Honolulu City Council Chairman Ernie Martin wants to “stop the bleeding” on the rising cost of the city’s $6 billion-plus rail project by putting a cap on how much in general excise tax surcharge dollars can be used to build it.
The Council Budget Committee is considering Bill 23, authorizing an extension of the Oahu-only 0.5 percent surcharge through the end of 2027 — a move that is projected to raise an additional $1.6 billion. Martin is proposing to cap that figure at $910 million.
The Council chairman wants any funds generated by the surcharge beyond the capped amount to instead go toward construction of affordable housing, a plan that would need the approval of the state Legislature.
The committee will take up Bill 23, as well as Martin’s plan to use surcharge dollars for housing, at its 9 a.m. Wednesday meeting.
Martin said the announcement Thursday by Honolulu Authority for Rapid Transportation officials that the estimated project cost has risen again, now to $6.57 billion, is only further reason for Council members to consider a cap, Martin said.
Martin said he’s always supported the rail project, “but now the question has to be asked: How much further can we go? How much more can we take?”
Earlier this year the state Legislature voted to extend the surcharge to Dec. 31, 2027, five years beyond the Dec. 31, 2022, sunset date previously allowed.
But before that can happen, the Council must give its OK through Bill 23.
Martin’s proposal caps the amount of surcharge money going to rail construction over the extended life of the surcharge at $4.58 billion, which he says provides for the additional $910 million that city transit officials said last spring that they needed to complete the first phase of the project, but no more. City officials had projected extending the surcharge would bring in an additional $1.6 billion, Martin said, or at least $700 million more than what his proposal would allow them to keep.
In recent months, changes and revisions have pushed the price tag to the latest $6.57 billion tally announced Thursday.
Even with the latest financial update, rail officials acknowledge they still don’t know what the final price tag will be to build the transit system. The city doesn’t expect to have all rail’s remaining construction contracts signed until next summer, and the project isn’t slated to be finished until 2021.
Martin’s proposal means those extra costs, or any additional costs that might arise later, could not be covered by the surcharge extension.
Council members are likely not inclined to allow HART to receive any additional money from the surcharge beyond that, he said. “That’s a long shot.”
Only 15 months ago transit officials assured Council members the project had a healthy contingency fund that it could tap, Martin said.
“I don’t know how much more faith we can put into HART,” he said. “What I’m offering is some sensibility, if the majority of the members decide to move it forward. I think consideration needs to be given to stopping the bleeding.”
Martin wants to use any money collected beyond $4.58 billion to instead go toward constructing affordable workforce housing.
Resolution 15-292, also on Wednesday’s agenda, urges the Legislature to allow for the funding to be used for housing.
Martin said he’s using the language “affordable workforce housing” instead of “affordable housing” because the latter is often tied to restrictive federal guidelines. He said he would prefer to work with state lawmakers to create a new definition for affordable workforce housing.
Martin’s version of Bill 23 also calls for requiring all subcontractors of the rail project to follow the same requirements as general contractors in providing detailed reports to the city. The city auditor estimates the rail project has at least 500 subcontractors, and “we don’t know what they’re doing,” he said.
Asked what HART should do with any shortage of funding as a result of a cap on the tax surcharge revenues, Martin said “real serious discussions have to be had.”
Martin said he thinks HART needs to show it has a “Plan B” or even a “Plan C.”
“Why haven’t those things been prepared? They’re assuming that the Council is just going to step aside and give them what they’re asking for.”
One idea he’s open to, he said, is shortening the distance of what is now a 20-mile, 21-station route from East Kapolei to Ala Moana Center.
Officials with HART and Mayor Kirk Caldwell’s office said they are reviewing Martin’s proposal and declined further comment.
State House Finance Chairwoman Sylvia Luke (D, Punchbowl-Pauoa-Nuuanu) said it’s up to the Council to decide whether it wants to cap the amount HART gets from the surcharge. As for Martin’s idea to use other money from the surcharge for housing, she said, “If that’s something that the City Council wants to do, it’s something we need to discuss next (legislative) session.”
Budget Chairwoman Ann Kobayashi has scheduled three meetings to allow public input on Bill 23. More meetings may be scheduled if there is a demand. Kobayashi said while it’s up to her committee, she’s not inclined to hold a vote on the bill until all those meetings are done.
If the bill makes it out of the Budget Committee, it still needs two more votes of the full Council and one more pass through the committee before going to Caldwell’s desk.
Kobayashi said she doesn’t anticipate a final vote on the tax surcharge until the end of the year.
Public invited to weigh in on Bill 23
The City Council Budget Committee will hold at least three meetings in the coming weeks for the public to comment on a bill extending the 0.5 percent excise tax surcharge for the $6.57 billion rail project.
Bill 23 allows the city to extend the surcharge through Dec. 31, 2027.
Council Budget Chairwoman Ann Kobayashi said there may be additional meetings if there is enough interest.
The meetings are:
>> Wednesday, 9 a.m., in Honolulu Hale second-floor Council committee room.
>> Nov. 5, 5:30 p.m., in Kapolei Hale first-floor conference rooms.
>> Nov. 9, 5:30 p.m., in Washington Middle School cafeteria.
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CORRECTION: A previous version of this story reported the public meeting at Kapolei Hale was on Nov. 3rd. The meeting is on Nov. 5th.
