A $2.4 billion bailout plan for the troubled Honolulu rail project cleared some big hurdles Wednesday, passing both the full Senate and two House committees despite opposition from lawmakers who say the project’s costs have spun out of control.

Final passage for the measure is expected to be voted on by the full House on Friday. Gov. David Ige has said that will he will sign into law a measure that passes the Legislature.

Senate Bill 4 has been moving through the Legislature at a brisk pace during a special session designed to last just five days. It sailed through both the House Finance and Transportation committees after a lengthy hearing Wednesday afternoon. Earlier Wednesday, the bill cleared the full Senate on a 16-9 vote.

Sen. Jill Tokuda speaks in favor of the rail bailout before a key Senate vote. Stewart Yerton/Civil Beat

The measure is projected to raise about $1.3 billion from Hawaii hotel guests by increasing a statewide hotel room tax to 10.25 percent from 9.25 percent for 13 years. It would also raise a projected $1.046 billion from Oahu taxpayers by extending the general excise tax surcharge three additional years from 2027 to 2030.

Wednesday’s joint hearing before the House committees was largely a replay of the Senate hearing earlier in the week, with neighbor island officials and tourism industry executives opposing the measure.

Stress Over ‘Stress Test’

Mayor Kirk Caldwell has also strenuously opposed the package, arguing that it doesn’t provide enough money.

The Honolulu Authority for Rapid Transportation had repeatedly reported the total rail cost would be $8.165 billion. But beginning late last week, Caldwell had claimed the cost was $8.7 billion, the extra money needed because of a risk analysis, called a “stress test,” that the Federal Transit Administration would require.

In a blunt refutation of Caldwell, U.S. Rep. Colleen Hanabusa testified at the House hearing that the test was not required. She said she had participated in a conference call on Wednesday morning where representatives of the FTA, which has committed $1.55 billion to the project, told her that budgeting for a stress test wasn’t necessary.

Rail Funding Proposal

Even if the FTA ends up requiring another stress test, it wouldn’t immediately seek more funding, Hanabusa said. Instead, the FTA would re-evaluate project costs and projected tax growth rates, then see how a potential shortfall could be remedied, Hanabusa said.

“I can understand why the mayor wants this money,” Hanabusa said. “Why wouldn’t he if he can convince you to give him money?”

During his testimony, Caldwell acknowledged the stress test was not required and that he didn’t know the last time he had talked with the FTA. But he said he wanted $600 million to $900 million more than the $2.4 billion the Legislature’s rail package provides.

While the bill has survived the first three days of the special session, one casualty appears to Caldwell’s credibility among some legislators. In harsh terms, lawmakers said they simply did not believe the mayor.

House Finance hearing rail Congresswoman Colleen Hanabusa.
Congresswoman Colleen Hanabusa said additional funding beyond what’s proposed in the Legislature is not necessary to satisfy federal officials. Cory Lum/Civil Beat

Representatives repeatedly pressed Caldwell on whether he would rescind his call for more funding beyond the $2.4 billion that would be provided under SB 4.

“Forgive me, Mr. Mayor. It seems to me, from reading my constituents’ emails, nobody trusts your figures,” Rep. Joy San Buenaventura told Caldwell.

Rep. Matthew LoPresti echoed the sentiment. “I felt like I was lied to,” he said. “With all due respect, I don’t believe you anymore.”

During the earlier vote in the Senate, several opponents made passionate pleas to stop the bill, saying that it would lock taxpayers into paying for the rail line at the expense of other much-needed services, like health care, housing, education and addiction treatment.

Sen. Josh Green of Hawaii Island said he recalled when the Legislature voted to adopt the 0.5 percent Oahu GET surcharge his daughter was just born and the rail line was projected to cost $4 billion. Now, Green said, “a $4 billion project has ballooned into an $8 billion project in cost.”

Invoking the English satirist Jonathan Swift, Sen. Gil Riviere of Oahu called the rail a “Brobdingnagian budget-busting boondoggle.”

“I cannot support this bill because we are just throwing, I think, good money after bad,” Riviere said.

Senator Laura Thielen rises in opposition to SB4 before final senate floor vote.
Sen. Laura Thielen spoke in opposition to the rail bill before the final Senate vote.. Cory Lum/Civil Beat

Sen. Laura Thielen of Oahu said it was imperative to provide a source of public transportation for people who live in Mililani and Kapolei, Oahu’s growth areas. She added that transit-oriented development provides an opportunity to create affordable and workforce housing.

But she said the rail was not the way to achieve those goals and that committing billions more dollars to the project locks Oahu into one, expensive solution.

“We’re closing the doors to a lot of alternatives to that broader vision,” Thielen said.

Still, support for the bill prevailed even among some senators who acknowledged the rail project has gone awry.

Sen. Will Espero said management of the project by the Honolulu Authority for Rapid Transportation and the cost overruns were “totally unacceptable to our voters and residents of Hawaii.”

Senator Will Espero speaks in support SB4 rail bill before final seante floor vote.
Sen. Will Espero spoke in support of the bill, saying, “our backs are against the wall.” Cory Lum/Civil Beat

But he said, “Unfortunately, there is no turning back … Our backs are against the wall. If someone has a better idea, then please present it because I haven’t seen it or heard it.”

Although some critics have complained that visitors to neighbor islands will end up helping to pay for the Oahu project, Senate President Ron Kouchi said it has been clear that the bailout measure would have to include a mix of excise and hotel taxes. The Legislature ended the regular session deadlocked over which source to use.

“I think it was clear on May 4 that any deal was going to include the TAT,” Kouchi said, using the acronym for  the Transient Accommodation Tax.

In the end, the compromise bill was the best solution, said Sen. Jill Tokuda, who was ousted from her seat as chair of the powerful Ways and Means Committee after the rail bill stalled in the regular session.

Taxpayers would still be on the hook for billions of dollars in rail money spent so far and would have to give $1.55 billion back to the Federal Transit Administration if taxpayers don’t commit billions more to bail out the project, Tokuda said.

“To do nothing would hurt the very people in our community we are trying to help,” she said.

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