State lawmakers today released more of the details of a new plan to raise another $2.37 billion to bail out the city’s financially troubled rail project, but Mayor Kirk Caldwell is warning lawmakers the new funding provided in the package is still “not sufficient” to cover the budget shortfall for rail.
The Legislature is scheduled to meet in a special session next week to debate and vote on a bill to pump more money into the rail project, but it is unclear whether there are enough votes in the Senate to approve the package. By some accounts, a bare majority of 13 out of the 25 members of the Senate support the new plan.
House and Senate negotiators this week tentatively agreed to the bailout package, which involves raising hotel room taxes statewide by 1 percentage point for the next 13 years to raise an additional $1.32 billion for rail. That would temporarily increase the state’s hotel room tax to 10.25 percent. The plan also would require that lawmakers extend the half-percent excise tax surcharge on Oahu for another three years, to raise $1.24 billion for the project.
The tentative agreement also calls for reducing the so-called “skim” of revenue that the state takes from the general excise surcharge collections on Oahu. The House-Senate proposal would reduce the skim from about $30 million a year today to about $3 million a year in the future, which would provide tens of millions of dollars in additional funding for rail each year.
The deal brokered by leading lawmakers would also require the state auditor to conduct a “forensic” audit of spending on the rail project to determine exactly how the cost of the project grew so rapidly. The auditor would also be tasked with conducting an annual review of rail’s spending in the years ahead.
The partially built rail line is vastly over budget, with the estimated price tag for the project increasing from $5.26 billion in late 2014 to nearly $10 billion today, including financing costs.
City officials estimate the project now has a budget deficit of about $3 billion including financing costs, and Caldwell this year asked the legislature to extend the excise tax surcharge on Oahu to cover the shortfall. The surcharge generates about $300 million a year, and now pays most of the construction costs for rail.
Members of the House and Senate met in closed-door caucuses at the state Capitol this morning to review the latest proposal for providing more funding for rail.
In a letter to lawmakers today, Caldwell said he was presented with a partial outline of the plan on Wednesday, and House Finance Chairwoman Sylvia Luke asked him to accept the package. Tempers flared at that meeting, and Caldwell reportedly walked out. The mayor said he was told “this was not a negotiation, but a take it or leave it situation,” according to his letter.
Caldwell said he needs to review the actual bill “to ensure that the almost one million residents and taxpayers and our rail project are not adversely impacted by the proposed legislation,” according to the letter.
Caldwell also said in his letter the extra additional funding from the hotel room tax and the excise surcharge extension would not be enough to close the funding gap for the project.
Even after that extra funding is provided, “by our calculations, the gap is somewhere between $600 million and $900 million,” Caldwell wrote. “To fund the gap with city operating revenue would place an enormous financial burden on the residents and taxpayers of Oahu well beyond what a straight forward extension of the (general excise surcharge) would do.”
During the regular legislative session session this spring, lawmakers failed to agree on a package that would provide the billions of dollars in additional funding that are needed to complete the project.
The Senate approved a plan to extend the half-percent excise tax surcharge for 10 years, while House approved a plan to extend the excise surcharge for a year, and increase the hotel tax to help fund the project.
The city has a Sept. 15 deadline to show the Federal Transit Administration how it plans to raise the money to cover the project’s budget shortfall.