Lawmakers take big step toward bailing out rail

HONOLULU — Hawaii lawmakers took a big step Friday toward bailing out Honolulu’s financially troubled rail transit project, approving a funding plan critical to the project’s future.

The state House of Representatives passed a bill to raise $2.4 billion in taxes for the commuter train planned for Honolulu and nearby suburbs on the last day of a special legislative session. The vote was 31-15 with five members excused. Maui County Reps. Joe Souki, Kaniela Ing and Kyle Yamashita supported the measure; Rep. Justin Woodson voted for the measure with reservations; and Reps. Lynn DeCoite and Angus McKelvey voted against.

The proposal previously passed the Senate and now heads to Gov. David Ige for his review.

“My Cabinet members and I will be doing a final review as we do for all legislation, but I fully anticipate signing the bill before the Honolulu City Council meets on Tuesday,” Ige said Friday afternoon.

The $9.5 billion rail transit line, one of the most expensive per-capita in the nation, is less than half built and faces a shortfall up to $3 billion.

Rail officials are up against a Sept. 15 deadline from the Federal Transit Administration to show they can pay for the project. Without that assurance, they risk losing $1.5 billion in federal money and possibility having to return about $800 million in federal funds already spent.

Critics have said that the project is too costly and doesn’t make sense on an island with high construction costs and a small population.

But ardent supporters say it will encourage affordable housing and transit-oriented development while providing relief to commuters on the west side of Oahu, where drivers can sit in traffic for hours and there’s only one route into urban Honolulu.

“This will dramatically improve the quality of life for the people of West Oahu,” said Democratic Rep. Matt LoPresti, who represents parts of Ewa on Oahu’s west side.

The bill would extend a surcharge on the general excise tax — a surcharge now planned through the end of 2027 — for another three years, generating $1 billion for the project. The general excise tax, currently about 4.5 percent on Oahu, is essentially a business income tax that’s often passed on to customers.

The bill also would raise the hotel tax — also called the transient accommodation tax — statewide by 1 percentage point to 10.25 percent for 13 years, through 2030. It also would increase the amount that counties receive from the tax from $93 million to $103 million.

“To come out here and then to go back to the Neighbor Islands and ask them to pay for rail is going to be very, very difficult,” said Democratic Rep. James Tokioka, who represents Lihue and other parts of Kauai and voted against the proposal. “People on the Neighbor Islands think Honolulu takes too much from the pot.”

His fellow representative from Kauai, Democratic Rep. Dee Morikawa, disagreed, saying that Oahu residents help Neighbor Islands in many ways.

“When an island needs help, we step up,” she said. “That is our job. That is what we’re elected to do.”

The proposal also calls for more oversight of the rail project. It would require the state to conduct an audit, and money would be directed into a new state fund so the state comptroller could review expenses before doling out the money.

Republican representatives introduced floor amendments to cap money going to rail, exclude Neighbor Islands from the hotel tax increase, require a forensic audit to look for irregularities — not just an audit — and require that 10 percent of rail funds come from public-private partnerships.

“People are saying enough is enough,” said Republican Rep. Gene Ward, arguing for the funding cap.

All four amendments failed to pass.

Rep. Sylvia Luke said that she understands the concerns of Neighbor Islanders, but an amendment limiting the hotel tax increase to Oahu and exempting Neighbor Islands would guarantee that not enough funds are provided for the rail line.

Ing, who represents South Maui, said Friday that he supported the GOP amendment to exclude the Neighbor Islands from the hotel room tax before ultimately voting for the measure.

He noted that the hotel tax increase “isn’t a tax on the Neighbor Islands; it’s a tax on people staying in our hotels,” that the package passed by the Legislature also included the increase in the Neighbor Islands’ share of the hotel room tax to $103 million and that passing a rail funding measure was an imperative.

Neighbor Islanders are not exempt from the costs of the 0.5 percent general excise tax surcharge because all goods passing through Oahu get hit by the surcharge, Ing pointed out, adding that the excise tax extension would hurt Neighbor Islanders “way more” than the 1 percent hike in the hotel tax.

Ing indicated that he would like to see the projected 8 percent increase in revenues in the hotel tax distributed equitably among the counties.

It got real “nasty” this session, he said. Neighbor Island leaders clashed with state lawmakers, leaders of the Legislature butted heads with Honolulu Mayor Kirk Caldwell, Neighbor Island legislators clashed with Oahu legislators.

“There is going to be a lot of time to heal,” Ing said, adding that he has already observed its beginnings.