Amid rail-related construction work on busy Dillingham Boulevard ramping up, some area businesses are grappling with plummeting customer foot traffic.

In response, the City Council is weighing a proposal to resurrect a plan — created during former Mayor Kirk Caldwell’s administration — through which the city Department of Budget and Fiscal Serv­ices and Honolulu Authority for Rapid Transportation could share responsibility of compensating eligible local businesses that claim lost income due to ongoing rail construction along Dillingham Boulevard and into urban Honolulu.

Earlier this month the Council’s Committee on Transportation voted to push forward a draft resolution that directs city staff to review and report on possibilities that would require HART to pitch in toward compensating hurting businesses. Resolution 22-281 is set for full City Council review for approval today.

Among those interested in applying for compensation is Jin Lee, manager of a dual karaoke bar and Korean fried chicken eatery on the 1000 block of Dillingham Boulevard. He said the operation is in financial trouble due in part to the increased cost of the cooking oil used to fry the baskets of spicy chicken his business serves up and the ongoing construction of a nearly $10 billion rail project just feet from his doorstep.

HART in 2022 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 work along the Dillingham Corridor is expected to last through 2026.

At Soul Chicken and Bliss Lounge, Lee said, “business is down 50%.” Lee, who for the past three years has managed the operation, a shared business space that employs six, added, “We now have a little crowd of people coming. … Even the bar is slow.”

Lee said the problem — construction digging up Dillingham Boulevard and often blocking access into his parking lot — is so bad that he’s considering a staff reduction or a move to another location. The business across the parking lot from Lee’s spot — Chicken & Brisket — closed Sunday. A sign posted on its front door says it’s relocating to Pearl Highlands Center in Pearl City.

Relief for businesses

Introduced by Council member Radiant Cordero, whose district covers a segment of Dillingham Boulevard, the resolution seeks a status update regarding the Transit Construction Miti­gation Fund. Established through city legislation in 2018, the fund was slated to “receive and expend money to mitigate negative economic impacts from the construction of the Honolulu High Capacity Transit project.”

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 moving forward, “HART should be responsible for the transit construction mitigation measures” and pay for any associated costs.

Meanwhile, a program was never established for distribution of money in the mitigation fund — leaving affected businesses empty-­handed.

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

According to Cordero’s resolution, HART’s current business mitigation program is “limited to promoting businesses located along the rail line during times of construction.” Further, the resolution notes that HART has stated publicly in testimony submitted to the Council that it maintains that Honolulu Hale alone should be responsible for covering the cost of construction mitigation.

During the HART board of directors’ meeting held last week, the panel balked at seeing the transit agency — dedicated to constructing and delivering an 18.75-mile rail project with 19 stations to the city — also financially compensate affected businesses.

Lori Kahikina, the transit agency’s executive director and CEO, said the mitigation funds in question “will not come from HART.”

The board asserted that the city and not HART should help struggling businesses affected by the rail line. “It’s not HART’s money,” said board Chair Colleen Hanabusa, “it’s the city’s money. … My position is ‘not us’; we have enough problems.”

Although some on the board expressed support for the intent of the Council’s draft resolution, the board voted unanimously to remove HART from mention of having any responsibility of administering the transit construction mitigation fund and program.

And as far as outreach to local businesses along Dil­lingham Boulevard, the agency said that that work continues. Joey Manahan, HART’s director of government relations, told the board that agency staff meets “with merchants almost every day” over the ongoing rail construction and its impacts. “Overall, the businesses are taking it in stride,” Manahan added.

But according to Lee, with the exception of a paper flyer he’d received detailing the rail construction work along Dillingham Boulevard, he’s not personally met with or been visited by anyone from the city or HART regarding the rail project.

Lapsed funding

Andrew Kawano, the city’s current budget director, said the transit construction mitigation fund is in limbo. “It was initially funded; however, there was no action and the funds lapsed,” he said. “So my understanding is that the fund remains active right now,” although it has no funding.

Additionally, Cordero asserted that prior city leadership — including a former city budget director — claimed HART should be responsible for determining which businesses are deserving of mitigation relief.

Under the prior city administration, Kawano said, “rules, eligibility criteria and procedures to do the assessment and provide relief” were never put in place.

“I think that still has to happen based on where we are today,” Kawano said, adding that the city would ask for a valuation of parcels and business owners in the area. “They’re going to include everything, even government-owned properties along the Dillingham Corridor.” The new effort for this fund would “start from scratch and come up with a plan and work with Council members to get a solution,” he said.

Kawano said the city would likely examine an applicant’s financial statements and related documents. “We want to ensure the loss incurred is due to rail construction and not anything else,” he said. “We also understand a lot of the businesses are still struggling to recover from the pandemic.” He added that the process to restart the fund might take time and “require more staffing if we were going to go the route of applications.”