Council approves GET surcharge extension with $910 million cap
Hawaii News

Council approves GET surcharge extension with $910 million cap

  • DENNIS ODA / DODA@STARADVERTISER.COM

    Construction of the rail project progressed in October along Kualakai Parkway near the Salvation Army Kroc Center Hawaii in Kapolei.

The Honolulu City Council on Wednesday moved a step closer to approving a bill requiring consumers on Oahu to pay a 0.5 percent surcharge on the general excise tax for five more years to help finance the city’s $6.57 billion rail project.

And while, at least on the surface, there appear to be enough votes to give final approval to Bill 23 next month, a division among Council members over whether to cap the amount of surcharge dollars going to the project could unhinge support for the extension.

The Council voted 7-2 to give second reading approval to Bill 23, leaving in place language that caps the amount of new revenues going to rail at $910 million of the $1.2 billion to $1.8 billion estimated to be raised during the extra five years.

The bill now goes back to the Budget Committee on Jan. 13 for another review. If the bill is approved there, a final vote of the Council would likely take place two weeks later, on Jan. 27.

Members Ikaika Anderson and Ann Kobayashi voted against the bill. Kobayashi has consistently voted against legislation for the rail project.

Rail supporter Anderson, the Council’s vice chairman, said he will not vote for a bill that includes a cap because Honolulu Authority for Rapid Transportation officials have said that won’t be enough to cover the cost of a 20-mile, 21-station rail project. But Council Chairman Ernie Martin said he would not support a rail extension unless there is a cap.

The Legislature last spring gave the city the go-ahead for an extension of the surcharge through Dec. 31, 2027. Consumers on Oahu pay the additional 0.5 percent surcharge on top of the state’s 4 percent general excise tax on all goods and services.

But in what he describes as an effort to “stop the bleeding” on a project that’s seen a dramatic rise in its price tag to $6.57 billion from $5.26 billion in less than a year, Martin proposed language capping the amount going to rail at $910 million. That’s how much HART officials told state lawmakers earlier this year that they needed to meet additional expenses and contingencies.

Experts estimate an additional five years of the surcharge would net between $1.2 billion and $1.8 billion, depending on the island’s growth rate. Martin wants any money raised above the cap to go to city housing projects, a plan that would need the approval of the Legislature.

Martin’s language including a cap was inserted into the bill that was given tentative approval by the Budget Committee last month and what was before Council members Wednesday.

But Council members Brandon Elefante and Kymberly Pine had, before Wednesday, proposed new drafts deleting the cap. Elefante, at the meeting, withdrew his own proposal and supported Pine’s draft. Pine’s draft was shot down 5-4, with Martin joined by Carol Fukunaga, Kobayashi, Joey Manahan and Trevor Ozawa. Anderson, Elefante, Pine and Ron Menor voted to delete the cap.

Before Wednesday’s vote, Mayor Kirk Caldwell and HART Executive Director Dan Grabauskas reminded Council members that Therese McMillan, acting administrator of the Federal Transit Administration, said her agency is withholding $250 million, the next installment of a promised $1.55 billion, until the Council OKs the city’s funding share through the surcharge extension.

Caldwell said he opposes the “artificial cap” but that he supports other language by Martin calling for HART to submit additional financial reports, including details of what is paid out to project subcontractors, to ensure better oversight and transparency of project expenses.

“I think we need to show the federal government … that we are still committed to the course that we began to travel back in 2012 when we signed the full funding grant agreement,” the mayor said.

But Caldwell took heat from several Council members.

Ozawa said that rather than heed warnings from the FTA that the city had breached the funding agreement, city officials should be questioning whether the FTA is within its rights to withhold the money.

“We should be demanding that money from them,” he said.

Kobayashi said the concerns of the city’s taxpayers should outweigh the FTA’s demands. “They want assurance that their property taxes won’t go up so high that they’ll have to give up their properties,” she said.

Caldwell said the project can now be paid for from only two sources of funding: federal transportation funds and surcharge revenues. Using any other funding, including property taxes, would need approval from the Council and the Legislature. “And I don’t the votes are ever going to be there to do that,” he said.

Anderson pointed out that budget officials estimate the average property owner would see tax rates increase 40 percent in each of the five years if the city were required to find $2 billion necessary to stop and dismantle the project.

A little more than half of about 15 public speakers testified against the project.

Several opponents suggested that the Council should reject the extension, using what money has already been generated to build the rail line to end at Aloha Stadium or the Middle Street bus terminal. Rail supporters, however, said that plan would not provide enough ridership to make the project viable.

