Legislators make little headway on settling rail funding

The clock is ticking, but state lawmakers say they haven’t made much progress yet on a special session that’s supposed to solve the rail crisis.

“We’re not anywhere close,” House Finance Committee Chairwoman Sylvia Luke said Monday.

Last month, legislators told the Federal Transit Administration they’ll meet in July or August to hash out a multibillion-dollar funding deal for Oahu’s cash-strapped transit project. Many in the Legislature hope to finish what they were unable to get done this past spring amid their deep discord over rail and the path ahead.

So far, however, there’s no set date for that session or an agreed-upon funding mechanism.

Luke’s new counterpart in the Senate, Ways and Means Chairman Donovan Dela Cruz, said he’s trying to help build consensus incrementally in that chamber for a rail fix.

“We’ve got to get to the point where we agree on more than half or a substantial amount of facts,” he said Monday. Once legislators arrive at a “tipping point,” they’ll likely schedule a special session, Dela Cruz added.

Both money committee leaders do agree on at least one thing so far: They’ve opted to disregard many of the financial projections provided by the city and the Hono­lulu Authority for Rapid Transportation on rail, and they’ve switched to using state budget numbers instead to try to find a way out of the morass.

Luke said she doesn’t trust the city’s budget figures because they’re constantly changing.

The project is now estimated to cost as much as $10 billion, including financing, and it faces as much as a $3 billion budget deficit. City leaders have said a 10-year general excise tax surcharge extension would get rail done. However, Luke said the city could reduce that tax extension by several years if it more aggressively paid off the principal and interest on rail’s construction bonding.

Critics of the elevated transit project, such as retired University of Hawaii law professor Randy Roth, often argue against using more GET dollars for rail because it’s considered a highly regressive tax that hits the island’s low-income residents the hardest.

Luke (D, Punchbowl- Pauoa-Nuuanu) and Dela Cruz (D, Wahiawa-Whitmore-Mililani Mauka) met last week with the Legislature’s transportation chairmen, plus the House speaker and Senate president. It was the group’s first formal meeting on what to do about rail since this year’s regular legislative session ended with sharp disagreement and “high emotions,” as Luke described it Monday.

The rail issue dominated the entire regular session. The House and Senate ultimately deadlocked over whether to extend the half-percent excise surcharge on Oahu for rail as the city requested, or try another approach to fund rail that involved an increase in the state’s hotel room tax.

Many senators had balked at the hotel tax proposal because they said the idea was introduced in the “11th hour” without enough transparency or public input. They instead passed their own dueling amendment to extend rail’s general excise tax surcharge another 10 years, through 2037.

The two chambers couldn’t agree and the rail effort died.

A special session could address those senators’ procedural concerns — but it won’t guarantee they’ll go along with the hotel tax proposal, Dela Cruz said Monday. “There’s so many sensitivities” to the rail talks underway at the Capitol, he said.

Luke, meanwhile, still wants to use a hotel tax increase instead of a simple GET extension because the hotel dollars would boost rail’s coffers immediately and reap big savings on the project’s financing costs, she said.

“I’m still not convinced that the city and the HART board have done enough to cut costs,” Luke said Monday. An estimated $4.5 billion of rail’s total price tag goes toward construction while the rest covers the project’s engineering, consulting, marketing and other expenses, according to Luke.

“They have to convince the public that they have done everything they can. … They hired a bunch of expertise to run this project,” she said Monday. “I don’t think they have trimmed that much at all.”

Not all legislators think the solution rests with the hotel tax versus the general excise tax. Some, such as Sen. Laura Thielen (D, Hawaii Kai-Wai­manalo-Kailua), have called for a pause to revise rail as its costs approach $500 million per mile. Thielen has proposed spending about $100 million to at least study alternatives and potentially save nearly $1 billion to use on the state’s other pressing needs.

HART officials counter that one of the most frequently suggested alternatives — bringing rail to street level past Middle Street — would be unrealistic on Hono­lulu’s congested, crumbling streets and impractical because it would require different train cars along that stretch.

If state leaders wait too long, officials say, the FTA could declare the city in breach of its contract and revoke some or all of its $1.55 billion in rail funding.

Star-Advertiser reporter Kevin Dayton contributed to this story.