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Hawaii House Passes Rail Funding Bill in Special Session

The Hawaii House of Representatives voted in Special Session today to pass Senate Bill 4 to fund the City’s $8.2 billion rail project. The vote was 31 yes, 15 no and five excused.

The Senate passed the measure on Wednesday. The bill now goes to Governor David Ige for his consideration.

The bill will provide about $2.39 billion to complete construction of the rail project to Ala Moana and provide a secure funding source to ensure continued federal support.

House Speaker Scott K. Saiki (Kakaako, Downtown) said after passing this funding bill, it is now up to the City to manage the project in a way that is both accountable to the taxpayers and completed within its budget.

“The legislature has taken on the responsibility of finding a way to fund rail and to secure federal funding,” Saiki said. “I want to thank our lawmakers for working together to reach this compromise.”

The bill will:

  • Extend the general excise tax surcharge on Oahu for three additional years, from December 31, 2027 through December 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 percent to 10.25 percent for 13 years, from January 1, 2018 to December 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 percent to one percent.
  • 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.

This bill addresses the immediate rail construction shortfall by collecting funds upfront through a small TAT increase instead of adding additional years of GET surcharge on the back end. This will reduce the financing costs of the project by hundreds of millions of dollars.

A rail bill that relies solely on GET will continue to tax the poor and increase the cost to taxpayers in the long term. By substantially relying on the TAT, visitors will now bare a significant portion of the financing burden.

Rep. Sylvia Luke (Pauoa, Punchbowl, Nuuanu), Chair of the House Finance Committee, said careful thought and consideration went into this bill.

“After hearing testimony from city officials, neighbor island residents and the public, we looked in detail at how to fund rail while creating the least amount of increase on our taxpayers,” Rep. Luke said.

Rep. Henry Aquino (Waipahu) said it is important to support the rail project to relieve traffic congestion for West Oahu residents.

“This bill is a compromise that provides the funds to get rail built. When completed, rail will be a great relief for the thousands of people stuck in traffic every day,” Rep. Aquino said. “This bill not only provides much needed oversight on spending by the State Comptroller, it also mandates accountability though audits and financial reviews.”

House Transportation and Finance Committees Pass Rail Funding Bill

The House of Representatives committees on Transportation and Finance today passed SB4, a critical step in moving the bill forward to provide the funds needed to complete the City’s rail project.

Senate Bill 4 Report Title:  County Surcharge on State Tax; Extension; Transient Accommodations Tax; Appropriations:

Authorizes a county that has adopted a surcharge on state tax to extend the surcharge to 12/31/2030. Authorizes a county to adopt a surcharge on state tax before 3/31/2018, under certain conditions. Decreases from 10% to 1% the surcharge gross proceeds retained by the State. Allows the director of finance to pay revenues derived from the county surcharge under certain conditions. Clarifies uses of surcharge revenues. Establishes a mass transit… (See bill for full description.)

Stakeholders and the public testified at the State Capitol today including City, State and HART officials before both committees voted to pass the bill. Transportation voted 4 to 2 in favor with one excused, and Finance voted 8 to 6 in favor of the bill with one excused.

Transportation members voting yes were: Henry Aquino, Nadine Nakamura, Joy San Buenaventura (with reservations), and Bob McDermott. Voting no were: Sean Quinlan and Tom Brower. Mark Hashem was excused.

Finance members voting yes were: Sylvia Luke, Ty J.K. Cullen, Cedric Asuega Gates, Daniel Holt, Jarrett Keohokalole, Matt LoPresti, Nadine Nakamura and Kyle Yamashita. Voting no were: Romy Cachola, Bertrand Kobayashi, Lynn DeCoite, Nicole Lowen, Andria Tupola and Gene Ward. Beth Fukumoto was excused.

The bill contains two funding mechanisms: a three-year extension of the 0.5 % GET surcharge on Oahu and a 13-year 1% increase in the TAT statewide. This bill ensures that the City’s rail project will be sufficiently funded and reaches Ala Moana.

Finance Committee Chair Sylvia Luke said the bill also mandates accountability for hard-earned taxpayer money.

“This bill will provide enough money to fund the City’s rail project to Ala Moana and require the City to be transparent about how they are spending that taxpayer money,” Rep. Luke said.

The bill provides accountability by requiring a state-run audit and annual financial reviews of the rail project, and requires the State Comptroller to certify HART’s invoices for capital costs. The bill also requires the Senate President and the House Speaker to each appoint two non-voting, ex-officio members to the HART board of directors.

Transportation Committee Chair Henry Aquino said not depending solely on the GET to fund rail will save taxpayer money.

