Facing new pressure from the Federal Transit Administration, Honolulu’s City Council has moved closer to lifting the ban on using city funds to pay for rail construction.

On Wednesday, its members voted 7-2 to advance Bill 42 on second reading. A third and final vote to approve that controversial measure, scheduled for Oct. 30, will pave the way for the city to commit its first $44 million in general obligation bonds to help build rail.

State and federal tax revenues have funded rail so far. Last year, however, state leaders required that the city pitch in to help cover those construction costs if they were to approve the latest $2.4 billion funding package to rescue the troubled transit project.

With its current cash flows, the Honolulu Authority for Rapid Transportation has repeatedly stated that it doesn’t need the first $44 million, which represents the city’s share for 2018 and 2019.

But the FTA recently demanded in writing that the city commit those dollars anyway — and get it done by about Nov. 20 — or it could risk losing millions more in federal funding.

HART Rail Guideway being built near Aloha Stadium.
Rail’s elevated guideway continues to take shape near Aloha Stadium. Cory Lum/Civil Beat

Essentially forced into a corner, city leaders revived Bill 42 during two special, expedited hearings on Wednesday after tabling the measure for over a year. Their vote moves them closer to reversing the pledge made years ago by previous city leaders to Honolulu residents that their property taxes would not be used for rail construction.

“This Council is left with the politically despicable option of allowing real property taxes to be made available to support this project,” Councilman Ikaika Anderson wrote in remarks that he submitted at Wednesday’s meeting, upon voting in favor.

“But this is not a blank check,” he added.

The vote also comes with no guarantees that the FTA will find that step sufficient.

City budget officials have said it’s impossible to float those bonds by the Nov. 20 deadline they face. Mayor Kirk Caldwell’s staff has asked the FTA to clarify whether lifting the ban and moving forward with the bonds issuance would be enough. On Wednesday, Deputy Budget and Fiscal Services Director Manuel Valbuena told the Council that they still haven’t heard back.

That’s one reason Trevor Ozawa, who joined his Council colleague Ann Kobayashi in voting no, gave for his dissent.

“What is the next hoop that I’ve got to jump through?” Ozawa said Wednesday. The East Oahu councilman also faces an electoral challenge in November from a political rival, Tommy Waters, whom Ozawa narrowly edged by 41 votes to win that seat in 2014.

Honolulu City Council member Trevor Ozawa during full council meeting.
Honolulu City Council member Trevor Ozawa voted against Bill 42 on Wednesday. Cory Lum/Civil Beat

On Wednesday, the Council added language to Bill 42 backed by Caldwell that would cap the total amount of city funds that could go toward rail construction at $214 million. That’s the amount listed in HART’s 2017 recovery plan. It would further cap the city’s annual contribution at $26 million.

Honolulu rail currently faces another key funding hurdle: The FTA has concluded that the project needs an additional $134 million – just in case. HART disagrees, but the local agency has to find a way to cover that extra amount.

At Wednesday’s meeting, HART officials struggled to explain to the council that they believe updated projections for the project’s general excise tax and transient accommodations tax collections would cover the difference. Ernie Martin, the council’s chairman, essentially had to coax that out of HART Chief Financial Officer Robert Yu.

Yu and his boss, HART Executive Director Andy Robbins, sounded cautious and careful Wednesday — likely because they’re still finalizing the latest financial plan for the project. A draft should be available next week.

When Councilman Ron Menor asked Robbins for assurances that the city would not have to cover the extra $134 million, Robbins said, “that is what we’re working on” and “hope to accomplish.”

Representatives of Hawaii’s construction industry and unions, including the General Contractors Association, Hawaii Construction Alliance, and Hawaii Laborers Union Local 368, testified in support of Bill 42 on Wednesday.

Members of the Financial Accountability for Rail Mass Transit Association, a grassroots group that includes former Councilman Rod Tam and former Republican gubernatorial candidate John Carroll, voiced their opposition. They called for the state’s audit of rail to be finished before the council makes any more moves.

Carroll called the 20-mile, 21-station rail project “Hawaii’s Titanic.”

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