Honolulu rail funding bill passes 2nd reading in Senate -- with little debate

At special session on rail, mayor renews plea for more money than current deal provides
Published: Aug. 28, 2017 at 9:42 AM HST|Updated: Aug. 29, 2017 at 4:27 PM HST
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HONOLULU (HawaiiNewsNow) - A bill that would generate almost $2.4 billion to bail out the city's troubled rail project passed its second reading in the state Senate on Tuesday, and the measure appears to have enough support to make it through the third and final vote.

Tuesday's 17-7 vote was not on the substance of the rail deal, but to move the bill from committee to the Senate floor where the formal debate will take place Wednesday.

Several senators chose to state their positions early.

Senator Laura Thielen read from a 2006 newspaper article -- back when the price to build the project rose to a shocking $3 billion dollars.

"Mayor Mufi Hannemann said that does not necessarily mean more taxes will be needed, citing the possibility of public private partnerships," Thielen, D-Kailua, read from the article.

Others who oppose the bill say they probably don't have the votes to stop it.

"The majority of people in the legislature are uncomfortable with this, but they believe that the project must go forward and so they're going to support the funding," said Senator Gil Riviere, D-Haleiwa.

"I'm not willing to put forward an amendment because it would push us into a longer special session. Its a difficult choice because I don't want to have our neighbor islands pay for a project on Oahu," said Senate Majority Leader J. Kalani English.

Senate Ways and Means chair Donovan Dela Cruz says he believes lawmakers are becoming more comfortable with the bill as they work out the numbers and hopes it gains support as it moves ahead.

"We really have to just move forward so that we can start implementing the law and fund the shortfall the city created," said Dela Cruz, D-Wahiawa.

Tuesday's vote came a day after a marathon hearing in which the Ways and Means Committee narrowly voted 6-5 on Senate Bill 4.

Among the "no" votes were neighbor island senators who are both supporters and critics of the bill.

The close vote on Monday indicated that the deal was on thin ice and lawmakers had a difficult time coming to a compromise.

After more than five hours of public testimony, senators questioned rail leaders on whether the Federal Transit Administration would demand their bill to fund a stress-test in order to pay for the rail's remaining capital costs.

This came after Honolulu Mayor Kirk Caldwell said the current proposal would still fall short by $600 to $900 million.

"This is something that I, as mayor, cannot accept," Caldwell said.

The bill is projected to bring about $2.37 billion to help complete the 20-mile rail, in part, by extending the half-percent excise tax surcharge on Oahu for another three years.

The mayor recommends it be extended to five years.

If lawmakers didn't agree, he asked them for a promise.

"Make a public statement that should there not be sufficient funding from the perspective of the City and County of Honolulu, you will step up with us as our partners in a legislative session somewhere down the future to address that shortfall," Caldwell said.

Both U.S. Sen. Brian Schatz and Congresswoman Colleen Hanabusa spoke in support of the bill.

They said the FTA is not likely to make the stress-test amount a financial requirement.

"My read is that this revenue package is likely to be viewed as serious and sufficient," said Schatz, D-Hawaii.

Tourism industry leaders also came out in full force to testify against the part of the bill that would raise the state hotel room tax by one percent for the next 13 years, but in the end, the committee said there was no factual proof it would burden the industry.

The bill will be heard on the Senate floor once again on Wednesday. If approved, the measure will then head over to the House of Representatives for consideration.

The city has until Sept. 15 to show the Federal Transit Administration how it plans to raise the money to cover the project's budget shortfall or it risks losing $1.55 billion in federal grant funding it has already received.

Lawmakers are calling their funding bill a breakthrough compromise to bail out Honolulu's rail project, but whether it has the support needed to pass remains unclear as city leaders continue to insist the proposed deal leaves the project at least $600 million short.

The mayor said he wants to support the deal, but is seeking some tweaks.

The compromise extends the existing half-percent general excise tax surcharge on Oahu for three additional years through 2030, which will generate about a billion dollars.

It also raises the statewide hotel room tax 1 percent for the next 13 years -- which equates to about $1.3 billion for upfront construction costs. To help please the neighbor islands, the counties' share of the hotel tax goes up from $93 to $103 million.

The proposal would also reduce the state's administrative fee, or skim, on collecting Oahu's rail tax from 10 percent (around $30 million) to just 1 percent (about $3 million).

The bill would also require a state audit and annual reviews of the Honolulu Authority for Rapid Transportation. It would also allow the Senate president and House speaker to appoint two, non-voting, members to HART's board of directors.

Lastly, it creates a mass transit special fund where all the collected rail taxes will go and which the state would then distribute to HART to cover construction costs.

The partially built rail line is years behind schedule and way over budget -- with the estimated price tag ballooning from $5.26 billion in 2014 to nearly $10 billion, including financing costs.

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