City Council should reject measure to cap GET surcharge meant for rail

The leadership of the Honolulu City Council is playing a risky game of chicken with the Federal Transit Administration (FTA) over the completion of Honolulu’s rail transit project.

Responding to the cost overruns of completing the rail system, the state Legislature passed a bill that was signed by the governor to extend the general excise tax surcharge for five years. This is expected to raise $1.5 billion to complete the system.

The City Council is forwarding Bill 23, CD1, which is requiring greater fiscal accountability of Honolulu Authority for Rapid Transportation (HART), the project manager, a response to the rightful anger of taxpayers to the cost overruns.

But this bill, at the urging of Council Chairman Ernie Martin, is also capping the amount of the GET surtax that would go to HART to $910 million rather than the whole $1.5 billion.

The surtax extension has a hoped-for cushion of funds to ensure the completion of the rail system. The mayor, HART Board, FTA and the City Council leadership itself all are counting on this. All of them signed on to a Full Funding Grant Agreement (FFGA) on Dec. 19, 2012. The signed agreement ensured $1.55 billion of federal money for the system to be completed.

In addition, the Legislature, in agreeing to allow the city to extend the 0.5 percent surtax for five years, insisted that the $1.5 billion it would raise could only be used for construction to complete the 20-mile, 21-station system.

The FTA, the mayor, and the HART board are all objecting to the Council’s bill, saying that the $910 million is not enough to complete the system.

The FTA told the mayor a few days before the committee’s vote that it would take back the $1.55 billion in federal funds if the Council adopts the spending cap. In a meeting with Council Vice-Chairman Ikaika Anderson, agency officials told him the same thing. They see the cap as a violation of the FFGA.

Leadership in the Legislature also has problems with what the City Council is doing with the cap on spending. Should this cap pass the City Council, the Legislature would have to take up this measure again in this next session to amend its previous bill.

In the best case scenario, the Legislature and governor would agree but HART contracts and federal funding would be greatly delayed, raising costs.

In the worst case scenario, the federal government would immediately ask for its monies back and we would lose the funding of $1.55 billion. This would kill the rail project.

The value of rail to Honolulu is twofold: Improving the quality of life for the growing population of Leeward Oahu, and the opportunity for development of more affordable rental housing along the rail line.

City officials are reporting that there is capacity to build 50,000 new workforce housing units in the transit-oriented development area. This needed housing could be lost if rail fails.

The anger over rail’s cost overruns is justified, but the cost of not moving ahead, we believe, will be even greater, especially with the returning of the $1.55 billion to the federal government.

The discussion over the cap and its ramifications will be acrimonious and will roil our politics for years. The rail system must be completed as approved by the voters and insisted upon by the FTA. Bill 23 should be passed without the spending cap.