HONOLULU — A bill to fund completion of the $8.2 billion rail project on Oahu will be considered during a special legislative session next week.
House and Senate Committee Chairs on Thursday drafted a bill that will extend the general excise tax surcharge on Oahu for three additional years, from Dec. 31, 2027 through Dec. 31, 2030.
It will also raise the state’s hotel room tax charged to visitors by 1 percent from 9.25 percent to 10.25 percent for 13 years, from Jan. 1, 2018 to Dec. 31, 2030. This also applies to timeshares.
Together, those moves are expected to provide nearly $2.4 billion.
“I want to thank my colleagues and their respective staffs for all of their efforts in developing this proposed compromise draft bill that includes a permanent increase in the counties’ share of the TAT from its current $93 million base to $103 million,” said Senate President Ron Kouchi. “I am hopeful that this compromise legislation will satisfy the FTA’s construction cost concerns as testified to numerous times by the City and County of Honolulu.”
Sen. Mazie K. Hirono said the bill’s success is critical for the completion of the rail project.
“While cost changes should be anticipated in a project of this magnitude, the drastic increase in the cost of this project is deeply concerning,” she said in a press release. “State lawmakers are prepared to secure additional funding to see the rail project through.”
Gov. David Ige said he was pleased legislators came to an agreement that will move the rail project forward.
“I look forward to hearing the public’s input during next week’s special session,” he said. “I firmly believe transit is a strategic asset for our communities that will enable us to provide affordable homes for our families while preserving open space outside the urban center.”
According to a press release from the Hawaii State Legislature, the bill addresses the immediate rail construction shortfall by collecting funds upfront through a modest TAT increase instead of adding additional years of GET surcharge on the back end.
“This will likely reduce the financing costs of the project by hundreds of millions of dollars,” the release said.
A rail bill that relies solely on GET will continue to tax the poor and increase the cost to taxpayers in the long term, the release said.
“By including the TAT, visitors will now bear a significant portion of the financing burden,” it said.
House Speaker Scott K. Saiki said the $2.378 billion funding shortfall package will fund the rail project through Ala Moana and will not jeopardize the $1.5 billion in federal funding.
“By working with our colleagues in the Senate, the Legislature has come up with a concrete plan to fund the rail project that will reduce the overall costs while shifting some of the regressive tax burden away from our residents, who are struggling to make ends meet,” Saiki said. “This plan will not have a direct impact on neighbor island county budgets.
Other aspects of the proposed bill:
w The current method of collecting the hotel room tax remains the same. It is collected statewide and goes directly into the general fund, not to the island where it is collected. Each county receives a specified amount of the tax regardless of total amounts collected. Raising the tax does not change that amount.
w Reduce the State Department of Taxation’s administrative fee on the GET surcharge from 10 percent to 1 percent.
w Require a state run 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, the State Comptroller will review and disburse the funds to the City for its costs as the project moves forward. This will allow the state to keep track of both spending and construction progress.
“We have taken a long look at the rail project and have heard the concerns of residents during our joint public hearing on rail funding this month,” Saiki said. “This is a critical infrastructure project for Hawaii. We are not giving the City a blank check but instead insisting on audits and financial reviews and expenditures to provide complete transparency for our taxpayers.”