Rail taxes sought to help businesses

Honolulu’s Council chairman on Wednesday proposed the city consider using some of the hundreds of millions of dollars from a five-year rail tax extension to help Oahu businesses hard-hit by rail construction.

However, Chairman Ernie Martin’s suggestion comes as the Council has yet to even approve the controversial extension of the Oahu general excise tax surcharge. Gov. David Ige authorized the extension earlier this month, but it still needs the Council’s nod. Martin has previously said that such approval would not be granted lightly.

His idea of using state rail tax funds to help businesses would have to pass several other hurdles, too: It’s not clear yet whether federal policy allows those dollars to compensate businesses trying to stay afloat amid all the rail construction and traffic.

The issue came up during the Council Budget Committee’s latest discussion of Bill 42, a measure that would make grants and loans available to rail-impacted businesses. City officials have been working on the idea for several months now, and the committee on Wednesday unanimously advanced the bill. It now goes before the full Council Aug. 5, but its members still don’t know where they’ll draw the money or at what amount.

Meanwhile, more businesses report feeling the brunt of rail construction. Much of Kamehameha Highway in the Pearl City area is torn up and riddled with steel plates for utility relocation.

The popular Flamingo Restaurant Bakery closed its Pearl City location on July 12, citing a steep dropoff of its longtime customers who couldn’t stomach the traffic to get there.

“It’s not just the businesses that close; there’s a widespread effect,” Budget Chairwoman Ann Kobayashi said Wednesday. “All of the employees, what happens to them and how do they pay their bills?”

Added Councilman Trevor Ozawa: “What happens if we gain the rail and we lose everything else?”

The five-year rail tax extension that state lawmakers approved this year aims to raise some $1.8 billion to help rail climb out of a budget hole as deep as $910 million. It would also give the project plenty of contingency for any other issues that arise. On Wednesday, Honolulu Authority for Rapid Transportation Chief Financial Officer Diane Arakaki told Council members that the agency’s preliminary figures show the extension could raise closer to $1.5 billion.

The Council would have to work with the Legislature to tweak the state law allowing the tax extension so that those construction dollars could go toward businesses, too, Martin added. That effort could happen next year at the earliest, even with construction already in full swing.

At a prior Budget Committee meeting in May, HART Executive Director Dan Grabauskas told members that he wasn’t sure whether rail officials could “carve out” the state’s GET funds and use them apart from the restrictions on federal transit dollars, which can only go toward construction.

Grabauskas did not attend Wednesday’s meeting, and federal transit officials in Washington, D.C., were unavailable for comment after the meeting. Martin said he would follow up with federal officials to clarify.