Rail tax on track

The state Legislature has approved a five-year extension of Oahu’s rail tax surcharge, sending to Gov. David Ige a bill that aims to help pull the largest public works project in the state’s history out of a huge cash crisis.

With the Senate’s 21-4 vote and the House’s 39-12 vote Tuesday, lawmakers ended their months­long debate on rail by concluding that the train has already left the station. The best way forward for the cash-strapped project, a majority of them decided, would be to provide the tax dollars needed to keep construction going but not to bail out the city leaders on other tough questions, such as how exactly they’re going to fund the future rail system’s operations.

House Bill 134 would generate some $1.8 billion in additional rail funding from Oahu’s 0.5 percent general excise tax surcharge by allowing it to expire in 2027 instead of 2022. Transit leaders say that’s more than enough cash for the project to climb out of a budget hole that could be as deep as $910 million. Plus, it would provide a large contingency cushion to address any future problems.

The rail votes came as lawmakers approached the last day of the 60-day session of the Legislature, which is Thursday.

Both chambers took final votes Tuesday on an array of issues, ranging from providing preschool slots for disadvantaged children to supporting the Hawaii Health Connector program under the federal Affordable Care Act and allocating funding to purchase 55 acres at Turtle Bay.

The rail spotlight now shifts to Ige, who will decide the bill’s fate. He could sign it into law by July 14, take no action by that date and let it take effect without his signature, or alert the Legislature by June 29 that he plans to veto the bill.

Ige maintained through much of the Legislative session that he did not see why an extension would need to be passed this year. However, asked last month whether he still held that opinion, Ige said he would watch for what the Legislature decides. He added that "any measure should really be focused on the approved project, so the 20 miles that the public has embraced and the funding agreement is focused on."

If Ige signs the bill, the Hono­lulu City Council would then have to vote in favor to enact the surcharge.

The measure would leave in place the state’s controversial 10 percent fee to administer the tax, which has so far diverted more than $163 million to the state’s general fund instead of the rail project. The fee stands to divert at least $200 million more.

HB 134 would also give the state "air rights" above the rail system. The move would give the state control over future development there, and it raises questions about whether proceeds from that development will help fund the system.

Rail officials first announced in December that the 20-mile, 21-station rail system faced massive cost increases and cash shortages that would leave them powerless to finish construction without more money. They blamed the problem on delays — some of them self-inflicted and others caused by lawsuits — that pushed the project into a red-hot local construction market. Lagging GET revenues further compounded the problem, they said.

Ever since then, Honolulu Mayor Kirk Caldwell, arguably rail’s strongest local advocate, has spent what he estimated to be nearly 90 hours at the state Capitol lobbying legislators for an extension. He actually started touting the idea of increasing the GET extension last year as a way to fund the elevated rail system’s operations and maintenance.

On Tuesday, after watching the Legislature’s final debate take place, Caldwell praised its members’ "political courage and bravery" for authorizing a tax extension. However, Sen. Sam Slom, the chamber’s lone Republican and an avowed opponent of the rail project, took a jab at Caldwell’s constant presence in recent months. Slom said Caldwell appeared to be "camping out" at the Capitol.

"I thought he was homeless, Madam President — he was here every day," said Slom, who’s clashed with Caldwell at hearings on the measure.

Sen. Laura Thielen (D, Hawaii Kai-Wai­ma­nalo-Kai­lua) joined Slom in voting no because she said the Legislature was getting "played." In voting yes, the Senate would surrender a chance to hold the city more accountable as it spends proceeds from a tax that hits the poor the hardest, Thielen asserted.

The House spent nearly an hour debating the bill’s final passage. Rep. Matt LoPresti (D, Ewa Villages-Ocean Pointe-Ewa Beach) made impassioned arguments for the rail project, saying he could either leave his two small children with no debt and "nothing," or "I can do what is necessary to build a better future for them and give the responsibility to help maintain the systems that I build for them."

Rep. Andria Tupola (R, Kalaeloa-Ko Olina-Maili), meanwhile, said she couldn’t support rail because she viewed it as a "package" deal with the controversial planned Ho‘o­pili housing development, which Tupola worried would bring drivers only more gridlock.

Supporters have countered that however bad H-1 freeway traffic gets in the coming years, the rail system would give west-side commuters a reliable option to avoid sitting for hours in their cars.

Dollars raised under HB 134 could only go toward the costs to build rail and not toward future system operations once rail is up and running. If there’s any contingency left over, it might eventually go toward design and planning of route extensions to the University of Hawaii at Manoa and central Kapo­lei, Caldwell said.

The measure further allows neighbor island counties to enact their own surcharge for transportation-related projects and improvements. Rep. Angus McKelvey (D, Lahaina-Kaanapali-Hono­ko­hau) lauded the provision, saying it would fund badly needed upgrades on the island, such as bus shelters. Rep. Joy San Bue­na­ven­tura (D, Hawaii Acres-Pahoa-Kala­pana), however, said the neighbor island counties provision cost her support of the measure because she represents one of the poorest regions in the state, and they would be hard-hit by a GET increase.

Opponents of the measure have called the GET a highly regressive tax that burdens low-income residents much more than higher earners.

Lawmakers also gave final approval to a two-year budget that appropriates $12.9 billion for the year that begins July 1 and an additional $13.3 billion for the following year. That is a slightly leaner budget than the one originally proposed by Gov. David Ige.

Rep. Gene Ward (R, Kalama Valley-Queen’s Gate-Hawaii Kai) warned his colleagues that the state continues to spend down its cash reserves, and the Legislature is required by law to set aside more and more money each year to fund its obligations for public worker pensions and retirement health care.

"We’ve got a tsunami coming, and we’re spending more than we take in," Ward said.

House Speaker Joe Souki (D, Wai­hee-Wai­ehu-Wai­luku) replied that lawmakers are gradually bringing spending into line with state tax collections and other revenues, and at the same time are already banking more money each year for future retirement benefits for public workers.

House Finance Chairwoman Sylvia Luke (D, Punchbowl-Pauoa-Nuu­anu) said much of the additional spending in the budget for the next two years will be to pay for raises for public workers and to cover fixed costs and health care payments that the state is obligated to make.

Several public-worker bargaining units agreed to contracts with the state and counties in recent weeks, prompting lawmakers to budget an additional $77.7 million to cover new raises and benefits for unionized state workers next year. Lawmakers budgeted an additional $81 million to cover newly agreed-to raises and fringe benefits for the following year.

The House and Senate pushed dozens of other bills to final passage Tuesday. Here are some of the measures:

» Lawmakers approved a bill to provide $6 million for the Preschool Open Doors program to provide preschool slots for children from lower-income families.

» They also adopted a measure to require that the state Board of Education develop a plan to end multitrack schedules in overcrowded public schools by targeting construction funding to expand those schools.

» Also approved was a bill to provide $2 million to continue the operations of the Hawaii Health Connector, which is the insurance exchange established by the state under the federal Affordable Care Act.

» Lawmakers provided $15 million to help close a budget shortfall in the Hawaii Health Systems Corp., which operates the state’s network of public hospitals.

» The House and Senate voted to increase the excise tax credit that is designed to offset the impact of the excise tax on food. The credit is available to low-income families.

» Lawmakers also gave final approval to a bill to eliminate the requirement that gasoline sold in Hawaii include 10 percent ethanol.

» The House and Senate also approved a measure to provide $35 million to purchase land and acquire a conservation easement to protect lands near Turtle Bay from development.