Keep it simple with rail tax plan

Negotiations over money for Oahu’s rail transit system are going down to the wire Friday. State House and Senate conferees must refuse to be distracted by side issues erupting at the 11th hour and focus on the central issue, on which they agree: The general excise tax surcharge funding construction of the $6 billion project needs to be extended past its original 2022 expiration date.

Once zeroed in on that key element, it is obvious that the Senate’s original proposal is superior. It would extend the current half-percent surcharge for five years, raising enough money to complete the 20-mile rail system without permanently raising taxes. The House’s fundamental plan — to halve the surcharge to a quarter-percent but extend it for 25 years — would bring in too little to resolve the $910 million projected budget shortfall and unnecessarily prolong the surcharge.

It is essential that legislators resolve the rail project’s immediate budget problem with a clear, straightforward approach, which the Senate bill provides. Lawmakers must avoid muddying the issue, and not get bogged down in the last-minute ideas and conditions arising as time runs out in conference committee.

Moreover, it is unacceptable that legislators unleash such tactics while ignoring a viable alternative: Reducing the unconscionable 10 percent skim the state extracts in exchange for administering the surcharge. Hundreds of millions dollars more would flow to rail construction if the state kept only what it actually costs to administer the fee, as it should.

Tying approval of the rail-tax extension to counties taking ownership of so-called "roads in limbo," for example, as has been floated during whirlwind negotiations, would wrongly seek to resolve in mere hours disputes that have persisted for decades.

There are hundreds of roadways across the state whose jurisdiction has been disputed for years by state, county and private entities. Repair and maintenance likely would run in the hundreds of millions of dollars. This long-standing problem needs a full public airing, which can occur next session.

Likewise, using "air rights" above the rail system as a bargaining chip is risky at this late date. House conferees inserted a provision that would grant those rights to the state, reportedly because some House members are worried that outdoor advertising may proliferate along the rail line. That’s a legitimate concern, but city officials have asserted in the past that they need the air rights to forge private-public partnerships that could help offset the budget deficit and advance the transit-oriented development that is a huge part of the project’s appeal.

Honolulu Mayor Kirk Caldwell, for example, has talked about how a private developer could pay to build one of the 21 transit stations that will extend from Kapolei to Ala Moana Center in exchange for the air rights above the station, space that could be used for high-rise housing, parking or commercial outlets.

The bottom line: Schemes that could end up making it harder for the city to generate revenue it needs to build and operate the elevated rail system should not be under consideration this late in the process. They have undergone none of the public vetting of the original bills and are sure to carry unintended consequences. There is time to fully consider their merits and minefields later.

Now, facing Friday’s final bill-decking deadline, lawmakers should move ahead with the least complicated solution, which is a five-year extension of the current GET surcharge as outlined in the original Senate proposal.

There has been much debate this session about whether the GET surcharge is the best funding mechanism to build the rail-transit system. Clearly it is. Since 2007, consumers have paid a 4.5 percent GET for purchases on Oahu, which includes the half-percent island surcharge on top of the 4 percent state tax.

The GET is a regressive tax, compounding at each stage of a transaction. But its broad application means it is not borne by Oahu taxpayers alone; residents, tourists and members of the military all pay it. Consumers can control how much they pay, somewhat, by adjusting their buying habits. By contrast, relying on real-property taxes, as House Finance Chair Sylvia Luke promotes, would impose too large a burden on property owners, and raise housing costs on an island beset by a lack of affordable residences.

State lawmakers originally approved the Oahu GET surcharge because they correctly recognized it as the preferred method to fund construction of a mass-transit system the island sorely needs. That hasn’t changed. Five more years to finish it is a price Oahu consumers should be willing to pay and westside commuters, especially, will surely appreciate.