Legislation OK’d to deny state a cut of Oahu’s rail tax revenue

The state Senate passed a proposal to deal with Oahu’s troubled transit project Tuesday, but not before several members vented about the city’s handling of rail and called for more accountability.

In its current form, Senate Bill 1183 would end the state’s controversial 10 percent “skim” of the general excise tax surcharge funding rail. However, it would not provide any extension of the rail surcharge, which city leaders still hope to get. The measure now goes to the House, where it’s likely to morph further.

All 25 members of the Senate voted to advance SB 1183. Its current austere language appeals to the members who are more critical of the project and don’t want to approve a rail tax extension. At the same time, the bill remains for rail advocates the only vehicle alive in the Legislature that could help rescue the project from its latest, daunting budget shortfall of some $3 billion.

A similar rail bill in the House failed to advance and move to the Senate.

“I, like many of you, are angry and very unhappy at the overruns of the rail, and it is certainly an issue that we need to look at now into the future,” Sen. Will Espero (D, Ewa Beach-Iroquois Point) said Tuesday on the Senate floor prior to the vote. “But … this is about how we’re going to move around people, goods and services on Oahu and continue to create a strong, vibrant economy.”

Ending the state skim would send the city an additional $300 million or so over the next decade to fund rail construction, officials estimate, but the bill would also leave the city to cover an additional $500 million or so in actual project costs plus more than $1 billion in contingency for unforeseen costs.

Sen. Jill Tokuda (D, Kailua-Kaneohe) has suggested that the city could cobble together a plan with its annual revenue gains to cover rail’s shortfall if it’s a big enough priority, but Honolulu Mayor Kirk Caldwell and his administration’s budget officials insist there’s no city money available. Last month Caldwell told a Senate panel that the city would have to raise property taxes 14 percent across the board to cover rail construction costs, although he opposes the move.

Sen. Donna Mercado Kim (D, Kalihi Valley-Moanalua- Halawa) took issue with that Tuesday.

“The mayor made it seem as though we are obligated to support this, and if we don’t (then) shame on us and they’re going to raise the property taxes and it’s going to be all our fault,” she said during remarks on the Senate floor. “But if you recall correctly, when the city decided to pass rail, they didn’t come to us and ask if we agreed. They passed rail on their own. … Why should we feel that we are responsible for whatever shortfalls that they have now?”

Mercado Kim added that the current rail debate isn’t over whether someone supports or opposes the project — “it’s about how we’re going to fund rail and whether the Legislature is obligated to fund rail.”

Last spring, as it became clear to the public that rail was once more slipping into a deep budget chasm, U.S. Rep. Colleen Hanabusa, who was then chairwoman of the Honolulu Authority for Rapid Transportation board, said that her former colleagues at the state Capitol told her the city should not approach them for another tax extension. The state had already approved a five-year extension in 2015 after rail leaders assured that would likely be enough.

Federal deadline

Now the city faces an April 30 deadline to tell the Federal Transit Administration how it plans to deal with the problem. It hopes to secure a tax extension, but if unsuccessful it could fall back on a “Plan B” to build rail as far as downtown, near Aloha Tower, with seven fewer stations and no Pearl Highlands transit facilities. If the FTA doesn’t agree to that plan, Honolulu rail could face losing up to $1.55 billion in federal dollars.

“I think it’s prudent for us to stop, re-evaluate the project, determine what needs to be done to keep the costs actually under control. And there’s a lot of pressure from people saying, ‘No, no, no we can’t stop; we have to keep moving forward,’” Sen. Laura Thielen said Thursday. Thielen (D, Hawaii Kai-Waimanalo-Kailua) was one of four Senators to vote against the tax extension in 2015.

On Thursday she again pressed for the city to study taking rail to ground level past Middle Street. Even if that requires a new $100 million environmental impact study, it’s “more than worth it” compared with the current course of action: spending at least $1 billion to keep building the elevated pathway into the city’s core, Thielen said. (She later said that construction industry leaders provided her that $100 million estimate.)

Rail officials have said that those who’ve advocated switching to street level have vastly underestimated the costs and challenges of making such a change in midroute. Nonetheless, Thielen said that publicly funded upgrades to water and sewer lines for new housing around the rail line won’t be affordable if the project’s costs keep soaring.

“We do need to take a breather now,” she said Thursday. “We do need to go back and re-evaluate the project.”

‘Credibility issue’

Rep. Sylvia Luke (D, Punchbowl-Pauoa-Nuuanu) has already started requesting information from rail leaders. Records show that she and House Majority Leader Scott Saiki (D, Downtown-Kakaako-McCully) recently asked HART for ridership details and how those numbers would differ between the city’s Plan B versus building the full system to Ala Moana Center.

In July Luke said she “would not entertain” another rail tax extension during this session.

“At this point in time it has become such a credibility issue. How do you know what they’re saying now is true? We cannot just give them a blank check,” Luke said last summer. SB 1183 is expected to go before the House Finance Committee she chairs in the coming weeks.

On Thursday Sen. Karl Rhoads (D, Downtown-Nuu­anu-Liliha) said that stopping rail at either Aloha Stadium or Middle Street — a move that some project critics still advocate — would make it a “train from nowhere to nowhere,” with “horrible” ridership. If the city’s transit project stalls, then it will fall to the state to come up with an alternate solution, he said.

“There’s just not very many good options for us to go forward and as a state to pick up the pieces … if the rail project fails,” Rhoads said.