Senators blast city leaders over rail funds

Senate leaders delivered Honolulu’s mayor and those overseeing the city’s troubled rail project a harsh rebuke Monday when they advanced a measure that aims to help finish building the transit system without another tax extension.

Instead, under the latest version of Senate Bill 1183, the state would simply end the controversial 10 percent administrative fee it collects on rail’s general excise tax surcharge — widely known as “the skim.” That would close rail’s multibillion-dollar budget gap by about $300 million, based on official estimates.

Then, it would be up to city leaders to scrape and cobble together some $500 million from the city’s budget to cover rail’s remaining “raw costs.”

The city would further be on the hook for more than $1 billion in contingency funds, which is how much rail officials say they’ll need to cover unforeseen problems if they’re to build the entire 20-mile line to Ala Moana Center.

Mayor Kirk Caldwell, City Council leaders and Honolulu Authority for Rapid Transportation officials listened somberly Monday during a state Capitol hearing as Senate Ways and Means Chairwoman Jill Tokuda grilled them on their budget accounting and laid out the Senate’s new rail measure.

Caldwell advocates for extending the GET surcharge to cover the rail project’s budget chasm, just as he did in 2015. This year he’s joined by the City Council, which also supports a surcharge extension.

However, Tokuda (D, Kailua-Kaneohe) told the city leaders that after having read the city’s fiscal year 2016 budget, she’s convinced they could scrape together the funds to cover rail’s $7.1 billion in allocated, or “raw,” costs without another tax extension.

“If this is your No. 1 priority, then you make hard (choices), you make cuts,” Tokuda told them. Many Oahu residents “don’t want us to break our promise again,” she said, referring to the state’s 2015 approval of a rail tax extension after rail leaders said that would likely be enough.

“They think we’re liars,” she said of those who oppose another extension.

Earlier in the hearing, Caldwell told the committee members that to complete rail with city funds instead of a surcharge extension, it would require a 14 percent across-the-board property tax increase. He opposes using property taxes, however.

Tokuda said that city leaders talk only about property tax increases because it “scares everyone in the room.” She expressed skepticism that they have thoroughly combed through their budget to scrape together some alternative plan using a variety of sources.

She pointed to annual increases of at least $30 million in property taxes that the city sees every year simply from rising values, as well as other funds the city could tap — at the expense of existing services — if it really wanted to finish rail.

“What I’m saying is, have you taken the time to dig through your very own budget to find the money without taxing your own taxpayer?” she asked city leaders.

Much of the city’s added annual revenues will be consumed by collective bargaining agreements, city Deputy Budget Director Gary Kurokawa told the Ways and Means panel.

Tokuda was unfazed.

The state has to deal with such agreements, too, she said. Furthermore, the $30 million a year in rail “skim” dollars that the state would sacrifice could go toward education, health care, solving Hawaii’s homelessness problem and other social services, she added.

The city furthermore would be highly motivated to avoid having to spend any contingency dollars, which could help contain costs, Tokuda said.

The Ways and Means Committee then approved the latest, streamlined draft of SB 1183. It replaces a prior version that was nearly 14,000 words and lumped together four distinct proposals on rail, transportation and other issues into one measure. Senators had said that would give them plenty of options as they negotiate what ultimately should be included in the bill.

Contingency needs

In January Tokuda warned Caldwell and HART during an informational hearing that she would need more answers about the contingency fund and how much of that pot the city would actually need.

On Monday HART Interim Executive Director Krishniah Murthy told Tokuda and other Ways and Means members that his agency has reviewed “in detail” the needs for the contingency with Jacobs Engineering, the firm hired by rail’s federal partners to oversee the project.

Deputy Executive Director Brennon Morioka added that the Federal Transit Administration knows how much contingency money Honolulu’s rail will need to be delivered within its latest budget estimate based on past projects.

Tokuda said she understands the FTA’s contingency guidelines but that she’s concerned with “who should be paying that contingency and who should keep us in line.”

Earlier in the hearing, Sen. Gil Riviere (D, Heeia-Laie- Waialua) asked city and rail officials why they’re not exploring alternatives, such as completing the final four miles or so into town at street level.

“The only plan is the original plan,” Riviere said. Earlier in this year’s legislative session, Sen. Laura Thielen (D, Hawaii Kai-Waimanalo- Kailua) also asked about switching to street level. Thielen and Riviere were among the four senators who voted against the 2015 rail tax extension.

Murthy and Caldwell told Riviere that they expect the system would lose two-thirds of its projected ridership if the elevated system ended at Middle Street. They said any major changes would require a new environmental impact statement.

The Legislature could still pass a rail measure that’s much different from the current SB 1183 proposal. Its real negotiations on what to do about rail aren’t expected to take place until its conference committees, when House and Senate leaders meet to hash out differences on bills.

The House’s Finance Committee, led by Rep. Sylvia Luke (D, Punchbowl-Pauoa- Nuuanu), will have to pass its own rail measure for those conference sessions to happen.

Meanwhile the city’s updated fiscal year 2017 budget is slated to come out Thursday.

“You did give us a little bit of a scorching,” Caldwell told Tokuda at the end of Monday’s hearing.