Caldwell’s use of bond money for rail administrative costs is questioned

Mayor Kirk Caldwell’s plan to use city money to pay a share of the cash-strapped East Kapolei-to-Ala Moana rail project is already raising objections from at least two members of the City Council, the body that he needs to OK the major policy shift.

Caldwell on Friday submitted to the Council a $2.61 billion fiscal 2019 operating budget that’s roughly 6.4 percent, or $157 million more, than the current year’s as well as an $875,000 capital improvements projects budget that is down from the $1.07 billion CIP budget for this year.

The CIP budget includes $44 million in bond money to help cover construction costs of the $9 billion project, and specifically the administrative costs tied to the project. The proposed funding represents part of a projected $214 million shortfall in project costs that Caldwell assured Federal Transit Administration officials last month that the city would commit to paying.

The inclusion of rail money in the mayor’s budget package is significant. Until now the project has been paid primarily through a $1.55 billion federal grant and a 0.5 percent Oahu surcharge on the state general excise tax.

Caldwell’s plan to use city money and especially bonds — borrowed money that eventually will need to be paid back with interest by city taxpayers — raised the ire of Councilwoman Ann Kobayashi, rail’s biggest critic on the Council, who has warned over the years that the city would eventually renege on its promise to not use city funds for rail.

“You can’t use bond money to pay for operations. That’s really dangerous,” Kobayashi said Friday afternoon, adding that she will vote “no” on any proposal to do so.

The 2006 funding plan for the rail project mentions using federal and state money but not city dollars. The Council is currently pondering Bill 42 (2017), which would allow for the use of city funds for rail. The bill was deferred by Council members Wednesday and recommitted to the Council Budget Committee.

“So we have to borrow money to operate the city? There’s something wrong there,” Kobayashi said. “Once again we’re asking taxpayers to co-sign this loan.”

Councilman Trevor Ozawa held a press conference Friday morning to criticize Caldwell’s administration for failing to collect bulky trash in East Honolulu, and he questioned how the mayor could be asking to use city money to pay for rail when he is proposing in another part of his budget package that residents should now pay $5 a month for curbside trash pickup service and then additional fees if they want bulky trash collected.

“We should be using our property taxes for this, not for rail,” Ozawa said as he stood by uncollected trash. “No one voted for the general funds to be used for the rail, ever. … It was always that we we’re gonna be using GE on that.”

Caldwell said he appreciated the concerns raised by the Council members. “We’re going to work with them on it.”

He said the state Legislature left the city no choice but to tap into city funds. State lawmakers agreed to a $2.4 billion bailout package in the fall for the rail project that includes an extension of the surcharge by three years through 2030 and gives each of the counties a larger share of hotel room taxes. The plan leaves projected revenue just short of the estimated final cost of the project, the mayor said, and includes a stipulation that the city cannot use any of the money to pay for the project’s operation or maintenance.

Budget chief on board

Council Budget Chairman Joey Manahan, in a statement, said he supported Caldwell’s plan, and echoed the mayor’s reasoning.

“I’m glad the Mayor’s proposal includes the City subsidy for HART’s administrative costs as mandated by the Hawai‘i State Legislature,” Manahan said. “I do expect a lot of in-depth discussions and deliberations from the members, and I hope at the end of the day that the City Council continues its strong support for rail and the full federal grant agreement between the City and County of Honolulu and the Federal Transit Administration.”

Questioned why the city is borrowing money for the funding, city Budget Director Nelson Koyanagi acknowledged that the city would have to pay more in debt service. However, he said, “If we use operating money this year, then we’re going to have to raise property taxes or cut services.” In subsequent years, when more cash is available, the city could choose to fund the administrative costs through cash, he said.

Caldwell’s budget package also includes:

>> A proposal for a $5 monthly fee for residential pickup, and a switch to a call-in-only bulky-waste pickup system with a $10-per-cubic-yard fee.

>> $64 million for work on an Ala Moana transit plaza for rail and TheBus riders, and $3 million for a Pearl City facility that’s already been purchased.

>> Funding for four new “roving” park rangers who would patrol for park rule violations at Ala Moana Park and nearby facilities.

>> Additional money for Housing First and other initiatives to help the homeless, including $1 million for operating a new, four-story hygiene center on Kuwili Street in Iwilei.

>> $26 million for new buses and and Handi-Vans.

>> $2.5 million for continuation of the Honolulu Police Department’s body camera pilot project.

Where City Spends Its Dollars by Honolulu Star-Advertiser on Scribd

Star-Advertiser reporter Tyne Phillips contributed to this report.