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  • “Kobayashi has consistently voted against legislation for the rail project.” One out of nine, not so good odds to stop the rail. But if the others are voted out, we have a chance to stop the rail.

    • The Rusting Screeching RAIL REARS ITS UGLY HEAD AGAIN & AGAIN.
      the reality is the entire city council has been bought and paid for
      to the tune of hundreds of thousands of dollars each. None of their
      votes should be counted and they need to be prosecuted for the graff
      See the list of payoffs and tell them what you think:
      We found that the nefarious PRP Pacific Resource Partnership supported Carol Fukunaga with $86,000 in advertising for her 2012 election. AND under a different name, they gave Brandon Elefante $105,000 in advertising support. With this money, the percentage of Elefante’s support from the Ho’opili and Rail construction community jumped to 91%. Pretty amazing! He sure wasn’t going to vote against them!Here’s The Friends of Makakilo breakdown on City Council campaign contributions:
      Council Member Total Contributions Amount from Hoopili/Rail Interests Percent
      Kymberly Pine $160,879 $116,801 72%
      Ernie Martin $451,240 $268,017 59%
      Ikaika Anderson $139,518 $100,668 72%
      Trevor Ozawa $183,320 $104,550 57%
      Ann Kobayashi $57,136 $24,450 43%
      Carol Fukunaga $258,321 $104,565 40%
      Joey Manahan $182,215 $83,512 46%
      Brandon Elefante $37,322 $24,292 65%
      Ron Menor $48,405 $34,650 72%

        • The Justice Department should begin an immediate investigation into Therese McMillan as a federal authority using her position to influence state tax matters. She has already written the letters, get her.

        • Ernie Martin trying to give the impression of being responsible is acting irresponsibly by putting the city’s finances ar risk. Trevor Ozawa caving to pressure by Martin to criticize Caldwell or face still cuts in funding to his district is showing us what leadership is not about. And then we have lame duck Ann Kobayashi who really needs to retire but wants a job in a Martin administration.

        • Stop rail now at a cost of $2 Billion total (including demolition) and we save $8 Billion overall in construction costs and $200+ Million per year in Operations and Maintenance costs.

        • Rail is for our better long term future. We need to just bite the bullet and get it done while our economy is booming. Rail projects are always opposed when planned but never regretted after they are finished and running.

        • The rail is a black hole that is a remorseless tax dollar eating machine. It will handicap future generations who will pay for rail every time they buy food, gas, medicine or anything else.

        • uku is at it again with his rail shibai. In his saying, “We need to just bite the bullet and get it done” he is admitting rail is an ongoing government debacle, more than 100% over budget and climbing, over a year behind schedule and falling further behind every day, every day reveals a new management or financial debacle.

          Case in point. How could all those overpaid rail management bureaucrats like Grabby and HART, willfully fail to include a power source for rail, and forget to consider the cost of undergrounding HECO power lines? Those are just two in a long string of massive management failures. Rail money pit gets even deeper.

          We must stop rail at the Middle Street Bus Terminal to save billions, reduce rail’s crushing yearly O&M costs. Only then will our children and grandchildren have a chance, a chance at a normal life. Even then they will see more of their income be taken every year to subsidize the every growing cost of rail. Asking their parents, “What were you thinking?” Parents regretting the day they fell for the siren song of rail.

    • We did not have to build heavy elevated rail. The open plains could have remained open plains with the train running on the ground. And maybe we need to re-think whether the train needs to go to Ala Moana or to build some smaller and lighter version from the Stadium to town to save money and to be able to complete the project faster.

      Went to Japan last month and the trains are run by for profit companies. Over here, with the inefficient and incompetent HART running it, the train has become a black hole money pit for our tax dollars.

      • We had a great BUS system and now we have a mess because the RUSTING RAIL PROJECT has destroyed the
        routes and created major traffic issues for Waipahu & Pearl City. Wait until people try to go to Pearl ridge and are stuck in traffic for hours & hours. Most will decide to buy from amazon.com and if they use prime the products arrive with no traffic hassles. Now that they have lied about having a business section to help the businesses along the route tell us which ones they have helped because those of us in Waipahu have not heard word from anybody. WAKE UP HONOLULU AND STOP THE RUNAWAY CHOO CHOO IN ITS TRACKS

  • We need to finish the project, all the way to Ala Moana Center. The project is ugly and maybe what we would not want now if we had known when we approved it all the things that were wrong with it. But it has got to far to back out. Lee1957 is right on because the project will cost more to tear down than to finish. Ending it at Aloha Stadium serves no useful purpose…what, get on a bus stuck in traffic to go onward to Ala Moana? Get real! Martin is like Trump, say anything just to get some press time.

