Feds rebuff city request for another pile of cash to fund rail

City leaders are expected to return to the Legislature this winter to seek an extension of the 0.5 percent general excise tax surcharge for the $8 billion rail project because their efforts to secure additional federal dollars were shot down by top federal transit officials in San Francisco this week.

The request, however, is likely to be met with skepticism by state lawmakers frustrated that they once again are being asked to take the political hit for a project that has climbed in price by more than $2 billion since they agreed two sessions ago to a five-year extension of the surcharge through 2027.

The Federal Transit Administration also made it clear during two days of meetings that halting rail construction at Middle Street — rather than in the Ala Moana area, as the city originally planned — is not acceptable, and the agency warned that stopping the line short could jeopardize $1.55 billion in federal grants, city officials said.

City and federal transit officials announced in the spring that building rail now likely will cost a projected $8 billion for the full 20 miles, from East Kapolei to Ala Moana Center, with 21 rail stations. That’s about $2 billion more than the cost estimate made two years ago. Consequently, they said, there would be only enough money to reach the Middle Street station, about 5 miles short of Ala Moana.

Both Mayor Kirk Caldwell and City Council Chairman Ernie Martin said Tuesday they asked FTA officials for additional funding and were told none would be made available.

One bright spot resulting from the talks, city officials said, is an optimistic expectation that the FTA will consider the city’s request to extend the deadline for coming up with a recovery plan for the project funding beyond the current Dec. 31 deadline.

The Honolulu delegation that traveled to the FTA’s western regional office included Caldwell, Martin, Council Transportation Chairman Joey Manahan, Honolulu Authority for Rail Transportation Chairwoman Colleen Hanabusa and HART acting Executive Director Michael Formby.

Leading discussions on the FTA side was Acting Administrator Carolyn Flowers.

Caldwell told the Honolulu Star-Advertiser on Tuesday night, “They said no to any additional dollars under the New Starts program.” He added that the city was told all the money for that program has been committed to other projects.

Martin, in a news release, said the city delegation was told there are 60 other transit-related projects being funded through the program.

Caldwell said this was his third time asking for additional federal transit dollars. “That doesn’t mean I won’t do it again,” he said, adding that the November election and a new presidential administration could bring new opportunities.

“With the end of this cycle, with the new year starting, with a new administration in place and maybe a different makeup in Congress, and a new budget cycle, there’s a possibility, and that’s why I would ask again,” Caldwell said.

In a surprising change in position, Martin said Tuesday he intends to join Caldwell at the Legislature in seeking an extension of the surcharge, especially because the FTA made it clear that pausing the project at Middle Street would be unacceptable and jeopardize the $1.55 billion federal share.

“I’ve been opposed to going back to the Legislature to ask for a further extension of the GET surcharge, but given the FTA’s position, it is clear that we don’t have a choice,” Martin said in a separate statement. “This project is too often viewed as a city issue but it’s a quality of life issue for the people of Oahu who are struggling with some of the worst traffic congestion in the country.”

Manahan, in a statement, echoed the call. “We need the Legislature’s support to invest in a better future with us and to recognize the role rail will play in improving the quality of life for the people of Hawaii,” Manahan said.

Key state lawmakers told the Star-Advertiser on Tuesday that any effort to extend the 0.5 percent Oahu-only surcharge on the general excise tax will be a hard sell.

House Finance Chairwoman Sylvia Luke (D, Punchbowl-Pauoa-Nuuanu) said the tax is among the most regressive levies that can be imposed on citizens. “It hits everybody from the working poor to retirees,” she said.

Luke said legislators would pursue some detailed fact-finding because what was a $5.26 billion project when the city first asked for an extension in January 2014 has now climbed to $8 billion.

“A lot of the information we were given was not true, and knowing now that information was withheld from us, whether it was from the city administration or HART, for us that doesn’t matter,” Luke said. “If you’re going to be responsible in taking billions of dollars from taxpayers, I think it’s everyone’s obligation to make sure that the right facts are presented and things are not withheld. The city has lost a lot of credibility with the Legislature.”

Further, Luke said, city officials give the impression that the surcharge “is somebody else’s money. … They don’t look at it as taxpayers’ money.” What’s needed, she said, is a “real discussion” among city leaders about “putting their skin in the game, and we have yet to see that discussion at all.”

Asked whether she was suggesting an increase in city property tax rates to pay for rail construction, Luke said she is open to “any other alternative other than the general excise tax … other taxes and fees.”

Senate Ways and Means Chairwoman Jill Tokuda (D, Kailua-Kaneohe) said city leaders need to “get their own house in order” before approaching lawmakers for an extension of the GET surcharge.

“At this particular juncture, we still have not seen a number of things from HART and from the city,” Tokuda said. “We haven’t seen a functional budget, in terms of one that’s credible that they can hang their hat on. We have not seen an operations and maintenance plan” or a plan regarding its sustainability.

Lawmakers made it clear two years ago that the surcharge was to be used for construction only — not operations and maintenance, she said.

Luke said it might be prudent for the city to not approach lawmakers in the coming session. “This rail tax is not going to expire next year,” she said. Tokuda echoed that sentiment, noting that with four months until the start of session, “I don’t think they’ll have that information ready.”

Rail leaders, however, have hoped that they could go to the Legislature for funding options before having to deliver a recovery plan to the FTA. Caldwell has said that’s a key reason the city is asking for more time to submit a recovery plan.

Hanabusa, the HART chairwoman, told the Star-Advertiser on Tuesday that some state legislators she’s spoken with recently said they’re willing to “consider the facts” facing the rail project, and that having a new executive director as part of those discussions would help the city make its case before state lawmakers.

The delegation seemed relieved that the FTA is willing to consider extending the deadline. Hanabusa said she is “cautiously optimistic” that the city will get more time to forge a rail recovery plan.

In exchange, she said, the city would need to put forward a cost containment plan for rail and submit the project to more expert peer review conducted through the American Public Transport Association, a Washington D.C.-based nonprofit that lobbies for public transportation.

Rail officials must also work to complete the project’s long-overdue financial plan under that understanding with the FTA, although no firm deadline for that was given in San Francisco, Hanabusa said.

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Star-Advertiser reporter Marcel Honore contributed to this report.