Why not use bonds to fund construction of rail project?

There is nothing like a $1 billion surplus to perk up the ears of a budget-strapped politician.

The issue came into focus last week as many of the major players in Honolulu’s messy rail project threw up their hands and said “Yes” to raising taxes.

First it was Mayor Kirk Caldwell and City Council Chairman Ernie Martin, who usually have a hard time agreeing what month it is.

We should just increase taxes, the pair said after the Federal Transit Administration told everyone no more stalling or risk losing the $1.55 billion federal share, so get on with building rail all the way to Ala Moana Center.

The pair had their eyes on keeping the special Oahu excise tax surcharge to pay for the rail project, now estimated to be $1.5 billion to $2 billion over budget.

Martin also asked Gov. David Ige to pony up a portion of that $1 billion state surplus, and cut some of the state’s 10 percent slice of the tax surcharge.

Councilman Brandon Elefante chimed in, saying to just make the surcharge permanent and maybe extend rail to Manoa and West Kapolei.

And then long-time rail Scrooge and candidate for mayor, Charles Djou, also agreed that the project had to continue and would need more funding.

But, the question comes up, why does the city have to buy the entire project now?

State and city projects aren’t usually paid for upfront — government sells bonds, pays interest on the bonds and uses that money for the project.

Investors like bonds because they know government is good for the debt because they can always raise taxes if they need the money.

Besides fiscal reasons, there is also a philosophical reason. Rail is being sold as a legacy project: This is a Honolulu-defining project for the ages. Generations from now, commuters will salute the wisdom of 2016, they say.

Here’s what Caldwell said in June when he announced the city didn’t have the money to go any farther than Middle Street.

“Some kid 20 years from now will get on the train in Waipahu with a surfboard. … His mother and father will know that he is safe going to and from. … It’s your gift you’re giving to his community.”

So how do we get that kid and his buddies to pay for that glorious ride?

Long-term bonds.

Rep. Sylvia Luke, House Finance Committee chairwoman, and Sen. Jill Tokuda, Senate Ways and Means chairwoman, who both don’t want to use an excise tax increase to bail out rail, said bond financing makes a lot more sense.

“We bond large infrastructure because interest rates are so good and it’s a future investment. The city’s insistence on doing this with cash is puzzling,” said Luke.

“The city should look at all available funding options, including bonding,” said Tokuda. “They should be exploring alternative or innovative sources of financing that would more equitably raise revenue versus just relying on extending a very regressive tax like the GET.”

If it is possible to stretch out the payments, why doesn’t that make sense?

A legacy doesn’t have to be a free ride.

Richard Borreca writes on politics on Sundays, Tuesdays and Fridays. Reach him at rborreca@staradvertiser.com.