Bills to extend rail tax clear hurdles as lawmakers look at funding options

Bills to extend rail tax clear hurdles as lawmakers look at funding options

HONOLULU (HawaiiNewsNow) - Bills that would extend the rail tax are clearing important hurdles at the state Capitol, but they're in for tougher challenges now.

Rail is currently estimated to cost $8.2 billion for construction of all 20 miles and 21 stations from Kapolei to Ala Moana, but it's facing at least a $3 billion deficit right now.

State lawmakers are considering several different proposals to bail out the city's embattled project and raise money to cover rapid transit's budget gap.

The main focus has been on whether to extend an existing rail tax: The half-percent general excise surcharge on goods and services, which is set to expire in 2027. The tax is paid by Oahu residents, businesses and all visitors who make purchases on the island.

The surcharge has been collected since 2007, and from the beginning, the state has taken 10 percent off the top -- a flat fee that goes into the state's general fund.

On Wednesday lawmakers passed Senate Bill 1183 that would reduce the state's skim significantly, but just how much is yet to be determined.

The measure includes provisions to either extend the rail tax in perpetuity or only five more years, until 2032.

The bill also proposes a low-income tax credit to cover the GET surcharge for families who qualify. In addition, it require a bus rapid-transit lane across Central Oahu and create a new access road to Leeward Community College.

Lawmakers clearly want options, which is why legislators passed another bill -- House Bill 349 -- that would extend rail's GET surcharge an additional 30 years. It would also require the city to take ownership of disputed roadways the state insists are not its responsibility.

Rail's price tag keeps ballooning. Officials testified this week that the project costs an estimated $410 million to build each mile, excluding financing costs.

City and Honolulu Authority for Rapid Transportation leaders told lawmakers that if they don't get the GET surcharge extension they're asking for, it could jeopardize the $1.55 billion in federal funding they've received.

They say they're working on a backup plan, and without more money, rail may need to end near Aloha Tower instead of at Ala Moana.

Of course these are just the initial phases of legislation; the bills have passed through key committees, but still face votes by both the full House and Senate.

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