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Two years ago, the Honolulu City Council created a fund to help businesses hurt by construction of the 20-mile long rail project. But there was a hitch: the council never appropriated any money for it.
Then last April, the council put a line item in the budget for fiscal year 2018, which began July 1 and ends June 30, offering $2 million in property tax breaks to businesses suffering losses from work on the rail line.
With five months left to go in the fiscal year and no effort to distribute those tax breaks, that offer is looking like an empty promise.
“At this point we’re not sure how we’d administer those funds,” said Councilman Joey Manahan, who added the tax breaks to the budget.
The failure of the city to follow through with any assistance for businesses hit hard by construction work has left Lynn Elisala frustrated.
For 17 years, her restaurant, Kristen’s Kitchen, served plate lunches from its Waipahu storefront along Farrington Highway.
Then in January 2015, rail construction broke ground and blocked cars from entering the parking lot in front of the restaurant. Sales plummeted, Elisala said, and 11 months later Kristen’s went out of business.
Elisala hasn’t had much success contacting city officials about the tax breaks.
“I lost my whole 401k,” she said. “It’s just stress knowing it’s out there and they could, maybe yes, maybe no, follow up on it.”
Andrew Pereira, a spokesman for Honolulu Mayor Kirk Caldwell, said the administration opposes using property tax breaks to subsidize businesses because it’s not fair to the taxpayers who don’t get breaks.
“You’re basically taking the overall pot of property taxes and diverting some of that money to a specific group of folks,” he said. “You’re benefiting a small segment of the population.”
Manahan added a proviso in the budget requiring the city’s Department of Budget and Fiscal Services to come up with a mechanism to distribute the tax breaks.
“I don’t think BFS is keen on moving on it,” Manahan said.
At a Budget Committee meeting in April, Honolulu Budget Director Nelson Koyanagi pointed out that offering tax relief wouldn’t actually give his department cash to hand out to businesses. Instead, the tax breaks would just mean less money comes into the city.
He added that property tax breaks wouldn’t guarantee help to small businesses that lease their storefronts.
“You’re providing the tax relief to the owner of the property not necessarily to the businesses that are operating in the area,” Koyanagi said.
Steven Wong leases the storefront near the soon-to-be Waipahu Transit Center where he runs Honolulu Kitchen, a restaurant known for its deep-fried manapua.
Wong doubts his landlord would let the benefits of a tax break trickle down to him and his 16 employees.
“No landlord I know would do that,” he said.
Just before construction he sold 4,000 to 5,000 manapua per day.
“Then all of a sudden rail started, my business dropped right away 27 percent,” he said. “They were working right in front of us.”
If the city was offering cash to help him recover from the losses, Wong would apply for the money.
Wong said that the Honolulu Authority for Rapid Transportation’s program to advertise businesses along the rail line during construction, Shop And Dine On The Line, did help his business rebound a bit from the losses construction caused.
HART also holds monthly community meetings for residents and businesses in neighborhoods affected by construction.
“We listen to what their concerns are that we feel we need to address and then we inform them what construction and impacts are ahead for their particular areas,” said HART spokesman Bill Brennan.
At times HART contractors change when they close lanes to accommodate the needs of the businesses.
The agency will soon hire a business relations specialist to work as a liaison between the agency, contractors and businesses.
Other cities have done far more to soften the losses felt by businesses.
During the last two years, the Los Angeles County Metropolitan Transportation Authority’s Business Interruption Fund gave more than $11 million in grants to small businesses that could prove rail construction hurt sales.
A Metro official flew to Honolulu this year to advise HART officials and business owners on ways to mitigate the impact of construction.
“They have a lot more people and a lot more money than we do,” Brennan said. “But still, we’re in touch with them and follow some of their same programs and principles.”
At a November HART board of directors meeting, Brennan said the board added $250,000 to HART’s fiscal year 2019 budget request to aid businesses hurt by construction.
HART board member Ember Shinn added the money to the request and said it would probably need to come from the city’s general fund, according to Brennan.
Faced with the challenge of equitably distributing money to businesses, officials at LA’s Metro agency created eligibility requirements for its BIF program.
Among other requirements, businesses have to be small, with 25 or fewer employees, and operate for at least two years along the corridor.
As of October, 734 businesses have applied for funds and 249 received assistance.
The amount awarded to each business depends on how much its revenue declined during rail construction, varying from $500 to $50,000, according to Shalonda Baldwin, Metro’s deputy executive officer of diversity and economic opportunity.
The grant covers rent, utilities, payroll, insurance and other operating expenses. Any funds left over are used at the business owner’s discretion, Baldwin said.
In the late 1990s, Seattle public transportation agency Sound Transit began planning a segment of its rail system in Rainier Valley, a diverse area home to large immigrant communities.
“Then all of a sudden rail started, my business dropped right away 27 percent.” — Steven Wong, owner of Honolulu Kitchen
The Seattle City Council dedicated $50 million in city and King County funds to affected businesses in the Valley. That money helped more than 400 businesses, according to Jeff Munnoch, Sound Transit’s community outreach director.
The program did not extend to businesses in downtown Seattle.
“In downtown you’ve got great big businesses that can easily weather construction,” Munnoch said.
Brennan of HART estimates that in 2020, construction for the elevated rail guideway will begin in Kalihi, an ethnically diverse, working-class area cluttered with mom-and-pop stores.
And Manahan, who represents Kalihi on the City Council, said even if this year’s effort to help businesses fails it won’t be the last time the council addresses the issue.
“The intent was to anticipate the work coming down Dillingham,” Manahan said, referring to the Kalihi boulevard that will host the guideway.
Elisala doesn’t want city officials to forget about Kristen’s Kitchen or the businesses farther west along the guideway. She regularly calls and emails council members, met with Koyanagi and even tried to get through to Mayor Kirk Caldwell.
“They made it so difficult that anybody with half a brain would just say screw it, it’s too much trouble,” she said.
But she hasn’t given up.
“I still rattle their cage to let them know that I’m not dead yet.”