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Funding for Rail on Life Support – House and Senate Disagree on How to Pay for City’s Financially Troubled Project

The House of Representatives and the Senate could not agree today on amending Senate Bill 1183, the vehicle for funding the city’s financially troubled rail project.

Click to read bill

The House version of the rail funding bill takes the tax burden off Hawaii residents by increasing the Transient Accommodation Tax paid primarily by tourists. The proposal would provide nearly all of the money needed to complete the project, estimated to cost $8.1 billion, from Kapolei to Ala Moana.

The Senate also amended the bill, by extending the state’s 0.5 percent surcharge levied on Oahu’s general excise tax for an additional 10 years from 2027 until 2037.

“GET is one of the most regressive tax. It taxes the working poor and the elderly. It is our responsibility to stand up for those individuals,” said Representative Sylvia Luke (Makiki, Punchbowl, Nuuanu, Dowsett Highlands, Pacific Heights, Pauoa).

After consulting with members of the hotel industry, the House amended the bill to provide $1.7 billion for the rail project.

“We clearly support rail and the House plan provides more funding than any other conference draft we have seen,” said Representative Henry Aquino (Waipahu). “This is a responsible amendment that would provide funding in the quickest way possible.”

The House proposal for SB 1183 SD2 HD2 HCD2 includes:

Transient Accommodation Tax (TAT)

  • Increases TAT from 9.25 percent to 10.25 percent for 11 years through 2028
  • Prohibits the use of the TAT funds for rail operations and maintenance
  • Prohibits use of the TAT funds for HART administrative and operating costs
  • Maintains counties’ share of TAT revenue at $103 million per year (the share was scheduled to be reduced to $93 million beginning fiscal year (2017-2018)
  • Honolulu’s share of the TAT county subsidy (44.1 percent) will be solely directed toward funding rail
  • The scheduled 2018 reduction in the neighbor island county TAT subsidies will be eliminated and those counties will continue to receive their current TAT subsidy that is calculated as a percentage of $103 million through fiscal year 2027-2028:
  1. Oahu $45.4 million
  2. Maui $23.4 million
  3. Hawaii $19.1 million
  4. Kauai $14.9 million
  • These TAT amendments could generate $926.8 million over the 11-year period.

General Excise Tax (GET)

  • Extends the county surcharge on GET for an additional one year from 2027-2028
  • Continues the state’s reduced share of the administrative service fee (“skim”) at 1 percent in 2028
  • The reduction of the State’s skim to 1 percent generates $350 million from 2018-2028
  • These GET amendments generate $435.2 million in 2028.

New Start Education Special Fund

  • Reduces the annual allocation (for 11 years) for the New Start Education Special Fund from $50 million to $25 million, for a total of $275 million.

City Non-Rail Development

  • Prohibits a county from using public funds to reconstruct or redevelop an event venue (and associated infrastructure and appurtenances) that is within a Hawaii Community Development Authority (HCDA) district or in a manner that requires HCDA approval, through December 31, 2028.

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