Use tax surcharge exclusively for rail

Regardless of where they stand on the city’s elevated rail project, voters must be livid about Mayor Kirk Caldwell’s latest attempt to secure the added funds needed for the project: a big, unauthorized giveaway of taxpayer funds.

Caldwell is clearly feeling the heat — or is it the cold shoulder? — from state lawmakers. Now the mayor seems ready to throw a Hail Mary pass to win the extension of the general excise tax surcharge to bridge a financing chasm.

It’s a mammoth shortfall: The half-percent surcharge is projected to generate roughly $3 billion less than the anticipated $10 nearly billion total cost of completing the project as planned, stretching the full 20 miles from East Kapolei to Ala Moana Center.

Already extended once to expire in 2027, the surcharge still is not projected to generate sufficient construction funds. The city is on an urgent timetable to secure the financing because the Federal Transit Administration, which has approved a $1.55 billion federal subsidy for Honolulu, set an April deadline to receive a revised financial plan.

In other words: Show them the money, or the federal share goes away.

What Caldwell really wants is for the surcharge to be permanent, to begin to accrue the funding needed for operations and maintenance, as well as construction. Lawmakers are cool to that notion, because it could preclude the state increasing the GET for its own purposes.

So the mayor has proposed that in exchange for extending the surcharge, the state would get to keep a full one-fourth of the revenue in state coffers instead of passing it through to fund the rail.

As it is, the state budget takes a 10 percent “skim” from rail revenues; ostensibly that was to cover the state’s costs of accounting for and disbursing the money. Already, that amount is unconscionable.

Now the mayor is ready to more than double that, and all without going through one essential step: asking the taxpayers what they think.

Here’s what some think, anyway: This is completely unwarranted.

In 2005, the Legislature authorized the surcharge that largely underwrites the project. The Tax Foundation of Hawaii went to court to challenge the state’s skim of the funds, asserting that the 10 percent of revenues was enough to fund the state Department of Taxation’s operations entirely.

Then earlier this month, the University of Hawaii Economic Research Organization published a report titled “The Exorbitant Cost of Collecting Honolulu’s Rail Surcharge Tax.”

In it, the agency cited a recent survey of 10 states by the Institute for Professionals in Taxation in which the state collects a sales tax on behalf of local governments.

“Arizona, Illinois and Kansas don’t impose any fee,” according to the UHERO report. “Colorado imposes no fee for counties and statutory cities, but requires a fee for special districts. … In states where a fee is assessed, they are approximately 1 percent of tax revenues remitted.”

In other words, if best practices are any guide, the state is already guilty of robbing city coffers with its 10 percent take.

If additional millions are allowed to be siphoned off in this way, that extends the time it takes to pay the construction bills — and any financing charges for borrowing that’s required. That will add even more to project costs, while more money is tapped to pay for things the tax was never meant to fund.

The taxpayers, even those who support the project, should be outraged with the way elected leaders play fast and loose with their money, which only raises the risk that rail will be ditched.

That goes both for the mayor and for the lawmakers, if they are seduced by this scheme. State legislators should remember that without rail, expanding state highway capacity — and paying for it — would fall entirely to them.

Rail is, in fact, their responsibility. They should extend the rail tax, but no bribery should be required.