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Mayor Kim’s Testimony Re: Special Session 2017 – Rail Tax Surcharge

August 11, 2017
Special Session 2017 – Rail Tax Surcharge

Dear Senator Lorraine Inouye, Senator Clarence Nishihara, Senator Donovan Dela Cruz, Representative Henry Aquino, Representative Sylvia Luke, and Committee Members:

We understand that the upcoming Special Session will be considering many different proposals on how to help the City and County of Honolulu Address the funding of their rail system. While we understand that this is not an easy decision, we want to ensure that the legislatures makes their decision based on fairness. We understand that some of the options being considered include increasing GET and TAT for the entire state with all the proceeds going to rail.

These increased taxes would be collected on all islands, even though the rail system is only located on Oahu. That does not seem fair to tax those that don’t even have access to the rail system. We do support the extension of the GET surcharge for Oahu. That seems to be the fairest method to ensure that those most likely to benefit from the system will pay for the system.

In addition, the TAT cap for the counties was not restored to $103 million as in previous years. This reduced our TAT revenue by $1.86 million. This is more than the entire budget for our Civil Defense department. Without these funds, a significant increase in real property taxes for our citizens was necessary. The same citizens that you also represent. We cannot burden our citizens any more for something that will not benefit them.

Taxing all for the benefit of one is not fair. All islands could see an increase in the TAT and GET but only one will benefit. We all will be seeing less TAT in our budgets. We respectfully request that you whatever you can to provide the counties with their fair share of TAT and find another way to fund the rail system, such as continuing the additional GET for Oahu.

We appreciate your consideration as we all attempt to best serve our joint constituents, the people of Hawai’i.

Respectfully,

Harry Kim
Mayor

Guest Commentary – Hawaii Rail Fiasco… What They Don’t Want You to Know

You posted (on Facebook) an interesting article on Civil Beat in regards to the Rail Project: Lawmakers Consider Having Neighbor Islands Help Pay for Oahu’s Troubled Rail Project

What you and most fail to realize is that our House representatives on this island already voted YES to have the neighbor islands pay for rail, including our island and NO ONE called them out or held them accountable.

SB1183 is what deadlocked at the end of session because the House and Senate disagreed on the funding mechanism for the rail project.

This is the link to the HOUSE amendment to the bill that passed the House and was voted on by our representatives.

http://www.capitol.hawaii.gov/session2017/bills/SB1183_HCD2_.htm

The bottom line:

They voted for a increase to the TAT of 10.25% (an increase of 1%) statewide, with 100% of the proceeds going to rail and they voted to CAP the TAT distribution to the counties at $103 million to 2028.

How does the $103 million cap affect Hawaii County? Hawaii County gets 18.6% of that cap which is approximately $18 million. However, HI County should be getting almost $40 million from the TAT if it was, prior to 2009, apportioned fairly through a percentage based allocation. The State capped the Counties during the recession and has never restored it to a percentage based amount. Effectively, HI County is getting robbed every year of its fair share of TAT by the State, $22 million could pay for ALLOT of stuff on our island, busses etc..

Who voted for that? 100% of HI Islands House membership, every single one.

Now, we are going back into special session and the House has the same game plan, increase TAT statewide and this time, even worse, cap the Counties at $93 million, instead of $103 million.

If their is not enough public awareness on our island or pressure from their constituents, they will vote the same way. They don’t want anyone to know what I just shared with you, but it is all public information, just no one caught it.

But now you know…

A Concerned Citizen

Conference Committee Agree on Funding Honolulu’s Rail Project – Tourists Will Pay More

The House and Senate conference committee came to an agreement this afternoon on the future of Honolulu’s rail project. Earlier today, the House proposed removing the 2-year extension using GET surcharge from SB 1183 SD2 HD2 and replacing it by increasing the Transient Accommodations Tax (TAT) by 2.75%.

“The City and HART have been telling us over and over again that the cost of rail should be put on tourists and the visitor industry,” said Representative Sylvia Luke (Makiki, Punchbowl, Nuuanu, Dowsett Highlands, Pacific Heights, Pauoa). “We have taken them to heart and we have done that today without imposing a further tax burden on the citizens of the state.”

