Legislators eye tax surcharge extension for rail

State lawmakers who are negotiating the terms of a financial bailout of the city’s 20-mile rail project are focusing on a possible two- to four-year extension of the general excise tax surcharge on Oahu, according to House Finance Committee Chairwoman Sylvia Luke.

Luke, one of the key lawmakers involved in bargaining between the House and the Senate, said the extra money from the proposed excise surcharge extension would be supplemented with an increase in the state’s hotel room tax to offset a huge shortfall for the rail project.

House lawmakers earlier this year proposed increasing the hotel room tax by a percentage point to 10.25 percent for 10 years, and Luke said that “we’re trying to track the same time period” for the hotel tax increase during the most recent negotiations.

State officials estimate that a two-year extension of the general excise tax surcharge combined with a 1-percentage-point increase in the hotel room tax for 14 years would provide enough money to cover almost the entire $2.39 billion rail construction shortfall. That approach would leave the city with a shortfall of about $60 million, according to those calculations.

City officials estimate the project has a budget deficit of about $3 billion, but that includes financing costs. Luke has said House lawmakers want to reduce the borrowing costs for the project by providing more cash for construction by raising the hotel room tax.

The House and Senate are scheduled to hold a special session at the state Capitol starting Monday to approve a final version of the bailout bill. Luke said she is optimistic lawmakers will come to a final agreement, and other lawmakers agreed the negotiators appear to be close to a deal.

But with less than a week to go, there’s still no formal agreement between the House and Senate and no guarantee that the two chambers will meet in special session.

Senate President Ron Kouchi (D, Kauai-Niihau) remained tight-lipped Monday about the latest developments.

“We still don’t have a specific bill, so there’s nothing further to discuss,” Kouchi said Monday. “Until something happens, I’m not speculating on anything.”

Talks between the House and Senate have remained delicate since the regular session ended in May, and Kouchi said Monday that he didn’t want to jeopardize those conversations in the final stretch by saying something that could rub other lawmakers the wrong way.

Senate leadership is scheduled to meet today to discuss the latest on rail, Kouchi said. If the session is to proceed Monday, the Legislature will have to give public notice Friday, he added.

“I’m just continuing to pursue the path forward,” Kouchi said. “I’m hopeful that we’ll be coming in to work on Monday.”

Asked Monday whether there were any other key details to mention, Kouchi responded that he “wouldn’t have said it anyway, so no.”

Gov. David Ige said last week that it is “fundamentally important” that lawmakers find a way to fund the rail transit project.

“We can’t not finish the project, and I think it doesn’t make sense if we don’t build it to Ala Moana (Center), so it’s really about what the revenue source would be, what makes the most sense, and I’m open to the different options that the Legislature has talked about,” he said.

Ige said he does not have a personal favorite from among the ways that have been proposed to provide new funding for rail, but said he would “definitely” support a “modest” increase in the hotel room tax statewide to fund the transit project.

The partially built rail line is vastly over budget, with the estimated price tag for the project increasing from $5.26 billion in late 2014 to nearly $10 billion today, including financing costs. The city has a Sept. 15 deadline to show the Federal Transit Administration how it plans to raise the money to cover the project’s budget shortfall.

Star-Advertiser reporter Marcel Honoré contributed to this report.