“By adding the hotel room tax to the mix, which provides and immediate cash flow to the project, we are saving taxpayers hundreds of millions of dollars that would be spend on financing fees,” Rep. Aquino said.

The bill now moves to the full House for a vote on second reading tomorrow.

Hawaii Senate Passes Rail Bill

Members of the Hawai‘i State Senate today passed Senate Bill 4 on third reading by a vote of 16-9 to provide funding to complete construction on the City and County of Honolulu’s rail transit project.

SB4 addresses the City and County of Honolulu’s rail construction shortfall of $2.378 billion by extending the General Excise Tax on Oahu for three additional years through December 31, 2030 which will provide $1.046 billion. It also raises the Transient Accommodation Tax (TAT) by one percent to 10.25 percent for 13 years, to December 31, 2030. This will provide $1.326 billion. SB4 permanently increases the counties’ share of the TAT from $93 million to $103 million. The measure reduces the State Department of Taxation’s administrative fee on the GET surcharge from 10 percent to one percent. The measure creates a Mass Transit Special Fund to review and disburse funds to the city for its costs on the rail project. It also requires a state run audit of the rail project and annual financial reviews.

SB4 now crosses over to the House for their consideration.

A complete schedule of the hearings can be viewed at www.capitol.hawaii.gov

Mayor Harry Kim Opposed to Permanent Cap on Counties’ Transient Accommodation Tax


Testimony by Harry Kim, Mayor, County of Hawai’i before Senate Ways & Means Re: SB 4:

The County of Hawai’i opposes the permanent cap on the counties’ share of the Transient Accommodation Tax (TAT). This cap is unnecessary to achieve all other aspects of the bill to finance Honolulu’s rail. The bill proposes to finance rail by extending the General Excise Tax (GET) surcharge period to 12/31/2030, increasing the share of the surcharge that goes to rail by decreasing the administrative charge retained by the State, and increasing the TAT rate by 1% and dedicating all of that increase to rail. There is no reason related to rail financing to cap the share of the TAT to the counties.

A cap on the counties’ TAT share is contrary to the Legislature’s own working group report and the original intent of the TAT tax summarized as follows:

  • Working Group Recommendation. The working group recommended the Tourism Special Fund receive $82 million in FY 2016 and increase in subsequent years in line with the Consumer Price Index for Honolulu, $31 million constant for the Convention Center-Turtle Bay-Special Land Develop Fund, and the remainder split between the State and counties at 55% for the State and 45% for the counties. Based on total TAT revenues in 2016 of $444 million, the $103,000,000 cap represents 31% of the remainder of the TAT after allocations to the Tourism Special Fund ($82 million) and the Convention Center-Turtle Bay-Special Land Development Fund ($33 million). As a result of the cap, the counties’ share will only get worse as tourism grows.
  • Nexus to Tourism Services. The incidence of the TAT is primarily on visitors, so the TAT tax revenues should fund public services which benefit visitors. The UH Economic Research Organization (UHERO) estimated that the counties pay for 53% of the services for which visitors directly benefit (UHERO Working Paper No. 2016-4). These services include police and fire protection, rescue, parks, beaches, water, roads, and sewer systems.
  • Act 185 (1990). Recognizing that “many of the burdens imposed by tourism falls on the counties,” the legislature created the TAT as a “more equitable method of sharing state revenues with the counties” (Conference Committee Report 207 on HB No. 1148). The legislature deemed at that time that the fair allocation was 95% of the total TAT revenues to the counties.

The State has multiple sources of revenues. The counties only have property tax, motor vehicle weight tax, and public utility franchise tax. Our out-of-control homeless problems are a symptom of the soaring cost to rent or own a home in Hawai’i. And you want to offer us the power to increase the GET tax, the most regressive form of taxation that impacts the lower income the greatest. We already had to increase our property tax to make ends meet. With the collective bargaining decisions dominated by the State, we again will face possible increases. We ask only for our fair share as recommended by the Working Group, to maintain quality services that uphold the tourism industry and affordability for our people.

Discussion of Issues Relating to Special Session on Rail Funding, By Chairman of Maui’s County Council

The Chairman for the Maui County Council, Mike White, sent me the following document entitled “Discussion of Issues Relating to Special Session on Rail Funding:”


Mike White, Chairman of Maui County Council

Both the Hawaii State Association of Counties (HSAC) and the Hawaii Council of Mayors (HCOM) stand in support of the position to fund rail by extending the .5% GET surcharge.

