Extending the rail tax isneeded right now to keep Oahu’s cash-strapped rail project out of serious jeopardy, Honolulu’s mayor told a panel of state lawmakers Monday — part of his pitch to persuade them to lift the tax’s sunset during this legislative session.
Without an extension the city would have to raise real property taxes by about 30 to 40 percent to finish the largest public works project in Hawaii’s history and operate it, Mayor Kirk Caldwell told members of the Senate Ways and Means and House Finance committees.
However, after they finished grilling the mayor for about two hours straight, it was clear those lawmakers aren’t convinced yet — and that Caldwell and other rail leaders have a lot of work ahead if they’re to win them over.
Monday’s rail discussion dominated the lawmakers’ annual briefing by Hawaii’s four mayors on their priorities for the coming year, and how the state could help them. The rail back-and-forth was the first of what’s expected to be many briefings, hearings and debates in the coming months over whether to lift the 2022 sunset on Oahu’s 0.5 percent surcharge on the general excise tax to help fund the project.
Senate President Donna Mercado Kim sharply criticized Caldwell’s request because the city in 2009 turned down the state’s offer to extend the rail tax in exchange for lending to the state what had already been collected. At the time, she said, rail officials thought the project’s construction would go smoothly and that they wouldn’t need any more cash.
"You guys didn’t even consider that there will be delays," Kim told Caldwell, after he blamed the project’s shortfall of up to $910 million on holdups caused by lawsuits against the project. Caldwell did not mention the city’s earlier mishandling of notices to proceed on construction contracts, which also caused more than $80 million in delays.
"I cannot understand how you can say all these things before us" and expect the Legislature to allow the city to extend the rail tax in perpetuity, Kim said.
"I hear your anger and frustration, and I understand it," Caldwell said. In his response to Kim and in an interview later, Caldwell, who was managing director for former Mayor Mufi Hannemann in 2009 when state leaders made that proposal, said the city’s federal partners for rail weren’t comfortable with the idea and that it fell to him to tell Kim "no."
The figures Caldwell gave on increases to property taxes without an extension were based on preliminary calculations by the Honolulu Authority for Rapid Transportation, he also said after the briefing.
Rep. Sylvia Luke, House Finance Committee chairwoman, pushed Caldwell for more answers on what happens if the lawmakers don’t extend the tax and whether construction would halt. Caldwell stopped short of saying that construction on the 20-mile, 21-station elevated rail system would surely halt if the city didn’t get that tax extension.
He would say only that the project would be "severely challenged," but didn’t specify further.
Last year he also asked legislators to consider lifting the tax sunset as a way to operate rail once it’s built and to fund further expansions. This year he made the request mainly to help keep the project afloat.
Before the hearing, Caldwell said he started to worry last summer that rail could face financial problems, as more construction cranes appeared on the Honolulu skyline and the building market heated up. He said he knew in the fall the project was in trouble.
there was no input from HART officials or other experts on the lawmakers’ more detailed financial and legal questions.
Caldwell told lawmakers that the project needs the extension now because under the state’s procurement laws, HART can’t put out the rail system’s remaining contracts without showing it will have the available funds.
However, Senate Ways and Means Chairwoman Jill Tokuda (D, Kailua-Kaneohe) asked whether there wasn’t some flexibility there. That will depend on the more detailed financial information rail officials can provide, she said after the briefing.
"We want to make sure we have good information of how it all lines up," Tokuda said. "It will be a very rigorous discussion going forward."
