Honolulu mayor proposes use of property tax funds to help pay for rail construction

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HONOLULU (HawaiiNewsNow) - Honolulu Mayor Kirk Caldwell on Tuesday submitted a bill to city councilmembers that would allow funds from property taxes levied on Oahu residents to be used to help pay for the city's $10 billion rail project.

The proposal was one Caldwell says he had to make after the state House of Representatives passed only a two-year extension of the rail tax surcharge on Tuesday.

"I don't want to do that," the mayor said. "I think the better choice is just to extend the surcharge."

Detailed in a letter to the City Council, Mayor Caldwell's plan suggests lifting the current ban on using city operating funds -- which include property tax revenue -- to help pay for rail construction.

The City is required to lift the ban by the end of the year under the proposed rail tax extension. But the Chair of the House Finance Committee says the mayor hasn't looked hard enough at reducing project costs or finding other sources of money.

"We're confident that the amount we gave them is sufficient, if they do their part to make sure that there are cost-cutting measures and to make sure that their budget is on track," said State Rep. Sylvia Luke.

If that position doesn't change, Caldwell says real property tax increases could happen as soon as this fiscal year.

"That means the taxpayers of this island will not only have to pay this half-percent surcharge, but they're going to end up paying more in terms of real property taxes," Caldwell said.

The mayor and councilmembers are still hoping that state lawmakers will agree to an extension of the rail tax surcharge that lasts at least ten years when the two houses come together in during conference committees.

They have concerns that without the dedicated rail tax, the city may be forced to cut services that residents rely on.

"At that point, if that were to happen, then we would start picking and choosing between providing services and actually constructing the rail project," said Councilman Joey Manahan, chair of the council's Budget Committee.

Mayor Caldwell says taxes for every type of property would have to be increased -- possibly between 10 to 14 percent -- in order to keep pace with the project. His proposal is scheduled for a first hearing with the City Council on April 26.

"It is unfortunate that the mayor has come out with that statement, but I think in the end they're going to do the right thing and cut costs and ensure that property taxes are not raised for the capital cause," said Rep. Luke.

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