The amended bill calls for the City & County of Honolulu to contribute $13 million of their share of the hotel room tax to fund the rail project.

The bill allows for a massive infusion of money now for the rail project without putting the cost of it on the backs of our most vulnerable citizens, the poor, elderly and low-income working families. The money generated by the increase in the hotel tax in today’s dollars is equivalent to receiving $2.4 billion in future GET revenues. This would provide more funding for rail than any package currently being proposed.

“The end goal has always been to get rail to Ala Moana so that the City fulfills its agreement with the Federal Transit Authority,” said Representative Henry Aquino (Waipahu). “This bill gives the city more tools to use in managing and funding its project.”

The bill also calls for a moratorium on redeveloping the Neil S. Blaisdell Center, which is estimated to cost nearly $500 million, so the City does not fiscally over extend itself and can focus on its number one priority – rail.

The provisions of the amended bill include:

  • Removal of House’s proposed 2 year GET extension for 2027 – 2029;
  • Increase of the Transient Accommodations Tax (TAT) by 2.75% from its current 9.25% to 12% for 10 years from January 1, 2018 to December 31, 2027;
  • Revenue generated from the TAT increases will be distributed as follows:
  1. $50 million will be set aside annually for education in a newly created education special fund;
  2. The City and County of Honolulu will receive $130 million annually over 10 years concurrently with the GET surcharge revenue that they are already receiving now;
  • $13 million of Oahu’s share of the TAT go to funding the rail project;
  • Maintaining the House position to lower the state’s share of the administrative service fee to 1%;
  • Giving all counties the option to extend the GET surcharge;
  • Requiring Honolulu to repeal any ordinance prohibiting use of county funds for rail;
  • Prohibiting the use of the GET surcharge revenue to fund HART administrative, operating, and personnel expenses.

Hawaii House Approves $1.2 Billion Package to Fund City Rail Project

The House of Representatives today agreed to provide an additional $1.2 billion funding package for the City’s financially troubled rail project estimated to cost a total of about $8.1 billion.

In passing SB1183 SD2 HD2, the House extended Oahu’s 0.5 percent general excise tax surcharge for the City’s rail project for an additional two years through 2029 which will generate an estimated $792 million.

The House also agreed to reduce the funds it collects as a GET administrative fee by 90 percent which will generate an estimated $397 million for the City project.

When adding this new funding of $1.2 billion to the $6.8 billion already committed to the project, the State is providing $8 billion for the City rail project.

Rep. Sylvia Luke (D, Makiki, Punchbowl, Nuuanu, Dowsett Highlands, Pacific Heights, Pauoa), Chair of the Finance Committee, said the additional rail funding provided in the bill brings the City very close to its total estimated cost for the entire project.

“This bill is an honest attempt to once again provide sufficient funds for the city’s over-priced, over-budget rail project,” Luke said. “There are many more questions about the rising cost estimates that remain unanswered.”

(For the full text of Rep. Luke’s speech today, click here.)

“This was a reasoned approach and I would hope that reason would prevail at the city. It is incumbent upon the Mayor, the city, and HART to use this opportunity to take control of the cost and its budgets, and look at all viable options. Threatening the public with a property tax increase is doing a disservice to our citizens. The city must first do whatever they can to instill confidence and trust in this project. I am certain given the opportunity they will do that.”

As part of the bill, the Honolulu City Council must vote to allow city funds to be used for rail and approve the GET extension by Dec. 31, 2017 or void the additional State support.

In an impassioned speech, Speaker Joseph Souki (D, Kahakuloa, Waihee, Waiehu, Puuohala, Wailuku, Waikapu), said building rail is the largest public works project in Hawaii’s history and will provide jobs and a new mode of transportation for commuters.

“This is for the future. The burden now goes to the City. They need to have ‘skin in the game.’ Hopefully, the (City) Council will get the courage to pass it.  I’m asking all of you to support this bill,” Souki said.

Luke said the State must be very mindful of how it spends taxpayer money, and that  lawmakers and the public have lost faith in the credibility of cost estimates by the City and Honolulu Authority for Rapid Transportation administrators.

