The City Council Budget Committee gave a thumbs-up Wednesday to extending the 0.5 percent surcharge on the general excise tax by five years to support Honolulu’s rail project, setting up a final vote by the full Council on Jan. 27.

The Honolulu Authority for Rapid Transportation and supporters of rail say that extending the surcharge, through Dec. 31, 2027, is critical to completing the 21-mile, 20-station rail line and meeting federal requirements tied to $1.55 billion in federal grants. Opponents say the extension would give carte blanche to HART, the manager of the $6.57 billion project, to spend more taxpayer money at will.

The Budget Committee voted 4-1 to approve Bill 23 (2015). Councilwoman Ann Kobayashi, who has voted consistently against the current rail project, cast the lone dissenting vote. Voting for the extension were committee members Carol Fukunaga, Joey Manahan, Trevor Ozawa and Kymberly Pine.

The new draft, offered by Council Chairman Ernie Martin and Transportation Chairman Manahan, allows HART to use about $1.1 billion from the extended period to pay for the Kapolei-Ala Moana project. That’s higher than the $910 million “cap” proposed in a previous draft — an amount HART officials had said would not be enough.

HART officials told Council members in November that they now need $1.1 billion, based on a 4 percent growth rate, Martin told reporters after Wednesday’s vote.

Martin said his own staff estimates the growth rate over that period will be closer to 5 percent, which would mean the surcharge could bring in significantly more in revenues.

The new draft also softens language pertaining to the cap and addresses HART’s concerns while possibly raising a few legal questions.

Money collected beyond the $1.1 billion in additional surcharge “may be expended for” the following four things, in order of priority: contingency and reserves recommended by the Federal Transit Administration, improvements to aid accessibility to those with disabilities, planning and design of route extension, and “infrastructure improvements to rail station areas to support affordable housing.”

Funding for contingency and reserves appears to address HART concerns that a cap might hinder money going to that category, a requirement by FTA officials for the city to accept $1.55 billion in federal grants for the Honolulu project.

HART board Chairman Don Horner and board Finance Chairman Ivan Lui-Kwan, who received the latest draft of the bill during Wednesday’s meeting, indicated they could work with it.

Horner urged the committee to move the latest draft out, adding that he supports it “with reservations and a couple of tweaks.” He noted that the new measure both inserts more accountability checks on HART while “giving us the flexibility to move forward.”

Like several Council members at Wednesday’s meeting, Horner said he is concerned with the idea of including language in the bill allowing money to pay for housing-related expenses. Lui-Kwan, however, disagreed and said: “It doesn’t seem like it’s a requirement, it seems like it’s a discretionary matter. I don’t see that as a legal matter.”

Dan Grabauskas, HART executive director, told the committee that he wants to query FTA officials about the latest language.

Kobayashi and Councilman Trevor Ozawa, who represents East Oahu neighborhoods, said allowing excess funds to go to planning and designing for route expansion may be a big plus for them. Both said they and their constituents want a clearer picture about future plans to extend the rail line to the University of Hawaii campus in Manoa.

Whether the four stipulated items in Martin’s plan meet the requirements of state Act 240, the measure that authorized the excise tax extension, is a point of contention. Martin said the Council appears to be within its right to allow the funds to be used on the four items, adding that he’s checking with state Attorney General Doug Chin’s office.

Martin noted that HART must submit annual operating and capital improvement budgets to the Council for its approval. “The Council still retains that final authority to approve any budget … proposed for the project itself,” he said.

HART officials and Mayor Kirk Caldwell contend the money should go into an exclusive transit fund and not into the city general fund, thus taking the funds out of the purview of the Council, Martin said. Councilwoman Pine proposed to the committee that the money go into the transit fund, an idea that was shot down.

Caldwell, in a news release, thanked the Council for advancing the bill and urged members to give it final approval this month to allow the project to proceed. The administration will work with FTA, HART and Corporation Counsel Donna Leong “to see if additional amendments are necessary for legal or federal funding purposes,” the mayor said.

The latest draft of Bill 23 is at bit.ly/1JLpNWB.