Lawmakers vote for 2 more years of rail tax

The House Finance Committee voted late Wednesday night to provide an additional $1.2 billion to financially bail out the Honolulu rail project, but Honolulu Mayor Kirk Caldwell said that won’t be enough to get the job done.

Committee members questioned Caldwell for hours Wednesday in what amounted to a very chilly reception for Caldwell’s request for a 20-year extension for the Oahu excise tax surcharge, which provides most of the funding for the city’s rail project.

In the end the committee gave tentative approval to a new draft of Senate Bill 1183 that would extend the excise surcharge by just two years — to 2029 — and would provide some other extra funding to the city by reducing the state’s share of the excise surcharge down to 1 percent from 10 percent.

Caldwell said discussions over the surcharge can continue, but “we need about 10 years (extension). We got two.”

“It’s nowhere near what we need, obviously, and so we’d have to make up the difference at the city level. And of course, where do you get that revenue from? It comes out of real property taxes,” he said.

Caldwell began the discussion with the critically important Finance Committee by apologizing for making his request for help to bail out the rail project, which is vastly over budget. But it didn’t seem to help much.

“I understand how difficult this is for you, because I was here two years ago, and I want to say I apologize for putting you through this again, and I appreciate your patience and understanding, and hopefully your support to get this project built,” Caldwell said.

The mayor said he is asking lawmakers to extend the excise tax surcharge to at least 2047 to make “absolutely certain” the city will have the money it needs to complete the 20-mile rail system without returning to the Legislature yet again. “My goal is never to come back again. I’m not coming back again,” Caldwell said.

But state Rep. Matthew LoPresti, (D, Ewa Villages-­Ocean Pointe-Ewa Beach) said, “I feel like I was lied to” in 2015 when Caldwell last asked for an extension in the excise tax surcharge.

The excise surcharge for rail was originally supposed to expire in 2022, but Caldwell asked the Legislature two years ago to extend the special tax to raise more money because the project was costing more than expected.

Lawmakers agreed to extend the surcharge until 2027 with the understanding that the five-year extension they approved in 2015 would provide enough money to fund the entire 20-mile rail route.

As it turned out, the five-year extension wasn’t nearly enough to cover rail’s ballooning cost. Estimates of the cost of the project have expanded from a projected $5.26 billion in 2014 to as much as $10 billion today, including interest.

State Rep. Gene Ward, (R, Kalama Valley-Queen’s Gate-Hawaii Kai) told city officials that the evolving estimates for the cost of rail raise critical “trust issues” because the voters would never have approved the project had they known it would eventually cost $10 billion.

In another frosty exchange, House Finance Committee Chairwoman Sylvia Luke instructed Caldwell and Interim HART Executive Director Krishniah Murthy to explain to committee members exactly why the city’s projections two years ago turned out to be so inaccurate.

“I think you need to justify why we need to believe you now, why we need to believe your numbers now, and tell us why you were wrong two years ago,” said Luke, (D, Punchbowl-Pauoa-Nuuanu).

Caldwell said HART advised him in 2015 that the project was short about $910 million, “and at the end of the day, I think HART thought they could shave it close and reduce the number.”

Murthy said that when HART prepared the inaccurate cost estimates for rail two years ago, “apparently some mistakes were made in not taking into account all of the pending claims and issues that we had with the ongoing contracts.”

Some contracts were awarded in the 2009 to 2011 time frame before the city had made key decisions finalizing the technology that would be used to run the trains, how the stations would be designed, and how the operating and maintenance would be handled, Murthy said.

It took “a couple of years” to finalize those issues including the decision that the Honolulu system would be driverless, and that required amendments that added to the cost of already awarded contracts, he said.

Caldwell said contracts have now been completed or awarded for three-fourths of the system, “so some of the uncertainty that we faced two years ago has been resolved.”

“Things that were uncertain have now become more certain than they were when we were here two years ago,” Caldwell said.