Legislators announce special session to hash out rail funding

This past spring, state lawmakers couldn’t reach a funding deal for rail despite devoting considerable time to the conundrum. Their stalemate even helped upend leadership in the Senate.

Now the dates are set for them to try again.

House and Senate leaders have asked the Legislature to reserve the week of Aug. 28 to Sept. 1 so they can meet in special session. There they’ll aim to hash out what they hope will be a final bailout package to rescue the transit project, as costs have continued to soar over budget.

“We are optimistic that the lead committee chairs have held, and will continue to hold, productive discussions” as that week approaches, Senate President Ron Kouchi and House Speaker Scott Saiki said in a joint letter Friday to the Legislature. They added that they would confirm those dates for the session “as soon as practicable.”

The announcement comes as local leaders look to assure federal authorities that they aim to build the full 20-mile, 21-station line to Ala Moana Center as promised, despite a budget hole that officials estimate could be as large as $3 billion, including financing.

Honolulu has a $1.55 billion rail funding deal with the Federal Transit Administration, but the massive cost and schedule problems have placed the city technically in breach of that contract.

So far, the FTA has not sent an official letter putting the city on notice for that breach. Instead, the federal agency has given local leaders flexibility to work out the problem, and it has repeatedly extended the deadline to provide a funding solution.

Still, officials close to the situation say the FTA’s patience appears to be waning. Honolulu Authority for Rapid Transportation officials have publicly acknowledged that the FTA could serve them that notice at any moment.

“If we wait a year, I am really concerned that the rail project would be in serious jeopardy, based on conversations I’ve had with FTA officials,” Honolulu City Council Chairman Ron Menor said in May after the regular legislative session ended without a deal.

Excise, hotel taxes eyed

In June, Kouchi (D, Kauai-Niihau) and Saiki (D, Downtown-Kakaako-McCully) sent the FTA a letter assuring that they intended to hold a special session to help solve the funding crisis, but it didn’t include any dates. Now they’ve offered dates as their chambers try to agree on the best funding mechanism.

That mechanism could involve increasing the state’s hotel tax at least 1 percent, which House leaders preferred this past spring; extending Oahu’s half-percent general excise tax surcharge for rail, which Senate members preferred; or a mix of both.

“I am very, very optimistic that we will reach an agreement,” Saiki said Friday.

The House ended its session proposing a “hybrid mix” of hotel tax increases and GET surcharge extensions that would cover the project’s revenue shortfalls of some $1.3 billion through 2024, Saiki said Friday. After 2024, revenues are expected to exceed the costs — and the House’s position would leave the city to handle any subsequent financing charges, he added.

The Senate, meanwhile, proposed extending the GET surcharge another 10 years. That chamber further ousted Sen. Jill Tokuda (D, Kailua-Kaneohe) as its Ways and Means chairwoman and replaced her with Sen. Donavan Dela Cruz (D, Wahiawa-Whitmore-Mililani Mauka). Tokuda had rejected the city’s request for a GET surcharge extension.

Critics of the elevated-transit project 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. Others, such as Honolulu Mayor Kirk Caldwell, call it the best option because as much as a third of the tax is borne by Hawaii visitors.

On Friday, Caldwell issued a statement saying he was “pleased” that a session was scheduled and that he “looks forward to working with legislators … on a sound financing mechanism” to build the full system.

However, Saiki and House Finance Chairwoman Sylvia Luke (D, Punchbowl-Pauoa-Nuuanu) said they no longer trust the city’s numbers because they’ve changed so much. Instead, they’re relying on state budget officials, they said.

“We wanted to involve the budget and finance because those two revenue sources (hotel tax and GET) are state revenue sources, and their numbers are more reliable than what the city could project for us,” Saiki said Friday.

Many legislators planned to attend the National Conference of State Legislatures and the Council of State Governments in August, and that pushed the special session to the end of that month, Kouchi said Friday. House officials estimated it could cost some $27,000 in per diem costs for the 24 members from the neighbor islands.

HART has drawn down nearly $767 million of its federal dollars, leaving a balance of $783 million, agency officials report. However, the FTA is withholding $743 million of that balance until the city provides a complete, acceptable recovery plan.