Honolulu Rail Bailout Bill Signed into Law

Gov. David Ige today signed the rail funding bailout bill, SB 4, after completing legal and policy reviews of the measure over the weekend.

Background images courtesy: http://www.honolulutransit.org/ ; Maui Now graphics.

The bill extends Oʻahu’s general excise tax surcharge to Dec. 31, 2030, an additional three years. It also increases the state’s hotel room tax by one percent (10.25%) for the next 13 years.

“This is a strategic investment in Hawai‘i’s future. We must move this forward and complete this project,” said Gov. Ige.

“I have heard the concerns of leaders and residents in Hawai‘i, Kaua‘i and Maui counties. I recognize the uniqueness of each county and the fiscal challenges they face, with main revenue sources being property taxes and the TAT. I understand why they would like to see more support from the visitor industry and I intend to work with the county mayors, county councils and the Legislature on a fair distribution of the TAT,” said Gov. Ige.

The approval comes as the city faces a Sept. 15 deadline to prove to the FTA it can cover the shortfall.

House Speaker Scott K. Saiki issued a statement today saying, “SB 4 sufficiently funds the rail project’s completion to Ala Moana. The public’s and the legislature’s patience has been exhausted due to ballooning costs and delays.  To make the rail project successful, the City (inclusive of HART) must do two things: First, it must contain costs. Second, it must increase public confidence in the rail project by substantially stronger oversight and management.”

The rail funding bailout bill passed out of the House on Sept. 1, 2017 in a 31-15 vote.  The Transportation committee voted 4 to 2 in favor of the bill; and the Finance Committee voted 8 to 6 in favor of SB4, with Maui Rep. Kyle Yamashita voting in favor of it, and fellow Maui Rep. Lynn DeCoite casting a no vote against the measure.  It also narrowly advanced in a 6-5 vote in the Senate Ways and Means Committee on Aug. 29, 2017, with Maui Senator Gil Keith-Agaran among those who voted in favor of the bill, and fellow Maui Senator J. Kalani English voting against the measure.

Those opposed to the bill have included some Maui groups who say the neighbor islands should not have to contribute to the Oʻahu project.

The bill will:

· Extend the general excise tax surcharge on Oʻahu for three additional years, from Dec. 31, 2027 through Dec. 31, 2030. This will provide $1.25 billion.

· Raise the hotel room tax charged to visitors (Transient Accommodation Tax) by one percent from 9.25% to 10.25% for 13 years, from Jan. 1, 2018 to Dec. 31, 2030. This also applies to timeshares. This will provide $1.25 billion.

· The hotel room tax is collected statewide and goes directly into the general fund, not to the island where it is collected. Each county receives an allocated proportional share of the tax regardless of total amounts collected. Raising the tax does not change that amount.

· Permanently increase the counties share of the TAT from its current $93 million base to $103 million.

· Reduce the State Department of Taxation’s administrative fee on the GET surcharge from 10% to 1%.

· Require a state run forensic audit of the rail project and annual financial reviews.

The bill also provides that funds collected for rail go into a new Mass Transit Special Fund and rather than simply give the money to the City, and requires the State Comptroller to certify HART’s invoices for capital costs as the project moves forward. This will allow the state to keep track of both spending and construction progress.