After providing almost all the funds needed for the project, the State cannot write a “blank check” for more taxes going into the future just in case rail goes over budget again, she said.

Luke said the City should look at cost savings either through r public private partnerships, finding creative ways of securing bond financing, or aggressively looking at their contracts and making cuts to cover the final $100 million of the total cost.

Luke said this $1.2 billion package provides the City with funds to complete the rail project through Ala Moana and will not jeopardize the $1.55 billion in Federal Transit Administration funding.

SB1183 SD2 HD2’s provisions include:

  • Extending the general excise tax surcharge for two additional years, from December 31, 2027 through December 31, 2029, which will generate an estimated $792 million;
  • Redistributing 90 percent of the State Department of Taxation administrative fee to the City, which will generate an estimated $397 million;
  • Requiring the City to approve the extension on or before December 31, 2017;
  • Mandating that the City not prohibit the use of city funds for rail expenses;
  • Prohibiting the use of the GET surcharge revenue to fund HART administrative, operating and personnel expenses;
  • Stating that GET funds can only be used for construction;
  • Giving all counties the option to extend the surcharge.

In addition, the House also moved the following bills on Second Crossover:

Veterans

SB 602 HD1 repeals the requirement that a disabled veteran be in receipt of disability retirement pay from the armed forces to be exempt from the payment of annual vehicle registration fees.

Climate Change

SB 559 SD1 HD2 requires the State to expand strategies and mechanisms to reduce greenhouse gas emissions statewide in alignment with the principles and goals adopted in the Paris Agreement.

Affordable Housing

SB 1244 SD2 HD2 authorizes qualified nonprofit housing trusts to repurchase affordable units developed with government assistance when a government entity waives its first right of refusal to repurchase the unit.

Internet Privacy

SB 429 SD2 HD2 adopts uniform laws on protecting the online accounts of employees, unpaid interns, applicants, students, and prospective students from employers and educational institutions, respectively.

Condominium Law

SB 369 SD1 HD1 prohibits apartment and condominium associations, boards of directors, managing agents, resident managers, and apartment and condominium owners from retaliating or discriminating against an owner, board member, or association employee who takes lawful action to address, prevent, or stop a violation of Hawaii’s condominium laws or a condominium’s governing documents, or exercises any rights as an owner.

Prison

SB 603 SD1 HD2 requires report to Legislature on solitary confinement in Hawaii and Arizona correctional facilities that house Hawaii inmates. It also requires the Department of Public Safety to expand the environmental impact statement process for potential sites for the Oahu Community Correctional Center relocation and submit a report to Legislature.

Taxation

SB 620 SD2 HD2 requires retailers or vendors that are not located in the State and not required to pay or collect general excise or use tax for sales to send certain information to purchasers in the State.

SB 686 SD2 HD1 establishes education surcharges on residential investment properties and visitor accommodations for funding public education.

SB 704 SD2 HD2 allows transient accommodations brokers to register as tax collection agents to collect and remit general excise and transient accommodations taxes on behalf of operators and plan managers using their services for vacation rentals.

Homelessness

SB 717 SD2 HD2 makes appropriations and establishes a temporary program to clean up state real property after the departure of persons who have illegally camped or lodged on state real property.

SB 1290 SD2 HD2 allocates funds from transient accommodations tax revenues to the Hawaii Tourism Authority in conjunction with the Hawaii Lodging and Tourism Association for the implementation of initiatives to address homelessness in tourist and resort areas.

Pregnancy Centers

SB 501 SD1 HD2 requires all limited service pregnancy centers to disclose the availability of and enrollment information for reproductive health services and establishes privacy and disclosure requirements for individual records and information.

In Vitro Fertilization

SB 502 SD1 HD1 removes discriminatory requirements for mandatory insurance coverage of in vitro fertilization procedures to create parity of coverage for same-sex couples, unmarried women, and male-female couples for whom male infertility is the relevant factor.

Retirement

SB 249 SD2 HD1 reduces the percentage of average final compensation used to calculate the retirement allowance for a member who first earned credited service as a judge after June 30, 2050, to 2 per cent.

