Ways and Means Chairman Donovan Dela Cruz said he intends to reconsider the decision and kill the bill.

A bill that would allow Honolulu to extend the excise tax surcharge for rail to raise more money for the cash-strapped project was approved Monday in the powerful Senate Ways and Means Committee.

But barely an hour later, Sen. Donovan Dela Cruz said in an interview that the handling of Senate Bill 176 was an “oversight.” He said he planned to hold a new hearing to reconsider the committee’s vote and defer the bill, effectively killing it for this year.

Most of the funding for the rail project comes from an excise tax surcharge of one-half of 1% that is levied on Oahu residents and visitors. That excise tax surcharge raises about $300 million per year, and surcharge receipts are projected to total nearly $6.4 billion to fund rail construction.

Donovan Dela Cruz
Sen. Donovan Dela Cruz, chairman of he Hawaii Senate Ways and Means Committee, said the committee will reconsider its vote on a bill that would allow the city to extend the excise tax surcharge for rail. (Screenshot/2022)

The tax surcharge is scheduled to expire in 2030, but rail supporters have argued for years the Legislature should make the half-percent excise surcharge permanent. That would provide more money to build the rail project, and provide cash to cover the operating costs of the system.

For a few minutes on Monday it appeared those rail supporters were getting their wish — or something close to it — when Dela Cruz proposed that SB 176 be passed with amendments.

The committee voted 13-0 with almost no discussion to allow Honolulu and the other counties to extend the tax surcharge, a surprisingly relaxed handling of a politically supercharged issue that has bedeviled lawmakers for years.

The bill would scale back the excise surcharge from 0.5% to 0.25%, but would allow the reduced surcharge to continue beyond 2030.

The preamble of the bill explains that the Legislature “concludes that it is appropriate to authorize the counties to permanently adopt and impose a public transportation surcharge” at the lower rate.

But Dela Cruz said after the hearing that the Ways and Means Committee does not plan to extend the surcharge beyond 2030.

He said Democrats including Sen. Michelle Kidani and Sen. Joy San Buenaventura feel that if lawmakers are going to extend the excise tax “then that percentage should be going to education or social services, so that’s where I think we’re going to end up getting into a conflict.”

When asked why he advanced a bill that would have allowed the tax to remain in effect after 2030, Dela Cruz said only “that was an oversight.”

Instead, Dela Cruz said the Senate will push ahead with Senate Bill 1568, which was approved by the committee on Feb. 22. That measure would allow county councils that have not yet passed an excise surcharge to do so to help fund affordable housing projects, but the surcharge would still expire in 2030.

Dela Cruz scheduled SB 176 for reconsideration on Thursday.

The excise tax surcharge has been controversial each time the Legislature has had to deal with the issue. Lawmakers established the surcharge in 2005, then revisited the issue in 2015 and again in 2017 to extend the tax when the budget-busting rail project needed more money.

The rail project is once again short of funding, which prompted the city to shorten the transit line by about a mile.

Help power our public service journalism

As a local newsroom, Civil Beat has a unique public service role in times of crisis.

That’s why we’re committed to a paywall-free website and subscription-free content, so we can get vital information out to everyone, from all communities.

We are deploying a significant amount of our resources to covering the Maui fires, and your support ensures that we can pivot when these types of emergencies arise.

Make a gift to Civil Beat today and help power our nonprofit newsroom.

About the Author