On Monday, Honolulu’s mayor will go before state lawmakers and ask that they consider lifting the sunset on the general excise tax surcharge funding most of Oahu’s cash-strapped rail project and that they do it now — sparking what likely will be a big debate in this year’s legislative session.
However, what Mayor Kirk Caldwell and other rail officials won’t be able to do is to give those lawmakers a definitive answer on how much the project will cost. Some 40 percent of the 20-mile, 21-station project’s total construction still hasn’t been contracted out. Most of that work hasn’t even gone out to bid yet. Instead, Caldwell and other rail officials will have to rely on their best estimates.
Currently, the project faces anywhere between a $760 million and a $910 million shortfall, a total that rail officials failed to make clear to the public in recent weeks.
The lack of hard numbers on cost might prove problematic as they look to persuade state House and Senate leaders wary of appearing to burden their constituents with more taxes.
"Absent that information, can they paint a clear-enough picture of the total costs and how will they be able to contain those costs, and what it’s going to take to maintain and operate the system going forward to justify an extension of the GET?" Senate Ways and Means Chairwoman Jill Tokuda (D, Kailua-Kaneohe) pondered in an interview Friday. "If they can’t, that’s going to make it very problematic for this measure. We’ll have to see what they come forward with. Policymakers and taxpayers are going to demand that kind of specificity when it comes to something … of this magnitude."
Gov. David Ige and other state leaders have questioned why the 0.5 percent general excise tax surcharge for Oahu, set to expire at the end of 2022, needs to be extended so urgently now. But they’ve also said that they’re open to hearing the city’s case.
City and rail leaders maintain that the project needs the tax extension now because without it they can’t show that they have available funds. Thus, under state procurement laws, they won’t be able to sign rail’s remaining construction contracts.
Without those contracts signed, they won’t know the rail project’s true cost.
But without true cost figures, the tax extension that they say they need to sign the contracts could be shot down by the Legislature.
It’s a chicken-and-egg dilemma that could play out in the coming months at the state Capitol.
Meanwhile, Honolulu Authority for Rapid Transportation officials have struggled in recent weeks to clearly sum up the total financial hole that the project currently faces.
For the past month, HART leaders have told the public, city leaders and their own board members that the project faces a $550 million to $700 million deficit.
In reality, it faces a total budget shortfall of up to $910 million.
What’s excluded from the first figure are $210 million in so-called 5307 federal dollars. The city relies on those dollars to help maintain Oahu’s public bus system.
That $210 million was inserted in rail’s 2012 financial plan basically as an added layer of insurance, but city officials said they would tap those dollars only as a last resort.
Now that the project faces major budget woes and those dollars are needed, Caldwell has pledged that they won’t be used at all for rail.
In several public briefings this past month, HART Executive Director Dan Grabauskas has repeatedly flagged the looming issue over the 5307 funds and the need to find other dollars to replace them if that’s what Caldwell and the City Council want.
However, in those reports to the City Council and HART board, he did not include those dollars in his final budget shortfall.
Grabauskas was in San Francisco last week discussing the Honolulu rail project with federal transit officials. He responded to questions via email Friday about how his trip went ("our meetings … were productive"), but not questions about his excluding the 5307 funds from the total deficit amount.
In conversations this week, HART officials repeatedly insisted that the $210 million shouldn’t be considered part of the budget deficit because technically those dollars are still in the rail financial plan, despite Caldwell’s pledge not to use them. HART spokeswoman Jeanne Mariani-Belding said the agency considers the 5307 funds to be a separate financial challenge, one which HART will address later.
Mariani-Belding added that HART eventually will aim to find savings or other revenue sources to make up that $210 million. However, that’s the same strategy HART is using now to address the rest of the shortfall, which they say they consider separate.
The discrepancy irked some City Council members, who felt they were misled.
"I don’t know why they don’t really know the correct amount," Honolulu City Council Budget Chairwoman Ann Kobayashi, a frequent HART critic, said Friday. "What bothers me is their coming before us to float bonds for them. They’re not truthful — well, maybe it’s lack of communication."
HART intends to borrow as much as $350 million in short-term loans leveraged against the city’s general fund in 2015 alone to cover rail construction when revenues don’t keep up with costs. The borrowing has always been part of the plan.
However, rail officials have been reluctant to share publicly any general estimate or range of how much they think the project will need to borrow over the total course of construction.
They say it’s still too premature to do so, and that the numbers could change.
"When the City and County of Honolulu comes forward, I would guess this would be a pretty big piece of their presentation," Tokuda said Friday, referring to the proposed GET tax extension before the Legislature. But with so many details still unclear, "they’re going to have to answer to members: Well, how are you going to fill in the blanks?"
