A bill that will make a city-backed $450 million line of credit available to the Honolulu rail project in case it needs a sudden infusion of cash was signed into law Friday by Honolulu Mayor Peter Carlisle.
The city made the credit line available for rail to appease the Federal Transit Administration, which wanted the project to have a cash cushion available to help cope with any emergencies.
One of the unanswered questions about the new ordinance has been how the $450 million will be repaid if there is an emergency and the Honolulu Authority for Rapid Transportation has to draw on the credit line.
HART does not have a ready source of income that could be used to repay the credit line. Fare collections for the rail line are expected to cover only 40 percent of the cost of operating the planned rail system.
Carlisle said at the bill-signing ceremony at Honolulu Hale that "the likelihood is next to zero" that the credit line will be needed to complete the rail project.
However, if HART does use the money and must later pay it back, "then we’ll find the money (using) whatever method is appropriate, whether it’s continuing revenues from the GET (general excise tax), and whether we could get that by action, to be paid for, to use it, or … using the funds of the City and County of Honolulu if necessary," Carlisle said.
The City Council and former Mayor Mufi Hannemann in 2007 approved an ordinance that prohibits use of city general funds to finance construction of the rail project.
That 2007 ordinance requires that construction of the rail project be financed mostly through federal funds and a half-percent excise tax surcharge paid by Oahu residents and visitors. The money from the excise surcharge has already been built into the rail financial plan, and the surcharge is set to expire at the end of 2022.
Using city general funds or seeking an extension of the general excise tax surcharge "is at least a possibility, we’d actually have to explore all options to figure out what different avenues we could go down, what do we need to do, who do we need to approach, are there other available federal funds that we could apply for — all those things would be on the table," Carlisle said.
"So, you look at every conceivable place where you could get money, and then you pay it back."
Ann Kobayashi, chairwoman of the Council’s Budget Committee, said she believes the new line of credit amounts to an end run around the 2007 ordinance prohibiting the use of city general funds to pay for rail construction.
"In the end, because it’s the city’s line of credit, the city’s general fund will have to be used" to pay the credit line back, she predicted. "The spirit and letter of the law is no city funds can be used."
Kobayashi and Tom Berg were the only members of the Council to vote against the credit line.
Carlisle said the City Council’s 7-2 vote in favor of the line of credit "has already had ramifications in Washington. I mean, they are already extremely impressed, it shows an absolute, complete commitment" to the rail project.
The city has already begun construction of the 20-mile elevated rail line, which will extend from East Kapolei to Ala Moana Center. It will be constructed in phases, with the entire line scheduled to open for service in 2019.