Maui Hospitals

SB 207 SD2 HD1 appropriates funds to the Department of Budget and Finance for collective bargaining cost items related to the transition of affected Maui region hospital employees to employment with Maui Health System, a Kaiser Foundation Hospitals LLC.

Lifeguard Protection

SB 562 SD1 HD1 requires the Attorney General to defend any civil action against the county based on negligence, wrongful act, or omission of a county lifeguard for services at a designated state beach park under an agreement between the State and a county.

A complete list of Senate bills passed by the House to date is available on the Capitol website at http://capitol.hawaii.gov/advreports/advreport.aspx?year=2017&report=deadline&rpt_type=secondCross_ammend&measuretype=SB&title=Second Crossover.

Hawaii House Finance Committee Approves $1.2 Billion Package to Fund Rail Project

The House Finance Committee today agreed to provide an additional $1.2 billion funding package for the City’s financially troubled rail project estimated to cost a total of about $8.1 billion.

In passing SB1183 SD2 HD2, the committee amended the bill to:

  • Extend the general excise tax surcharge for two additional years, from December 31, 2027 through December 31, 2029, which will generate an estimated $792 million;
  • Redistribute 90 percent of the State Department of Taxation administrative fee to the City, which will generate an estimated $397 million;
  • Require the City to approve the extension on or before December 31, 2017;
  • Mandate that the City not prohibit the use of city funds for rail expenses;
  • Prohibit the use of the GET surcharge revenue to fund HART administrative, operating and personnel expenses;
  • State that GET funds can only be used for construction;
  • Give all counties the option to extend the surcharge.

Rep. Sylvia Luke (D, Pauoa-­Punchbowl-Nuuanu), Chair of the Finance Committee, said the $1.2 billion package will fund the rail project through Ala Moana and will not jeopardize the $1.55 billion in federal funding.

“This is the second time the State has bailed out the City and County of Honolulu and HART for the rail project. The public and the Legislature has lost faith and confidence in their ability to provide an accurate budget estimate and control costs,” Luke said.

“We are concerned with the City and HART being in breach of the Full Funding Grant Agreement (FFGA) with the Federal Transit Administration (FTA). This is why we are providing the City and HART with an additional $1.2 billion funding package. The State is even willing to substantially reduce its administrative fee to ensure that this project is completed.

“However, we continue to be disappointed that the City and HART have not considered significant cost cutting measures and alternatives to funding. We believe the funding we are providing today will be sufficient as long as the City and HART do their part to responsibly finance and manage their rail project.”

The bill will now be voted on by the entire House of Representatives on Tuesday, April 11, 2017.

U.S. Department of Transportation Releases $236,277,358 in Federal Funds for Honolulu Rail Project

Today, Senator Schatz announced the release $236,277,358  in federal funds for the Honolulu Rail Transit project.  This U.S. Department of Transportation funding will be used to continue building Hawai‘i’s first light rail system.

The very first Honolulu Rail Column 45 (Copyright Iopa Maunakea use with permission only)

The very first Honolulu Rail Column (Copyright Iopa Maunakea use with permission only)

“Federal funding for the rail project continues to flow and we continue to receive assurance from the DOT and the FTA that it is full speed ahead,” said Senator Brian Schatz. “After 40 years in the making, the rail project is now quickly progressing and I will continue to work towards making a rail system in Hawai‘i a reality.”

Senator Schatz serves on the Surface Transportation Subcommittee of the Senate Committee on Commerce, Science and Transportation. Earlier this year, Senator Schatz met with Department of Transportation Secretary Anthony Foxx and Federal Transit Administrator Pete Rogoff to receive their commitment to defend Honolulu rail transit’s funding.

 

More on Honolulu Rail Transit by Congressional Candidate Bob Marx

Last week Congressional Candidate Bob Marx released the following comments regarding Honolulu’s Rail Transit Project.

Congressional Candidate Bob Marx

I just received the following update:

I’ve been asked before how a rail advocate like me can be against the proposed HART project. Let me make this clear: I am an ardent supporter of mass transit systems. Today marks the 45th anniversary of the Reverend Martin Luther King’s speech denouncing the war in Vietnam and standing up for the poor.  In this spirit, thousands of Amalgamated Transit Union (ATU) supporters and working people across the country stood up to have their voices heard. I commend the efforts of the folks out there on the streets in their own communities demanding that federal cuts to public transportation be stopped.

