Due to ongoing rail-related construction along Dillingham Boulevard toward downtown, the Honolulu City Council supports a plan to give financial assistance to eligible small businesses struggling to stay open.

To that end, the Council voted 7-2 this week to adopt Bill 40, which would provide a $10,000 grant to eligible businesses that opened prior to Jan. 1, 2022. Qualifying businesses would receive the grant each year, but only as long as active construction remains in the area.

Still, the measure, to take effect July 1, would apply only to small businesses that are majority-owned by residents; have 15 or fewer employees; generate not more than $750,000 a year; and opened for business prior to commencement of active construction of the rail project, within the same city block as the business location.

Bill 40 would also feature a community outreach component — under city agencies yet to be designated by the Mayor’s Office.

After Wednesday’s Council vote, Anthony Han, three-year owner of Soul Chicken and Bliss Lounge, said he would be interested in applying for the city’s $10,000 annual grant program, as business remains slow. Han told the Honolulu Star-Advertiser by phone that he would use some of the money to pay rent for his business. “It’s already past due,” he said.

In early 2023, Jin Lee, manager of the dual karaoke bar and Korean fried chicken eatery on the 1000 block of Dillingham, told the Star- Advertiser that construction of the nearly $10 billion rail project just feet from his doorstep was having a negative impact on his bottom line.

“Business is down 50%,” Lee said of the depressed business at Soul Chicken and Bliss Lounge, which employs fewer than 10. “We now have a little crowd of people coming. … Even the bar is slow.”

Lee said the problem was so bad that the business across the parking lot from Lee’s spot — Chicken &Brisket — had just closed. A sign posted on that vacant store’s front door read it had relocated to Pearl Highlands Center in Pearl City.

The new measure effectively jump-starts the city’s existing yet dormant transit construction mitigation fund.

Established through city legislation in 2018 under then-Mayor Kirk Caldwell, the fund was slated to “receive and expend money to mitigate negative economic impacts from the construction of the Honolulu High Capacity Transit project,” now known as Skyline.

That year, the Council appropriated $2 million to provide real property tax relief to eligible businesses. And the following year, the Council added $750,000 to the mitigation fund.

In 2019, Caldwell issued a message stating that from then on, the Honolulu Authority for Rapid Trans­portation “should be responsible for the transit construction mitigation measures” and pay for any associated costs.

But in early 2023, HART’s board of directors voted unanimously to remove the rail agency from mention of having any responsibility for administering that fund.

And a program was never established for distribution of money in the mitigation fund — leaving affected businesses empty-handed. And, city officials assert, the fund itself is now wholly inactive.

Under the 2018 legislation, expenditures from that fund were to include grants to businesses forced to relocate due to rail construction; grants for business interruption to compensate those along the corridor for the loss of income due to construction impacts; and working capital advances — loans to cover business operating expenses required to stay open during the rail’s construction phase.

Before Wednesday’s vote, Council members Tyler Dos Santos-Tam and Radiant Cordero said the bill they introduced would help prevent eligible businesses from shutting down as HART’s rail construction continues down Dillingham Boulevard toward Kakaako.

“It’s going to keep on going for a long time,” he said. “We saw what happened to businesses in Aiea and Waipahu, and so we need to provide them with help. … Right now they’re suffering.”

Dos Santos-Tam said small businesses eligible for city assistance would be “a finite number of businesses simply because they have to be within a block of Dil­lingham. … It’s not the entire island; it’s not the entire (transit-oriented development) zone.”

“So there’s actually a number of businesses on Dillingham that will not qualify based on this,” he said, “but we’re targeting the smallest mom-and-pop businesses, many of whom are just hanging on.”

Others from the public also spoke at the meeting.

“I think that it’s nice to express concerns and to offer token financial compensation to mitigate the profound losses that many have suffered along the Honolulu Skyline project,” resident Choon James said. “But it is also, to me, so unfortunate that this fiscal black hole continues … to impose massive impacts on Oahu residents.”

She added, “Many businesses have lost their businesses, while others are trying to hang on, but I think that it is imperative that the City Council and mayor provide much more educational outreach and warning what’s on the horizon for our property owners, business owners and workers. I think that transparency is so much needed for our residents to prepare ahead and into the future,” she said. “We all know that small businesses and even big businesses put their sweat and equity to support themselves and their families and their children’s future.”

But Council member Calvin Say disagreed with Bill 40’s implementation — particularly, using the city’s general fund money to subsidize affected businesses.

“You’re just signing off a blank check,” Say said. “And you’re opening up a can of worms for other city and county projects that may affect small businesses also. That’s the concern I have; you open up a can of worms, and you’ve got to live with it.”

And he noted not having “the resources to come up with a balanced budget for the next fiscal year.”

“I’ve always taken a very conservative approach to the budget, and it is a concern,” he said, “because I don’t want any of my fellow colleagues to be impacted by us having to raise something. And everyone should know that the only source of revenue is our real property tax. … Because I am concerned about the pocketbook, I am concerned about what taxpayers are doing — paying.”

Council member Val Okimoto agreed.

“I’ve always been supportive of small businesses … but I do have concerns with what we’re doing, especially as we move into the 2025 fiscal year and (the city) says they’re not sure if it’s going to be a tighter year; they may have some difficulties,” she said. “(And) I worry about the precedent that this will set.”

Ultimately, with Say and Okimoto dissenting, the Council voted to adopt Bill 40.

In 2022, HART awarded Nan Inc. a $496 million contract to undertake utility relocation work along Dil­lingham Boulevard as the rail line advances toward downtown.

That work — called the City Center Utilities Relocation project — would, among other things, see one of two 138-kilovolt electrical transmission lines put underground.

Nan’s construction along the Dillingham corridor is expected to last through 2026, though the rail line is not expected to be completed until 2031.