  • The Proposal extends the GET surcharge for just three years to 2030.
  • The $1.3 billion raised by the TAT increase would be unnecessary if the GET was extended through 2033. The 3 additional years of surcharge would generate the same $1.3 Billion.
  • If the use of TAT fails the stress test of the Federal Transit Authority and is disqualified as a source to fund rail, will the TAT increase be reversed?

The promise to make permanent the $103 million to the Counties is questionable.

  • The Legislature’s history on keeping promises is weak. We all know that any action taken by today’s body can be reversed in any future session.
  • There was a promise that the 2% increase in TAT after the recession in 2008 would sunset after 5 years. It is not likely it will ever sunset.
  • The $103 million to the Counties still falls short in terms of the Counties being awarded their fair share.

There was hope that the recommendations of State-County Working Group would be taken seriously

  • The Counties’ share of the TAT would have been $184 million this past year if the legislature accepted the findings of the working group they established.
  • The working Group found that Counties provided 56% of visitor related expenditures from State or County general funds
  • Counties were willing to accept the lower 45% share compromise reached in the working group.
  • The Legislature has ignored the Working Group findings, maintained the cap and taken all of the increased revenue.

The State has already grown their share of the TATsignificantly.

  • TheState has increased its share of TAT from $17.1 million to $291.1 million since 2007
  • Since then the Counties share has dropped to $93 million, a loss of $7.8 million
  • The cost of Police, Fire and Parks departments in the four counties has increased by $264 million while Counties share has been reduced.
  • Without a rate increase State share will likely increase to $326 million in FY2018
  • With a 1% rate increase, State share will likely increase by another $58 million to $384 million.

Distribution to Local governments of taxes generated from Lodging Revenues

  • Nationwide, taxes on lodging have been established to cover the cost of services and infrastructure needed to support the visitors.
  • Nationwide, 67% of ALL taxes (GET & TAT) on Lodging revenue go to the local government.
  • In Hawaii, only 14% of GET & TAT generated is given to local Governments
  • The Hawaii TAT accounts for about 68% of the taxes on lodging. If we were to get the Average Local government share we would get almost all of the current TAT revenue.

Hawaii is not the only small state with large expenditures on Education and other government functions, but tax distribution is very different.

  • With similar populations to Hawaii, state expenditures on education in West Virginia and Idaho are close to Hawaii’s.
  • When Hawaii spent $1.6 billion or 23% of its General Fund (GF) on education, Idaho spent $1.6 billion (51% of GF)and West Virginia spent $1.9 billion (43% of GF) on education.
  • West Virginia has a 6% state sales tax and a 6% room tax (TAT)on lodging revenue. All proceeds from the 6% room tax go to the local government.
  • Idaho also has a 6% state sales tax and authorizes local government to impose “local option” taxes on lodging accommodations, drinks by-the-glass, retail sales, etc. The total taxes in resort areas appear to be about 12%. The state receives the 6% sales tax and the local government receives the rest.
  • This type of comparison deserves a closer look if we hope to bring a stronger sense of “partnership” to the relationship between our state and counties.

Our Legislators push the counties to increase property taxes instead of asking for more TAT.

  • Hawaii has lower property tax rates, but significantly higher home values.
  • Hawaii’s median home value is 5 times higher than West Virginia and three time higher than Idaho.
  • Even with lower rates, the average tax on the median home value is $1,430 in Hawaii vs $1,250 in Idaho and $660 in West Virginia.
  • Hawaii property taxes represent 2.1% of median household income. This compares to 2.6% in Idaho and 1.5% in West Virginia.

Neighbor Islands are again being offered the opportunity to pass the same .5% GET Surcharge for our transportation needs.

  • The concern that the neighbor islands have had for years is that once we pass the GET surcharge, the Legislature will take away ALL of our TAT revenue.
  • Some of us have been told directly over the years that this is their intension.
  • The Neighbor Islands favor keeping a visitor-generated TAT to pay for visitor–related services. It makes no sense to shift the cost of visitor services to our resident population through either GET or property taxes when the visitors have already paid their fair share.
  • The GET generated by the .5% surcharge would be just slightly higher than the amount of TAT we are currently getting.

Impact of TAT on Neighbor Islands

  • Oahu occupancy rates are 10 points ahead of Maui, 13 ahead of Kauai and nearly 20 points ahead of Big Island
  • From CY 2006 to CY 2016, Oahu GET base grew by 15% while Neighbor Islands remain below 2006 levels
  • One percent increase in TAT would remove over $30 million from our Neighbor Island communities and economies.

