The Associated Press and The Maui News

HONOLULU — Gov. David Ige signed a bill Tuesday that provides additional funding for Honolulu’s financially troubled rail transit project.

Ige said in a statement Tuesday that the rail line is a strategic investment in Hawaii’s future and must be finished.

Lawmakers passed the legislation during a special session convened last week to address rail funding as a Sept. 15 federal deadline neared. Rail officials need to present an adequate funding plan to the federal government or risk having to return more than $800 million already spent of a total $1.5 billion in promised federal dollars.

The $9.5 billion rail line is less than half built and faces a shortfall of up to $3 billion. The new law raises $2.4 billion in taxes by extending 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 new law also raises the hotel room tax — also called the transient accommodations tax — statewide by 1 percentage point to 10.25 percent for 13 years, through 2030.

It also calls for an audit of the rail project and for controls on the distribution of money to Honolulu county.

Since money raised in the hotel room tax would come from the other counties as well, lawmakers threw in a sweetener by raising the amount the counties receive from the tax from $93 million to $103 million. Maui County’s share of those tax revenues increased from $21.2 million to $23.5 million.

In Tuesday’s statement, the governor addressed cries from Neighbor Island lawmakers and officials about the fairness of a state tax paying for a project approved by Honolulu county.

“I have heard the concerns of leaders and residents in Hawaii, Kauai and Maui counties,” Ige said. “I recognize the uniqueness of each county and the fiscal challenges they face, with main revenue sources being property taxes and the TAT.

“I understand why they would like to see more support from the visitor industry, and I intend to work with the county mayors, county councils and the Legislature on a fair distribution of the TAT.”

Maui County lawmakers split on the bill with Sens. Roz Baker and J. Kalani English voting against the bill and Sen. Gil Keith-Agaran voting for the measure in the state Senate. In the House, Reps. Justin Woodson, Kaniela Ing, Joe Souki and Kyle Yamashita voted yes; Reps. Lynn DeCoite and Angus McKelvey voted no.

Honolulu Mayor Kirk Caldwell says the bill’s signing shows Ige’s commitment and leadership. He says the legislation is proof of the hard work done by lawmakers during the special legislative session.

House Speaker Scott Saiki said Tuesday that the law, which includes direct state funding for the project for the first time, provides money for the 20-mile rail project through Ala Moana.

“The public’s and the Legislature’s patience has been exhausted due to ballooning costs and delays,” Saiki said. “To make the rail project successful, the city . . . must do two things. First, it must contain costs. Second, it must increase public confidence in the rail project by substantially stronger oversight and management.”