If state lawmakers will agree to extend the half-percent excise tax surcharge on Oahu to provide desperately needed funding for the city’s rail project, the city would be willing to share the tax revenues from that surcharge with the state, according to a pitch made Tuesday by Honolulu Mayor Kirk Caldwell and City Council Chairman Ron Menor.

Caldwell and Menor made their surprise proposal in a hearing before the Senate Committee on Public Safety, Intergovernmental and Military Affairs on Tuesday afternoon, and Caldwell acknowledged in an interview the plan is designed to shore up political support for the rail surcharge extension among skeptical or even hostile lawmakers.

“If you ask me, I’m very concerned,” Caldwell said. “I think right now it’s questionable whether we will get the surcharge extended. I’m very concerned. I think we’re having a harder time than two years ago, and it’s all based on the fact that there’s no trust, that the numbers given have changed dramatically.

“The Legislature is very upset, I’m equally upset, but at this point it’s not about looking backwards and trying to blame and say, ‘I’m angry,’” the mayor said. “We’ve got a problem. How do we come up with a solution that benefits everybody? And I think part of that solution is a sharing of the surcharge.”

Caldwell successfully lobbied the Legislature in 2015 to extend Oahu’s 0.5 percent excise tax surcharge to provide extra funding for rail, and lawmakers grudgingly agreed to extend the surcharge by five years with the understanding that the tax extension would fully fund the project. The surcharge now earns nearly $250 million a year for rail, and is set to expire in 2027.

The problem is that construction costs for the 20-mile rail project have ballooned since then to more than $8.2 billion, and the latest estimates suggest the true cost of rail will be nearly $10 billion when borrowing costs are figured in.

If the tax surcharge expires in 2027 as scheduled, the city says, the surcharge won’t provide enough money to complete the rail project after all. This year Caldwell is asking the Legislature to make the surcharge permanent, an idea that got a frosty reception at the state Capitol.

House Majority Leader Scott Saiki said House Democrats would be reluctant to make the surcharge for rail permanent because that could preclude the state from increasing the excise tax in the future if money is needed for other state purposes such as improving public education.

Saiki said it will be difficult to win passage of another surcharge extension in the House, and said he needs to know more details about Caldwell’s proposal to know whether it would solve the problem.

“What exactly do they mean by a split?” he asked. “I think there are a lot of questions. Some members probably feel that they can’t rely on the answers that are being provided given past representations that were made to the Legislature.”

Currently the state takes a 10 percent share of the excise surcharge revenue, meaning the current split is 90-10 in favor of the city. Caldwell declined to say whether he has a specific percentage in mind for a new city-state split of the excise surcharge.

However, city Deputy Director of Budget and Fiscal Services Gary Kurokawa said the city has developed a financing model for rail that contemplates a city-state excise surcharge split of 80-20 or perhaps 75-25 in favor of the city.

He said a split that was more generous for the state would not leave enough money to properly finance the rail project and would likely cause the Federal Transit Administration to reject the city’s new financial plan for rail.

The city has calculated that if it were to continue to receive 90 percent of the surcharge revenue as it does today out to 2038, the borrowing costs for rail would be an estimated $1.3 billion. However, assuming an 80-20 split with the state, the city would need to finance rail debt out to 2047, and borrowing costs would increase to about $2.1 billion, Kurokawa said.

“The smaller amounts that we take, we just have to go longer for the financing,” Kurokawa said. Even so, Caldwell said the city is “willing to share a larger portion” to help with state issues.

“They are facing challenges in terms of revenue, and I’m thinking, would there be greater support for the extension if a larger share of the money went to the state to build transportation projects on all of the islands, because there’s huge challenges,” Caldwell said.

For example, Gov. David Ige’s administration has said the state does not have enough money in the Highway Fund to move forward with projects to increase highway capacity and reduce congestion on the neighbor islands.

The extra funding the state would receive from increasing its share of the Oahu excise surcharge could be used to help finance projects such as the widening of Highway 130 in Puna on Hawaii island, or the Kapaa Bypass project on Kauai, or one or more major projects on Maui, Caldwell said.

That would involve shifting tax money collected on Oahu over to neighbor island projects, “but we already do that,” the mayor said. “The million people on this island provide vast amounts of tax dollars for everything, for the school system … so we are helping with the educational system, we are subsidizing it already.”

Senate President Ron Kouchi said members of the Senate leadership are waiting to hear specific numbers from the city, and said it is too early to make a decision on the issue.

“Nobody has gotten behind any specific plan, and we are trying to get the information and see if there is something people could get behind,” Kouchi said. “I just think the first thing everybody wants is to know they’ve got information they can feel comfortable with so when they do make a decision, they can answer to the voters.”

He added, “That’s what was assured two years ago, and it didn’t pan out, so we want to be sure we’ve got good information this time.”