House Finance Committee Cuts City's GET Surcharge Request for Rail Transit

Apr 6, 2017

Mayor Kirk Caldwell testifies before the House Finance Committee.
Credit Wayne Yoshioka

The House Finance Committee conducted a six-hour hearing Wednesday night on the General Excise Tax surcharge for the Honolulu Rail Transit Project.  The meeting was not televised for the public.   HPR’s Wayne Yoshioka reports.

The City and County of Honolulu presented a united front before members of the House Finance Committee.  They said extending the half-a- percentage General Excise Tax surcharge was the best way to come up with the $2-billion shortfall to complete the rail transit project.   Honolulu City Council Chair, Ron Menor, said they’re up against a non-negotiable deadline.

“April 30 is a firm one and they indicated to us if we don’t come up with an acceptable recovery plan that that could definitely put the federal funding commitment at risk.  The concern we have on the Council level is we don’t want to lose that $1.55 billion.”

Honolulu Authority for Rapid Transportation interim executive director and CEO, Krishnia Murthy, says completion of the 20-mile, 21-station system from Kapolei to Ala Moana was the City’s agreement with the FTA and all other options are not feasible.

“Changing the fully automated system to manually operated at street car level means we have to buy different cars and go back and redesign our maintenance facility and some of the stations.  So it is prohibitively expensive at this stage of the game to go and do 4 miles of street cars.”

Mayor Kirk Caldwell asked lawmakers to extend the GET surcharge 20 years from its current expiration date of 2027 to 2047.   He said the City will take over the $400-to-$500 million operations and maintenance costs for the integrated rail and bus system.

“We have a choice to make.  We continue to pay the surcharge to some date in the future.  And then we look to find the funds from elsewhere in the City and County of Honolulu.  I prefer the first one because it’s something we’re already paying although it is difficult as opposed to paying both the surcharge and some other form of financing mechanism from the City and County of Honolulu.”

But, House Finance Committee Chair Sylvia Luke said the mayor’s request was excessive and she was hoping the City would only ask for the funding it needed.

“The 20-year extension amounts to about 8 billion dollars.  So in addition to the $5.3 billion of state funds that you folks got, you’re asking for an additional $8 billion which is $13 billion.  So you want the residents to commit over $13 billion dollars just to chase $1.5 billion?  Does that make sense?”

Luke cut the 20-year request to 2 years and gave the city back 90 percent of the state’s administration fee, called the skim.  That’s a total of 1.2 billion dollars.  She also mandated the City repeal its prohibition to use city funds for rail construction as a condition for receiving the state money.

“This is the second the state legislature is being asked to bail out the rail project and we continue to have major concerns about the cost overruns.”

The full House will vote on the measure.   If passed, it is expected to go to a Senate and House conference committee for further negotiations.  Wayne Yoshioka, HPR News.