    • Yes, finish it! Make they GET permanent, we really don’t feel it. I don’t like the cost but thats how business in Hawaii is done, try doing an addition on your house, same BS. Business as usual.

    • IRT Kukuinunu: On the contrary, the existing structure does not have to be torn down. It can be converted into a reversible roadway for BRT and/or tollway. This obvious mismanagement of the cost of this system necessitates a termination of the project as it stands and an alternative (plan-B) to be implemented. That is the only way to unburden the future generations of this city and state from the outrageous expense of it’s current construction and operation.

    • Why finish what nobody wants Its a lot cheaper to tear it down. so far they have only
      5 miles done and that was over empty farm land. the real change orders and more money
      requests are in the pipe as thy get near the population centers. this monster is going
      to hit 10 Billion on its way to 15 or 20 Billion WAKE UP HONOLULU

        • Stop with that lie already! We never voted for rail. We were told that there would be rail. We were only allowed to vote on what kind of rail we were going to be saddled with.

        • Only in Hawaii a non vote counts as a yes vote. We never had a chanvce to vote on this RAIL BOONDOGGLE that the last 3 mayors shoved down our throats. Like Carlyle who staged the ground breaking with 30 thousand from Ansaldo and did it 3 years prior the real ground breaking. they stopped the busses that the people used to protest so you had to walk a mile unless you were in the groundbreaking ceremony. We the people showed up and were hushed by UNION GOONS

        • People voted yes to Kapolei to UH Manoa @ 3.2 billion dollars.

          I have a strong feeling that a vote taken today would have a different result.

        • Wasteful is exactly what this entire project was from the very beginning. Look how much we’ve wasted on your salary.

        • Rail should be stopped at the Stadium or at Middle street. It will save money and with all those west side cars off the road because everyone’s on the train, shuttle buses can whisk the riders to downtown and other final destinations in no time.

  • I think all Council Members should be required itemize all incoming and outgoing monies. All their finances should be a matter of public record since they are dealing with public funds. I believe more than one person is benefiting from building the rail and will do anything to stay in office until the end is reached. How many dinners, gifts, etc have these people received? I find it hard to believe that the members who voted for this have any of the mile of human kindness in them, but then, that is just my opinion. I might be wrong.

  • I have always said that this will be a 20 Billion (with a B) project……..keep raising our taxes…..who cares…it’s a done deal…….where I live on Oahu I will never use Rail nor reap its benefits…..but it’s all for the greater good of the County.

      • So it will cost 150 million to tear down the rail? DO IT! W’ell be far better off than the boondoggle under construction now. Corruption on a monumental level.

        • Remember Caldwell saying it’s cheaper to start building right away and then have to tear it down instead of waiting until everything is approved and in place. How come the S-A doesn’t question him about this? The extension should be denied, but if it is approved, it should also say that no more extensions can be approved. How come there is no details of reducing expenses to meet the shortfall? It’s only more taxes!

  • “I think we need to show the federal government … that we are still committed to the course that we began to travel back in 2012 when we signed the full funding grant agreement,” the mayor said. That’s right Mr. Mayor. Bankrupt the citizens, their children and grandchildren. What do you care? You don’t and that’s what outrages me.

  • I have heard a statement of how h-3 cost rose and yet it was built. But remember that the bulk of the cost came from the federal government(about 2 or 3 to 1). Normally estimates of cost over-runs is max ten percent butter with the project not even one-fourth COMPLETED the over- run is 30%+ – How can our elected officials approve this?? ON TIME ON BUDGET where did that go. That was stated as recent as five months ago then all of a sudden we are 30% over budget?? Now we want to extend the surcharge with a cap and use monies for project other than the rail.. Please I hope the legislature get involved and stop this cause aren’t they who has the authority to stop this. Isn’t the words state monies generated buy the surcharge is ONLY to fund the rail. I really hope voters realize the kind of people we elect into office

    • Rail is 100% over budget and climbing daily, over a year behind schedule, falling further behind ever day. Expect final cost to be closer to $8-10 billion. No one wants to talk about rail’s yearly O&M costs as no one in rail has a clue. Word is over $100 million per year and climbing.

      Stopping rail at the Middle Street Bus Station is approved by the Feds and Jacobs report. Will save billions, lower the yearly O&M costs. Morning commuters are not going to Ala Moana, going to work in the city. Get off rail, step on a bus, be whisked to your work site.

      Stopping rail at the MSBT will help reduce the crushing cost of rail our children and grandchildren will have to pay their entire working life. The day will come when they will ask what their parents were thinking when they approved the rail money pit.

