Governor, lawmakers skeptical to extend Oahu tax for rail

Published: Jan. 26, 2015 at 11:38 PM HST|Updated: Jan. 27, 2015 at 1:25 PM HST
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HONOLULU (HawaiiNewsNow) - The city's rail project faces a shortfall of anywhere from $500 to $900 million and Honolulu Mayor Kirk Caldwell got some serious pushback from state legislators Monday about extending the tax to pay for rail.

Caldwell told state lawmakers' money committees that the city's rail project needs permission from the Legislature to continue Oahu's half-percent excise tax hike forever, instead of ending the tax, as originally scheduled, in 2022.

That's because Caldwell said new rail transit contracts cannot be approved unless there's a guaranteed source of funding.

"To get all the contracts out, to get all the work started on all the parts of the system, we need more money and we need it this year," Caldwell said.

Caldwell said the city would need to keep charging a half-percent more in the general excise tax for rail transit over at least 35 years, since construction projects are paid back with 30-year loans.

But he got a skeptical response from several lawmakers.

"Can you tell the taxpayers of this state how much more on the hook they're going to be for this project that never had a viable business plan from the very beginning?" asked State Sen. Sam Slom, the Senate's only Republican.

Caldwell told lawmakers the cost of the project may go up from $5.2 billion to nearly $6 billion  because so many of the construction bids have come in so much higher during a recovering economy that has contractors charging higher prices. The city was also on the hook for $190 million in contract delay costs, Caldwell added, because the project was delayed for by lawsuits and former Gov. Linda Lingle's one-year delay in approving the environmental study for rail.

"The fact that you guys did not consider all the delays does not make that plan accurate," said State Senate President Donna Kim, who admonished Caldwell, bringing applause from rail opponents in the audience at a State Capitol auditorium where the House Finance and Senate Ways and Means committees heard from all of Hawaii's mayor's about budget issues.

"I cannot understand how you can stand there before us and say all these things and then ask us to extend the tax into perpetuity," Kim said.

Caldwell responded: "I hear your anger and frustration and I understand it too."

In his State of the State Address Monday, Gov. David Ige said he wanted rail to succeed and said he's committed to the project. But Ige said he wants the city to prove it's doing everything possible to reduce rail costs before he supports extending the excise tax.

"We need to understand why (the tax extension is needed)," Ige said. "I believe it's premature. We still have 7, 8 years before the current tax expires."

Caldwell said while charging people a half-percent more for products, services and food they buy on Oahu is not ideal, one-third of the excise tax brings in is paid by tourists, helping to export a large portion of rail transit's increasing cost.

State lawmakers OK'd Oahu's half-percent excise tax hike in 2005 and the state started collecting the extra money in 2007.

About 60 percent of the contracts for the 20-mile, 21-station rail project have been awarded and 40 percent of the rail contacts remain to be bid, city officials said.

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