City: GET surcharge critical in paying for rail all the way to Ala Moana

HONOLULU (HawaiiNewsNow) - Last month, federal transportation officials told Honolulu leaders not to count on any additional federal dollars to pay for the city's beleaguered rail project.

They also said the city must build the full project -- all 20 miles to Ala Moana -- or the federal government's $1.5 billion for the project will be at risk.

"That's the takeaway -- failure is not an option," said Honolulu City Council Chair Ernie Martin.

Now, officials are scrambling to figure out how to pay for the project, which they had previously said would likely have to be stopped at Middle Street because of a budget shortfall.

"For us to keep the $1.55 billion we do have to complete the 20 miles, 21 stations as agreed to in the federal grant agreement," said Joey Manahan, Honolulu City Council Transportation chairman. "I think the feeling is anything less than getting it to Ala Moana or cutting it short anywhere before Ala Moana -- we would be creating a system that would not be heavily utilized. It would basically be non-functional."

Currently, the city has $6.8 billion for rail in the bank.

Federal and Honolulu Authority Rapid Transportation officials estimate the total cost to construct the full elevated guideway project and 21 stations is around $8.1 billion. That means Honolulu is about $1.3 billion short.

"We're very short on funds," said Martin. "We have other identifiable funding sources, but not as significant as the GET surcharge itself."

Through the local general excise tax, there has been a half-percent surcharge on all goods and services purchased on Oahu since 2007, all of which goes to rail.

The tax is set to expire in 2027 and will have collected $4.8 billion by then, but it's not enough. City officials say they'll likely have to return to the state Legislature next session to ask for another extension.

"We would definitely need the Legislature's support in getting more of the general excise tax to be able to complete the build-out. There's really no other means to financing that I see, having served in the state Legislature and now on the City Council, that can really pay for what we need to build," said Manahan.

The GET surcharge isn't the only option, though.

In addition to extending the rail tax, officials are considering whether to ask the state to reduce the 10 percent they currently take off the top for collecting the surcharge. Council members are also looking into borrowing money -- through traditional bonds -- and firming up public-private partnership investments.

Every option is on the table, officials say.

"The FTA themselves asked the county to work with the state to potentially identify federal highway funds that the state already has. Perhaps some of that could be reallocated to the project," Martin said. "They want us to look in every possible corner for any type of additional revenue source."

He added, "They recognize that we're in a hot construction market, but they mentioned cost containment is an issue that was brought up very early that was overlooked or perhaps ignored by the management at HART."

Even though federal officials have turned down requests for additional federal funding, Honolulu leaders say they'll be persistent. "There will be a new administration coming in. After the elections in the fall, hopefully we'll go back and ask again," said Martin.