      • The operating costs are laid out in Table A-2 of the 2012 financial plan, and yes, annual operating costs are in excess of $100 million after the first few years. Part of the problem, however, is that the fare recoveries are not reasonable, given our experience with TheBus. Even the bus fare recovery is questionable, going from 29% to 40% in 2017.

        • Lets be honest. With rail so far over budget, so many ongoing financial and management debacles, how credible is the 2012 financial plan? Not very.

          When it comes to recouping the operational costs of rail, in 2013 the San Diego Trolley was tops at 57%. Portland @ 47%, San Francisco @ 24%, Los Angeles @ 21%. Lower the recoup rate, the higher the city’s rail operational cost is. Too many employees, overhead management, payment for worker’s pensions, medical care, you name it. Tax payers on the hook for all expenses over the recoup rate. Ref: http://www.voiceofsandiego.org/2013/08/01/fact-check-one-of-the-best-light-rail-lines-in-the-country/

          Lets look at what San Francisco/Oakland residents are paying for BART. In 2013, workers from the two unions, which represent more than 2,300 mechanics, custodians, station agents, train operators and clerical staff, now average about $71,000 in base salary and $11,000 in overtime annually, the transit agency said. BART workers currently pay $92 a month for health care and contribute nothing toward their pensions.

          What does this mean to Nei taxpayers? Expect rail’s yearly O&M costs to be closer to $200 million per year. Just the way it is when you have unprofessional, rookie, rail management.

  • I vote for just leaving the .5 percent as a permanent increase. Come on people, the state tax has been at 4% since the time began. It’s time for EVERYONE to anti-up

      • It’s always the same story, me me me I already pay too much. Same as the Kakaako condos no no it’s built for the rich. Well I have friends that bought and they are certainly not rich.

    • That’s because all you see is the 4% when you make a purchase. Tax is added on from the time the product is purchased from the mainland to the shipping to Hawaii, delivery charges to local distributor to purchase by the seller to another delivery charge to the seller and a final tax upon your purchase. And that’s not including if there’s multiple middle men between the distributor and the final seller. All those change of hands has tax added to it.

        • No it’s not the same as the rest of the country and the world. Only in Hawaii do we charge this tax for food and medicine.

        • From what I understand and I may be wrong, Hawaii’s GET is applied at every level of transaction as stated above. The other states uses a Sales tax which is applied only at the time of purchase by the end user.

    • Since you so up on it, pay my share!! I will never use it so you can have my spot on the train day in and day out!! Obviously you don’t get how bad this is for this island. A double deck freeway would cost less AND relieve traffic more that this train will…

  • A lot of people have forgotten just who is really behind this debacle. He is no longer in office nor do you hear anything about him. It is his stupid vision that is really putting us folks in a hole. I won’t mention his name cause he knows who he is and what he has done.

    • Go ahead. Raise property taxes and make the GET permanent. Hopefully that will finally get the voters to clean house and not re-elect anyone who is currently sitting on the city council or the legislature.

  • I testified yesterday that for less than the current estimate for the 20-mile, 21-station steel wheels system, the city could build a 32-mile, 24-station urban magnetic levitation (maglev) system that reaches from West Kapolei to UH-Manoa and includes service to Waikiki. I stated that we can deal with the federal government to allow us to convert existing guideway for maglev, change the technology, and still meet the requirements stipulated in the FFGA. I also said that our “public servants” must show the political will needed to deliver an operationally superior and far more cost-effective maglev system that will enable enough ridership to dramatically reduce the number of driving commuters. I also said that I was ready to discuss the numbers submitted in my written testimony with the members. Naturally, nobody on the council chose to ask me a question. (Shady) business as usual.

  • Good to see the city council is finally starting to see the utter folly or rail in the Nei. Council should reject the extension, using what money has already been generated to build the rail line to end at the Middle Street bus terminal.

    Pure shibai with this statement, “Rail supporters, however, said that plan would not provide enough ridership to make the project viable.” Not true at all. The original concept was rail to UH Manoa. Now it’s a shopping center. Really? Makes no financial sense to spend over a billion dollars to take rail to a shopping center. Middle street bus terminal will be the perfect place to end rail.

    Disembark rail, short walk down to a waiting bus and then whisked to where ever you want to go. Far better than trying to drive all the way, find parking, etc. Rail will do just find ending at MSBT. Approved by the Feds and Jacobs report, a Win-Win for taxpayers.

    Only then could we start to reduce the crushing costs of rail. Even then, our children and grandchildren will spend their entire working life trying to pay the $200 million plus cost of rail’s yearly O&M. Forever asking what were their parents thinking when they fell for the false siren song of rail.

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