With a pair of key votes Tuesday, the Honolulu City Council all but reversed its nearly 12-year-old pledge that no city funds, including property tax dollars, would be used to help build the rail-transit project.
The 7-2 votes came during a daylong session of two special meetings to finally pass Bill 42, which lifts a ban on spending city funds for rail construction that had been in place since early 2007.
The move Tuesday aims to placate an increasingly impatient Federal Transit Administration. The agency has implicitly threatened to withhold funding vital to the project if the city doesn’t take swift action and open its own coffers for rail.
It also leaves the local agency overseeing rail with $44 million that it says it currently does not need. That’s based on the Honolulu Authority for Rapid Transportation’s cash flows.
“I don’t think any one of us wants to be in this position,” Councilman Joey Manahan said moments before voting with the majority. “Clearly, we had an ordinance that now we are reconsidering so we can make good to the FTA.”
Manahan and other council members, however, said they were backed into a corner under the terms of last year’s most recent state bailout package for rail. State leaders had required that the city pitch in as much as $214 million — ostensibly to cover the construction’s administrative costs — as “skin in the game.”
To meet that demand, city leaders would have to reverse a pledge first codified under former Mayor Mufi Hannemann back when rail was in the planning stages. Nonetheless, Bill 42 sat in limbo for months until mid-October, with the council leaders reluctant to proceed on such a politically volatile step.
Mayor Kirk Caldwell has repeatedly urged council leaders to take action, and a demand letter from the FTA in September appeared to finally force the council’s hand. Still, council members Trevor Ozawa and Ann Kobayashi voted no Tuesday.
The $44 million represents the first of the city’s $214 million contribution during remaining rail construction. Bill 42 contains language that caps the city’s contribution at that amount.
Bill 42 opponents, many of them staunch critics of the 20-mile, 21-station rail project as well, spent more than an hour testifying against the measure.
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, once more called for the state’s audit of rail to be finished before the council makes any more moves.
“What the Fukushima is going on around here? What are you thinking? Literally, what are you thinking?” bellowed rail critic Jack De Feo in his testimony before the council. “It’s about the money — it doesn’t grow on trees. And you expect us, the taxpayers, to foot the bill for the mistakes that you have made.”
Local union and construction-trade representatives spoke in favor of the measure as a means to ensure the island’s rail project moves forward.
Nelson Koyanagi, the city’s budget and fiscal services director, told the council Tuesday that the city would incur an additional $200,000 to $500,000 in costs just to issue the $44 million bond float for rail.
Caldwell and his council allies had pressed the council’s chairman, Ernie Martin, as well as its budget chairman, Ozawa, to issue those bonds concurrently with a larger set of bonds this past summer. That way, the Caldwell contingent said, city would have avoided the extra costs.
Ozawa opted instead to pursue an alternative budget maneuver that he hoped would ultimately spare the city from having to float the $44 million — or, more broadly, from even having to use property tax dollars to fund rail construction at all.
Ozawa’s maneuver never got the official buy-in from the FTA, however. The federal agency instead sent a Sept. 21 letter demanding that the city produce its share of rail funds. The City Council responded by scrambling into last-minute action.
“I’ve heard loud and clear from my district…and they don’t seem to support that,” Ozawa said Tuesday of using property tax dollars for rail, shortly before joining Kobayashi to vote “no.” The East Oahu councilman faces a heated race for re-election against political rival Tommy Waters.
With Bill 42’s passage, the $44 million in general-obligation bonds for rail likely won’t be issued until early next year. However, the FTA has made clear it wants to see that cash in hand by Nov. 20, city leaders say.
Thus, the City Council is slated to meet again next week and decide the best way to secure that $44 million in the short term. Then, the city would likely use the GO bonds issued next year to pay that off.
The City Council also voted 8-1 on Tuesday to approve the latest version of HART’s recovery plan, which was unveiled last week.
This latest version — the recovery plan’s third — comes more than two years after the FTA’s original August 2016 deadline to provide that report.
Its purpose is to show exactly how the city would address rail’s budget shortfalls and deliver the transit project so that it still satisfies the FTA. Rail’s federal partners have agreed to a $1.55 billion funding deal for Honolulu rail, but Honolulu has to live up to its end of the bargain.
The latest version estimates that rail will receive an additional $188 million more in state tax revenues, largely based on the updated collections of those sources. That would cover the extra $134 million that the FTA believes is needed to get the rail line all the way to Ala Moana Center.
The HART board is slated to review the latest recovery plan Thursday. It aims to approve the report before the FTA’s Nov. 20 deadline to show how the city would cover the extra $134 million.
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