The mayors of all four Hawaii counties are urging Gov. David Ige to extend the legislative session to ensure that a bill to help fund the Honolulu rail project doesn’t die.

During testimony before the City Council Budget Committee on Wednesday morning, Honolulu Mayor Kirk Caldwell described a letter the mayors sent to the governor.

Caldwell decried the state House’s push to raise the city’s hotel tax to fund rail. Senate leaders supported that position last week, but a majority of members overruled them Tuesday and amended the rail funding bill to rely on extending a general excise tax surcharge instead.

Mayor Caldwell Capital Projects 2018. 2 mar 2017
Mayor Kirk Caldwell supports extending the GET and opposes raising the hotel tax for rail. Cory Lum/Civil Beat

That has resulted in a standoff between the two chambers that puts the rail funding bill in jeopardy with the legislative session scheduled to adjourn Thursday. Without a bill, the project is about $3 billion short of what city officials say it needs.

Caldwell said the session can be extended if Ige or a two-thirds majority of the Legislature agrees to do so.

But Gov. David Ige told reporters later Wednesday that he’s not planning to extend the legislative session.

Caldwell said the session can be extended if Ige or a two-thirds majority of the Legislature agrees to do so.

But Ige told reporters later Wednesday that he’s not planning to extend the legislative session.

After hearing testimony from Caldwell and others Wednesday, the Council Budget Committee advanced a bill Wednesday that would allow the city to use any revenue to pay for rail, including property taxes. A second measure that moved forward would allow the city to use more funding from the general excise tax to pay for rail, provided the Legislature approves it.

‘Tough Choices We Are Going To Face’

Caldwell reiterated Wednesday that he supports using the general excise tax to fund rail construction, adding that he believes it will result in the “least amount of pain” for Hawaii residents.

The GET is the funding mechanism that the city has been relying upon so far to pay for rail construction, which has ballooned from more than $5 billion in 2012 to about $10 billion.

Legislators’ move Friday to use hotel tax revenue instead surprised many people, particularly the hotel industry that lobbied aggressively over the weekend against increasing the tax. Many senators criticized the lack of a public hearing on the proposal.

Caldwell warned Wednesday that raising the hotel tax could hurt the state’s economy, echoing concerns from state senators Tuesday.

“I don’t want to take this community down this path and I believe that you don’t either,” Caldwell told the Budget Committee. He warned that the city’s bond rating was at risk if the hotel tax revenue is used.

The mayor didn’t address worries about the regressivity of the GET. A study by the Institute on Taxation and Economic Policy found that low-income Honolulu residents pay a much higher share of their income in taxes than wealthy residents, largely because the GET taxes business activity including food and medicine.

The mayor estimates that the House version of the bill that relies on the TAT would force the city to come up with at least $1.5 billion for financing costs.

Even under the Senate version of the bill which he prefers, Caldwell said that the city could still see a $200 million shortfall.

He urged the Council to reconsider his suggestions for raising taxes and fees to cover the city’s operating costs.

“Depending on what happens with the House, I think you need to visit whether all three of these bills move,” he said, referring to his proposals to increase parking meter fees, the fuel tax and the motor vehicle weight tax.

He noted that the city is facing a $66 million shortfall if the House version of the bill passes because it would no longer be able to use hotel tax revenue and would have to cover the operating costs for the Honolulu Authority on Rapid Transportation.

He discussed the possibility of raising property taxes and cutting government employee pay and benefits to raise revenue, adding that he doesn’t want to do either.

“These are the tough choices we are going to face depending on what happens,” he said.

Read the mayors’ letter to the governor:

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