Rail tax surcharge stays on track

Oahu residents and visitors will be paying a 0.5 percent surcharge on goods and services through 2027 for the $6.57 billion rail project after the Honolulu City Council voted Wednesday to approve a five-year extension.

Council members voted 7-2 in favor of the extension. Ikaika Anderson and Ann Kobayashi cast no votes.

The approval came after months of deliberation and hand-wringing.

Bill 23 (2015) allows the Honolulu Authority for Rapid Transportation to use up to $1.1 billion from the extended period to pay for the bulk of the construction of the 20-mile, 21-stop line from East Kapolei to Ala Moana Center. The overall cost of the project is now up sharply from the $5.26 billion price tag that had been presented by rail officials through much of last year.

The project is expected to use $4.8 billion collected from the surcharge from Jan. 1, 2007, through Dec. 31, 2027.

Critics say they expect costs to climb even higher for what is the largest public works project in Hawaii history.

HART and Mayor Kirk Caldwell initially sought from the 2015 state Legislature an unlimited extension not just to complete the first segment, but also for additional legs to the University of Hawaii at Manoa campus and downtown Kapolei — and possibly rail operations.

But state lawmakers chose to extend the surcharge only through 2027, and only for construction of the first segment.

Council members have been discussing a cap of their own and passed one, of sorts. The language in the final bill, drafted by Council Chairman Ernie Martin, calls for $1.1 billion to pay for the 20-mile segment.

Remaining revenues “may be expended … in the following order of priority:” contingency and other reserves required by the Federal Transit Administration under a $1.55 billion grant; disability accessibility improvements; planning and design costs for the rail system’s future segments; and “infrastructure improvements to rail station areas to support affordable housing, as permitted by state and federal law.”

As Council members tried in recent months to insert a cap as well as other safeguards and conditions into the final language of the bill, HART officials, Mayor Kirk Caldwell and even some Council members warned that such changes, including a cap on the dollars for rail, could be viewed by the FTA as a breach of the conditions of the Full Funding Grant Agreement that gave the project $1.55 billion in federal money.

But HART Chief Executive Officer Dan Grabauskas told Council members during questioning Wednesday that FTA officials told him that they had no objections to the changes sought by the Council. His own staff also is OK with the latest draft, he said.

Unwavering rail supporter Anderson, despite those assurances, kept his promise to reject any bill that includes a cap.

Kobayashi, the other dissenting vote Wednesday, has historically opposed the project.

The bill also requires HART to be more accountable to the Council by submitting additional reports, including quarterly cash balance summaries and an annual report detailing funds invoiced and paid to general contractors and their subcontractors and what work they performed.

More than a dozen people testified on the bill, and most of them were opposed to it.

Roy Nakamura said HART has failed repeatedly to provide financial accountability. “The most important thing we’ve got to do is stop this project because this project is going to rip everybody off,” Nakamura said. “Our property tax, business taxes, excise taxes, you name ’em.”

Elaine Kam pointed to a diagram she sketched of a pit, “the rail pit that I have nightmares about.”

Several opponents alluded to the recent news by finance officials that, without considering other variables, annual operations and maintenance of the rail system would require a 9 percent across-the-board increase in property taxes.

Rail supporter Catherine Graham of the group Faith Action for Community Equity said the project will provide not just an alternative transportation mode, but also a way for the community to gain badly needed affordable rental housing.

Council members were equally impassioned when explaining their positions.

Councilwoman Kymberly Pine, who represents the Waianae Coast, said that this week she met with Transportation Services Director Michael Formby to discuss plans for a 3:48 a.m. express bus out of Waianae because the 4:03 a.m. bus is standing room only. Too many families have a long commute into town, she said.

Councilman Ron Menor called the decision on the bill “one of the most important issues that’s faced our island in many years.” The Central Oahu Council member said that if it were earlier along in the process, he would be more open to considering alternatives. But if the project were to be scrapped now, he said, “the alternative could be far more costly and less effective than if we were to proceed to rail.”

Kobayashi, the Council member who cast one of the no votes, however, said that extending the surcharge will hurt those in lower-income brackets the most. Rail’s public relations people have falsely convinced people that rail is essential to increasing the island’s housing stock, she said.

“We should be able to, and we can, build affordable housing around bus stops. … We do not have to build a railroad in order to build more affordable housing.”

Also Wednesday, the Council passed:

>> Bill 59, allowing the city to establish “parklets” and bicycle corrals on Oahu as part of its Complete Streets initiative.

>> Resolution 16-6, allowing developers of the Kapiolani Residence condominium project to build more of its affordable units for those making up to 120 percent of median income.

>> Resolution 16-1, asking the city auditor to conduct a performance audit of how domestic violence cases are handled by various city agencies.

>> Resolution 15-325, urging the Caldwell administration to build temporary housing units and hygiene centers in regions where the homeless reside.

>> Resolution 15-214, declaring the Council’s intent to consider investigating public ownership of an electric utility on Oahu.