The state tax director assured transit officials Thursday that the city’s rail project, which relies heavily on tax dollars generated on Oahu, will receive its fair share even if the cash does not arrive in steady amounts.
Much of what Tax Director Fred Pablo told the Honolulu Rail Transit Authority board echoed what department officials have already said: A lag in processing tax returns, thanks to the Department of Taxation being short-staffed, has led to the project receiving about $29 million less than anticipated so far from the 0.5 percent general excise tax surcharge used to fund it. The surcharge has garnered $1.16 billion since collection began in January 2007.
Pablo also pointed to other factors. There are monthly, quarterly and semiannual filing periods for certain tax returns, and some taxpayers pay by check — which takes longer to process than the payments made electronically by the majority.
Pablo’s board visit came after HART CEO Dan Grabauskas requested in an April 1 letter that the department explain exactly how the cash flows and the reason behind the “fluctuations that we have experienced since the inception of the GET surcharge.”
In response, Pablo told the board that the lag and other factors would make payments on a monthly and quarterly basis unpredictable.
He recommended that HART staff project cash flow annually, not month to month.
Pablo also presented the board with slides that showed fluctuations in statewide GET and the surcharge running nearly parallel on a monthly basis once the “noise” of the department’s processing delay was removed.
The presentation “gave the board confidence in the monies that have been paid” since the surcharge took effect and will help HART better forecast its cash flow, board finance Chairman Don Horner said after the meeting. Pablo gave “a reconciliation and a rationale as to why there’s such a significant difference” between statewide GET growth rates and the payments HART has received, Horner said.
Pablo told the board that the department has a 25 percent staff vacancy, and that much of its work is done manually, contributing to delays.
The department is dealing with staff shortages despite the state’s keeping 10 percent of the surcharge to administer the tax.
That 10 percent — which in 2012 was $21.2 million, roughly equivalent to the department’s budget — goes straight to the state’s general fund, where it can be used for a variety of programs and services.
A bill that would have reduced that 10 percent amount died in this year’s legislative session.
“Considering the limitations the department had, I think the tax administration did pretty well,” Pablo said.
GET collections are up nearly 11 percent through the first nine months of this fiscal year, and HART’s finances are based on a 5.05 percent annual growth rate.
