State leaders frustrated over lack of rail funding deal hound hotel, city leaders

HONOLULU (HawaiiNewsNow) - With a funding plan due to the Federal Transit Administration in just about a month, state lawmakers held a marathon hearing Monday to consider different ways of paying for Honolulu's controversial rail project.

During the seven and a half hour briefing, some state lawmakers were clearly frustrated that the issue on how to cover the rail project's almost $3 billion budget shortfall falls on them.

"It's no longer your decision. It's our decision to figure this thing out for you," House finance chair Rep. Sylvia Luke told city officials.

Instead of extending the rail general excise tax surcharge for 10 years, Luke pushed to use other sources of tax revenue -- like the Transient Accommodations Tax (TAT) -- to pay construction bills upfront and save money on interest payments.

"It provides certainty to the project, number one. And it will save the Oahu residents over a billion dollars in financing," Luke said.

Honolulu Mayor Kirk Caldwell, his administration, and the city council stood by their request to extend the rail general excise tax surcharge.

"If you can pay cash for a car, you should. Or for you house. But I think that for the most part when you're struggling and strapped for money that you might look at some kind of financing options," said Gary Kurokawa, Caldwell's chief of staff.

Meanwhile, the hotel industry says the proposal for a 1 percent increase to the hotel room tax could deter tourists from coming to Oahu.

"We are being unfairly targeted for the cost of the rail. Why are you considering increasing the TAT? Is there some sense that we're not already paying our fair share? Because we feel that we're paying more than our fair share," said Ed Case, Outrigger Hotels.

Several lawmakers questioned whether a hotel room tax increase was such a threat, saying hotels have added their own resort fees and raised room rates.

"It's so volatile that we're gonna raise the TAT by 1 percent when you raise your hotel rooms greater than 1 percent," said Sen. Donna Mercado Kim.

The funding plan is due to the FTA by September 15.

If the House and Senate are able to reach a deal on how to fund the project, lawmakers have been alerted that special session will take place the week of August 28.