal Deadline Looms

The mayor apologized to the legislators, given that he came before them just two years ago to ask for more money.

At Wednesday’s hearing, members of the Honolulu City Council also asked for the GET surcharge extension and also apologized for the difficult challenge before House Finance.

HART Rail Salt Lake Boulevard Aloha Stadium. The Bus. 23 feb 2017
The rail line crossing Salt Lake Boulevard near Aloha Stadium. Will it be built all the way to Ala Moana Center? Cory Lum/Civil Beat

Chairman Ron Menor reminded lawmakers that he and Councilman Ikaika Anderson recently met with Federal Transit Administration officials, who told them that $1.55 billion in federal support for rail was at risk.

The FTA has set April 30 as the deadline to learn if “plan A” — a fully funded recovery plan for the project — is going to happen, or what constitutes “plan B.”

At the hearing, legislators also heard from many of the same people who testified about previous versions of SB 1183, some reading word for word what they had already submitted in written testimony.

Luke asked testifiers to be brief and to the point, but that didn’t happen, stretching the proceedings even longer. They included comments from Bob Nakata, Tom Yamachika, Natalie Iwasa, Scott Wilson, Elaine Kam and Frank Genadio.

Some of their arguments — such as calling for the building of part of the route “at grade” rather than on an elevated platform, or switching to magnetic levitation technology — are not actively being considered, they complained.

But the rail plan is in place, and construction is moving closer to town from where it began in East Kapolei. It is not within the purview of the Hawaii Legislature to consider structural or technical changes.

City, HART Must ‘Do Their Part’

SB 1183 requires other changes. In essence, they require the city to come up with its own means of helping to fund the project:

  • require the city to approve the surcharge extension on or before Dec. 31, 2017;
  • mandate that the city not prohibit the use of city funds for rail expenses;
  • prohibit the use of the GET surcharge revenue to fund HART administrative, operating and personnel expenses;
  • state that GET funds can only be used for construction; and
  • give all counties the option to extend the surcharge. 

Allowing the city to use its own funds to help pay for rail requires the lifting of a City Council ordinance that prevents it. If the city does not act accordingly, Luke warned, there would be no rail tax deal at all.

“We continue to be disappointed that the city and HART have not considered significant cost cutting measures and alternatives to funding,” said Luke. “We believe the funding we are providing today will be sufficient as long as the City and HART do their part to responsibly finance and manage their rail project.”

Honolulu City Council Chairman Ron Menor asks the House Finance Committee to fully fund the rail system by extending the GET surcharge. Chad Blair/Civil Beat

Six members of the 17-member Finance Committee voted “no” on the revised draft, while one voted “yes” with reservations.

SB 1183 now faces a full floor vote in the House before moving to the Senate.

Because the bill is “clean” — that is, there is no “defective date” language to delay when it would take effect — the Senate could choose to accept what the House did and conduct its own floor vote.

If there are disagreements, SB 1183 could end up in conference committee, the behind-closed-doors maneuvering where Senate and House negotiators would try to reach an acceptable compromise.

But the Senate could also kill the bill.

This much seems certain: Caldwell promised legislators he would not return for a third time to ask for more money.

“I’m not coming back again,” he said.

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