State should work on ensuring all TAT taxing options and compliance issues are addressed before simply increasing the rate

  • The State is not receiving a significant portion of the TAT revenue even though the visitors are paying the TAT or an equivalent.Amend TAT statute to ensure collection of taxes from accommodation remarketers instead of just operators.  Maui County has drafted a bill to correct the problem, and it will likely be part of the HSAC package. $60-80 million in added revenue.
  • Increase the basis of the calculation of TOT on Timeshares from 50% of maintenance fee to a higher percentage.
  • Work with Counties to ensure vacation rentals are operating legally and paying both State and county taxes. Maui County will be contracting with internet service that will identify location and ownership of rentals being advertised on the internet.
  • Instead of TAT, evaluate a Rhode Island-type 1% tax on food and beverages consumed at restaurants, bars and hotels. Restaurant Association estimates the Hawaii base at $4.6 billion. $46 million in added tax revenue

Tax Review Commission recommendations would increase revenues by over $300 million per year

  • Not all the recommendations are popular
  • Sugary beverage tax of $.02 per ounce – $50 million
  • Increase collection of taxes on e-commerce/online retail sales – $30-40 million

Mike White,
Maui County Council Chairman

Information for 2017 Hawaii Legislature Special Session – How to Submit Testimony

The Legislature’s webmasters have set up a webpage for information on the 2017 Special Session called for Monday, August 28th. It can be found here: http://www.capitol.hawaii.gov/splsession.aspx?year=2017a.

This is where you’ll find links to the rail transit funding bill, “SB1 Relating to Transportation Financing”, and the notice for Monday’s 11:30 a.m. 3:00 p.m. WAM hearing (link to hearing notice). The hearing notice lists special email addresses for submitting your testimony.

Note: The hearing will be broadcast on Olelo on channel 49, will go out live to neighbor island PEG access TV channels, and can be viewed live online on the Senate webcasts page (http://olelo.granicus.com/ViewPublisher.php?view_id=13).

It appears that a number of nominations subject to Senate confirmation will also be considered during the Special Session, as numerous Governor’s Messages appear on the Special Session page.

Any subsequent hearing notices will also appear on the 2017 Special Session webpage.

Please don’t hesitate to contact the Public Access Room (PAR) with any questions.

President of Hawai’i Island Chamber of Commerce Statement on Pending Special Session on Honolulu Rail Project

Hawai‘i Island State Representatives and Senators

Re: Honolulu Area Rapid Transit system funding

Dear Representatives and Senators,

From August 28 to September 1 the Hawai‘i Legislature will be in session to assist the City and County of Honolulu with the capital for funding the Honolulu Area Rapid Transit system. We thank you for this opportunity to voice our concern and opinion in this matter.

We understand that the Legislature will be considering proposals including:

  • Maintaining the current general excise tax (“GET”) rate premium for applicable Oahu transactions through 2037.
  • Increasing the transient accommodations tax (“TAT”) rate for applicable services on Oahu.
  • Increasing the TAT rate for applicable services on all islands
  • Assessing premium GET taxes on a statewide basis.

The Hawai‘i Island Chamber of Commerce strongly recommends funding the capital shortfall for the Honolulu Area Rapid Transit system by extending the GET for transactions in the City and County of Honolulu only. We note the following:

  • Uncomfortable as it is to point out, the shortfall is primarily the result of management decisions made by an agency of the City and County of Honolulu. Neighbor islands were not part of either the management or the process. Asking the residents and visitors of the neighbor islands to pay for this process gone awry is not reasonable. Services provided by HART will be provided only on Oahu benefitting primarily Oahu residents and not the residents of the neighbor islands. We believe any impact should be borne by the future users of HART.
  • A major argument against simply allowing the GET on Oahu to continue is that this tax is regressive. However, this argument glosses over several economic realities that businesses face every day. Taxes of any kind increase the total price paid by the buyer. Higher prices for any good or service result in some level of reduced demand – if not for that service, for other services where those dollars may have been spent:
  1. While we do not know the number of travelers who will choose not to travel to Hawaii because of a higher TAT – there is no doubt that at the margin some will choose not to come here or to delay a trip.
  2. Some of those who do come will find that they must curtail their spending while here in order to stay within their budget.

In either of these cases, the dollars spent on goods and services in Hawaii will be reduced. The ripple effect of reduced spending will be a reduction in employee hours (and jobs) absorbed almost exclusively by employees at the lowest rung on the employment ladder. In short, these employees will suffer by losing income much more dramatically than they would if the current 0.5% premium in GET taxes is maintained on Oahu.

Beyond this, there is the simple equity issue. Should we be charging those who have no vote (tourists) for services that they are not likely to use – simply because they have no vote? This is not the right decision.