The bitter reality is that the proposed GOP budget and cuts nationwide to mass transit systems make it highly unlikely that Hawai‘i will receive the $1.5 billion in federal subsidies that Honolulu is relying on to fund the steel-on-steel elevated rail program. I cannot support a project that does not produce enough local jobs for the people of Hawai‘i nor benefit the people of my district. We are not supporting our local economy (or even the American economy) by outsourcing $1.4 billion in construction and maintenance of the trains to an Italian-owned business venture with questionable success rates. And writing the bill off on future generations or people in rural Oahu who won’t have direct access to the system is not right either.

To me, public transportation–like health care–should be a universal right for all our citizens. Dr. King knew this to be true. As this historic day draws to a close, we must be reminded that the main goal of public transportations should not be to alleviate traffic for weekday shoppers and sports fans, but to help those struggling to find work, or those paying $25 a day on gasoline and maintenance for their 40 mile commutes.

Dr. King called “urban transportation a true genuine civil right” and with ever-rising gas prices, we must make every effort to help those in the most need. The hard working people on the Waianae Coast–many struggling now just to get by–should be the first with access to a modern rail system. As the cost of living has steadily risen in the last decade, folks on the Makaha Valley have lost over 22% of their income. A modern, grounded maglev train from the Makaha through Nanakuli to Ewa beach can help those that need it the most, and at a fraction of the cost.

If the main goal of the Honolulu Area Rapid Transit (HART) is merely to alleviate traffic congestion in downtown Honolulu, I believe there are easier ways. It’s less than a quarter-mile from Hickam Air Force Base to Iroquois Point; a bridge (or tunnel if that better suits the Navy) would greatly alleviate traffic in downtown and provide an alternate route to the leeward side of Oahu and beyond. It would help everyone from Ewa Beach to Waianae to the commuters going west to east in the evenings.

Bob Marx practices law in Hilo, Hawai‘i and is a Candidate for Congress in the Second District.

Honolulu Candidate for Mayor Kirk Caldwell Statement on Cayetano Announcement

Honolulu Mayoral candidate Kirk Caldwell had this to say about former Governor Ben Cayetano’s announcement that he would also be running for the Honolulu Mayor’s seat:

Being Mayor means being hand on! And let’s get something straight right up front, rail transit is an important issue in this election. However, this election is about so much more. It’s about the buses that take people to and from their jobs everyday. the HandiVan service, bus passes, it’s about protecting people and their property, filling pot holes and repaving their roads.

If you want a world traveler or a single issue candidate, I’m not your guy. I’ll be a Mayor who understands the details, rolls up his sleeves, digs in, gets serious, brings people together, listens to ideas . . . and solves problems. That’s how I did things when I was Mayor, that’s how we’ll get the job done … everyday, hands on.

Kirk Caldwell

Sumitomo Files Formal Protest Regarding Winning Bid on Part of the Honolulu Rail Project

Media Release:

Sumitomo Corporation of America (SCOA) filed a formal protest today regarding the selection of the winning bid for the Core Systems DBOM (Design, Build, Operate and Maintain) part of the Honolulu rail project.

“We regret having to take this action. It is not how we normally respond to bid outcomes,” said Gino Antoniello, Vice President, Transportation Systems and Equipment, SCOA. “However, we are working with many local partners and our team includes several Honolulu-based companies. We owe it both to ourselves and to them to challenge what we believe to be a wrong decision.”

Antoniello went on to explain: “Our concerns have only intensified following our debriefing meeting with the City last Monday and as we thoroughly reviewed the documents that were made available to us. The failure of the City to recognize and properly take into account the cost of the project over its total life-cycle will leave the Honolulu taxpayers with the burden of paying as much as $900 million more to operate and maintain the system.”

“We believe that the City must give our protest serious consideration and we fully expect the City to realize that the Sumitomo offer provides the best value to the City and the taxpayers,” said Antoniello.