Mayor’s tax warning not about shortfall

This past winter, Honolulu’s mayor told state lawmakers that the city would need to increase property taxes 30 to 43 percent if the state refused to extend the tax surcharge funding rail.

However, most of that estimated property tax increase would go toward building future rail line extensions — not toward completing the existing cash-strapped project, Mayor Kirk Caldwell’s office confirmed in a statement this week.

The acknowledgment comes after recently released emails from the Honolulu Authority for Rapid Transportation estimated that the city would have to raise the median property tax bill by 5.6 percent to cover the existing project’s massive shortfall.

How to finance that $900 million shortfall and whether to extend the half-percent surcharge were major issues at the Legislature this year, and Gov. David Ige is now considering whether to sign a bill to extend the excise tax surcharge for Oahu residents for five years to cover the rail project’s cost overruns.

Caldwell and other rail leaders have said they need the extension now to keep construction going next year.

“Let’s say we didn’t get any more money. To raise the money to pay and operate this system, we’re talking … about raising real property taxes in the 30 to 43 percent range,” Caldwell said Jan. 26, addressing a question about funding options from state Rep. Ty Cullen (D, Waipahu-Royal Kunia-Makakilo).

The exchange came during Caldwell’s two-hour grilling by Cullen and other legislators at the start of this year’s legislative session, as they began to consider the best way to proceed on rail.

“Thirty to 43 percent range, and I don’t think you as a rep of your area would be suggesting to the city to raise your residents’ property taxes like that. I sure wouldn’t want to,” Caldwell said.

He also said those were “rough numbers.”

In late April, following repeated requests for more details on those numbers, Caldwell’s office said it was unable to produce data supporting the figures.

However, this week his office did provide figures that it said came from HART. They included the 5.6 percent increase for construction, along with an 8 percent increase to cover operating costs and a 24.8 percent increase to cover roughly $4 billion in future extensions to central Kapolei and the University of Hawaii-Manoa campus.

Combined, they would amount to a 38.4 percent property tax increase.

“These figures combined (are) squarely in the range the mayor mentioned that day,” Caldwell spokesman Jesse Broder Van Dyke wrote Wednesday in an emailed statement, referring to the Jan. 26 testimony. “The mayor was very clear that extending the GET in perpetuity would allow planning to begin now on the extensions.”

The recent emails separately provided by HART also had the 24.8 percent estimated increase for rail line extensions. They did not include estimates for property tax increases to cover operations and maintenance.

Meanwhile, recently released HART emails from the fall show that Caldwell’s office was preparing for a campaign to extend the rail tax surcharge well before the public knew just how much financial trouble the project faced.

HART officials publicly disclosed during a Dec. 18 meeting of its board of directors their best estimate of the full extent of rail’s construction deficit. The recently released emails show that city and transit leaders, along with rail advocates, were already coordinating how to secure a rail tax extension from the Legislature about a month before the rail deficit became public.

“I just want to be sure we are all on the same page and saying the same thing,” Caldwell Chief of Staff Ray Soon told HART Executive Director Dan Grabauskas in a Nov. 20 email, ahead of a private meeting on the rail issues later that day. “This discussion will allow us to say, ‘yep, that’s the answer we will all use,’” Soon told Grabauskas.

Soon’s agenda for that day’s meeting included topics such as:

» “Who should be at the Legislative table?”

» “Whom are we trying to convince?”

» “Who’s best at reaching those people; under what conditions?”

» “If absolutely necessary, what are we willing to give in return?”

The agenda also included discussing how long of a tax extension city officials should seek from state lawmakers. It proposed seeking it either in perpetuity, for 12 to 15 years to complete the existing line plus extensions, four to five years to complete the original line or just one year to make up for federal 5307 funds that had been budgeted for rail even though officials swore they would never be used.

The public had first learned in August that rail faced looming cost problems when bids to build the first stations came in more than 60 percent above what officials had budgeted.

A protest by one of the firms that bid on that station work stalled action for weeks, but by late fall the extent of the budget problem became clear and HART then briefed Caldwell on the project’s revised numbers, according to Broder Van Dyke.

Caldwell then insisted on a news conference to brief the public, but Grabauskas requested it take place after “he could properly inform the board,” Broder Van Dyke wrote.

They agreed on a compromise, he added, for the mayor to brief the press and the public immediately following the Dec. 18 HART board meeting.

Several months later, as lawmakers grappled with what to do about rail, legislative committees advanced bills that contained versions of all of the options outlined in that closed-door November meeting except for the one-year extension.

Ultimately the Legislature passed a five-year extension, which still sits on Ige’s desk.