Bill to generate $2.4B for rail bailout now headed to governor's desk

Bill to generate $2.4B for rail bailout now headed to governor's desk
Published: Sep. 1, 2017 at 4:20 PM HST|Updated: Sep. 1, 2017 at 4:54 PM HST
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HONOLULU (HawaiiNewsNow) - The rail bailout bill is headed to the governor's desk.

The state House voted to approve the measure Friday, after an hours-long debate that was the culmination of months of negotiation.

Fifteen legislators voted against the bill, while 31 voted for it and five were excused.

No one was jumping for joy over the compromise bill, meant to address a host of concerns from different camps. But even rail's detractors acknowledged that the funding bill to save Oahu's rail project was needed.

"As badly conceived and badly implemented as rail is, rail is our future," said state Rep. Bert Kobayashi, whose district included Kahala and Diamond Head.

House Finance Chair Sylvia Luke said legislators had tough questions for Honolulu Mayor Kirk Caldwell and the rail authority -- and would continue to following the project's spending.

"We are here for our taxpayers," she said. "We have the responsibility to be accountable to our taxpayers."

The measure would generate nearly $2.4 billion to save the beleaguered project, the biggest public works project in the state's history.

And after the vote Friday, Mayor Kirk Caldwell said he applauded the bill's passage, but continued to have concerns about whether it would provide enough money to fund the shortfall. (The mayor previously said the measure was about $600 million short.)

"I'm going to work as hard as I can with HART to make sure they complete the project," he said.

He added, "If these projections turn out to not be correct, that difference would be picked up by taxpayers of the City and County of Honolulu."

If the legislature's projections don't add up, he said, "questions will be asked about where that money comes from. And right now, it falls in the city's lap. That's a concern for me. The burden it (could) place on taxpayers of the City and County of Honolulu would be tremendous."

The timing of the special session deliberations remain of critical importance to the project.

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.

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

The legislature's agreement extends the existing .5 percent general excise tax surcharge on Oahu for three additional years through 2030, which will generate about $1 billion.

Caldwell recommended that number be extended to five years. If lawmakers don't agree, Caldwell instead asked them for a promise.

The bill 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. Additionally, the Senate president and House speaker will have the power to appoint two non-voting members to HART's board of directors.

Finally, the measure 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.

During today's floor session, House Democrats voted down several floor amendments proposed by Republicans. They wanted a more stringent forensic audit, which would look into potential fraud and theft, a cap on spending and an exclusion for neighbor island hotels from having to pay 1 percent room tax increase.

"We are against the underlying bill. All of the amendments we are proposing should not be done by the minority but should be done by the majority," said Rep. Gene Ward, (R) Hawaii Kai.

Meanwhile, the week-long emotional debate exposed a rift between Oahu lawmakers and Neighbor Island officials, whose constituents and businesses have expressed anger over having to pay to bail out a rail system they won't use.

Even lawmakers who voted for the measure expressed reservations over this.

"The use of statewide tax for rail has been and is divisive and a distraction that we don't need," said Rep. Marcus Oshiro, (D) Wahiawa.

This story will be updated.

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