7-year tax extension pitched to fund rail

Lawmakers are once again eyeing a possible reorganization of the state Senate to try to clear the way to provide more funding for the city’s embattled rail project.

Senate Transportation and Energy Committee Chairwoman Lorraine Inouye floated a new draft bill to extend the half-percent excise tax surcharge to fund the Honolulu rail project by seven years to 2034.

That seven-year extension would raise an additional $2.83 billion for the rail project, she said.

Earlier this week Inouye and Senate President Ron Kouchi proposed the Oahu excise tax surcharge for rail be extended by 10 years, but Senate Ways and Means Chairwoman Jill Tokuda refused to agree to the 10-year extension.

Inouye said Tokuda was not consulted about the latest seven-year proposal, and Tokuda’s resistance to the idea of extending the rail surcharge presents internal problems for the Senate. As chairwoman of the Ways and Means Committee, Tokuda controls appropriations and tax bills for the Senate.

Lawmakers face a midnight deadline tonight to finally decide the issue, which spurred a new round of discussions and negotiations Thursday among the political factions within the Senate that could lead to Tokuda being removed from her position, according to lawmakers familiar with the discussions.

Inouye said she worked with Kouchi on the new rail tax proposal, and there are enough votes in the Senate to win approval of a seven-year tax extension.

However, she acknowledged there can be no final agreement with the House unless Tokuda accepts the proposal. “If she’s there, yeah,” Inouye said of Tokuda. “As long as she’s there as WAM (chairwoman).”

She added, “You know, I let the president deal with that.” Kouchi did not respond to a request for comment Thursday.

Inouye (D, Kaupulehu- Waimea-North Hilo) said she alerted the city to her new seven-year extension proposal, and “the numbers will work.”

“They feel comfortable,” she said of city officials. The Honolulu Authority for Rapid Transportation “probably wants more, but it takes us to a good level,” Inouye said.

Spokesmen for Honolulu Mayor Kirk Caldwell and the Honolulu Authority for Rapid Transportation did not respond to requests for comment Thursday.

The Legislature extended the tax surcharge once already in 2015 at Caldwell’s request, but the city disclosed last year that the project is vastly over budget, which forced Caldwell to return to the Legislature this year to seek another extension.

The estimated price tag for the partially built rail project has increased from $5.26 billion in late 2014 to nearly $10 billion today, including financing costs. The project is funded mostly from the excise tax surcharge, which generates about $250 million per year and is scheduled to end in 2027.

The House has approved a version of the rail tax bill that would extend the surcharge for two more years, but Caldwell has said that won’t provide enough money to complete the project. If the House proposal passes, Caldwell said that could force the city to raise property taxes by 8 to 14 percent to make up the difference.

Inouye said lawmakers are worried that if they agree to the House proposal, the city will return yet again later to seek another excise extension for rail.

“People are saying they don’t want to come back to hear this again,” said Inouye. “The feeling I get, even here and upstairs (in the House), people are saying they don’t want to come next year.”

Inouye said her latest proposal would allow the city to use all of the proceeds from the excise surcharge except for 1 percent of the tax collections, which would go to the state Tax Department to cover the cost of administering the surcharge on behalf of the city.

“It’s either that or we won’t have anything. That’s the sad part,” she said.

House Finance Committee Chairwoman Sylvia Luke sharply questioned the proposal for a 10-year tax surcharge extension in a tense conference committee meeting Wednesday, and Luke said she also has questions about the seven-year proposal.

“I want to hear the justification of the seven years,” she said. Luke said her understanding is the Honolulu City Council does not have enough votes for a two-thirds majority, which is needed to issue bonds to finance the project.

“If that’s the case, then what’s the sense of providing the funds?” she asked. “Maybe the city should provide at least some kind of justification or some kind of showing that there is bond authorization. We haven’t seen any bond authorization.”