  • Finally, the City and County of Honolulu – most affected by Rail – has stated firmly that its choice is to fund by extending the GET through 2037. If that is their choice, it is not clear to us why we should over reach to further manage their decision.

Sincerely,
Bill Walter, President

Cover Sheet to Pending Rail Bill to Be Voted On

Here is the cover sheet of the Senate version of the rail bill that Hawaii Legislators will be voting on during the upcoming session on the Honolulu Rail Transportation Project.

It basically calls for:

  • 3 Year General Excise (GE) surcharge extension on Oahu
  • 1% Transient Accommodation Tax (TAT) Statewide (Increase hotel tax on all islands for everyone)
  • $103 million TAT to the Counties to be made permanent.

I should re-poll those that refused to answered my survey because they said they haven’t seen the bill, and ask them if they are now voting YES or NO on increasing the TAT Statewide… but I simply don’t have the time!

Representative Joy San Buenaventura’s Response to Questions on Special Session on Honolulu Rapid Transit System

Representative Joy San Buenaventura

As other legislators have noted, this questionnaire is premature in that we have not been told what we will be voting on in the special session. However, it is clear that there are 3 choices (and variations of these 3 choices) facing the legislature regarding rail funding: 1. No additional taxes and have rail be built until current funding runs out. HART claims that this is not an option because the federal government will want its $1.55 billion back. 2. Extend GE taxes forever (original request) or for 10 years until 2037. This is senate’s last position. 3. Increase TAT by 1% for 10 years and GE .5% for only 1 more year and gave back $10 million in TAT to the various counties with honolulu’s entire TAT share paying only for rail. This is the House’s last position. This was originally proposed late in the 2017 session because Mayor Caldwell testified that most of GE taxes were paid for by tourists (without data supporting his assertion); and it was to ensure that tourists did indeed pay for rail like he testified.

The tourist industry has recently spun the third alternative as a neighbor island tax on rail despite the fact that those who travel & stay with friends or family will not pay TAT tax at all; and completely ignoring the fact that a GE tax increase is also a tax on neighbor islanders who buy on-line from stores like Macy’s, Best buy, Sears, Target & Walmart. For the months of April &May 2017, amazon voluntarily collected Hawaii GE taxes too at 4.5% (http://www.hawaiinewsnow.com/story/34933913/sorry-hawaii-your-tax-free-shopping-on-amazon-is-about-to-end) and stopped after it appeared that the US Supreme Court was not going to rule on internet sales but now there are 9 members of the US Supreme Court. See: one-step-closer-to-internet sales tax. Don’t let the tourist industry fool you, a GE tax increase affects everybody, especially neighbor islanders who depend on on-line purchases, and not just Oahu.

The various counties also do not like the TAT increase option because they want the option to collect the .5% GE for its own transportation needs.

To answer your questions:

1. Will you vote YES or NO on a 1% STATEWIDE increase to the Transient Accommodations Tax (9.25% to 10.25%) to help fund the Honolulu Rapid Transit System in the upcoming legislative special session?

It depends on whether the proposed bill gave back to the counties $10 million/year like the latest house position and decreased the GE increase from 10 years down to 1. As I stated earlier, a 10-year GE tax increase affects more neighbor island residents than a TAT increase especially where it is likely that the new 9-member US Supreme Court will rule to allow taxation of all on-line sales. I voted Yes on the house position in 2017.

2. Would you support a 6 year extension of the Honolulu General Excise Tax Surcharge of 0.5% from 2027 to 2034 if this will help fully fund the Honolulu Rapid Transit System without raising the Transient Accommodations Tax STATEWIDE?

YES – but this is unrealistic because the State Constitution requires that Hawaii County and all the other counties be given an option to increase their GE tax once we give Honolulu the extensionso it won’t be a Honolulu-only GE tax AND no one has ever testified that 6 years was sufficient. HART and all entities have testified that it is their request that the GE .5% increase extensions be forever because they don’t think it ever will be financially sustainable with just fares alone. HART’s track record of asking for a 10 year extension in 2015 and now another extension 2 years later has shown that they will keep coming back. In 2015, I voted NO on any GE tax increase specifically because I did not want to give Hawaii County an opportunity to raise GE at a time when we were just recovering from Iselle and the lava flow so if it was a statewide increase in GE taxes, like that in 2015, I would likely vote NO again because a GE tax is regressive.

3. Would you support an increase of the Honolulu General Excise Tax Surcharge of 0.5% to 0.62% and a 3 year extension of the Honolulu General Excise Tax Surcharge from 2028 to 2030 if this will fully fund the Honolulu Rapid Transit System without raising the Transient Accommodations Tax STATEWIDE?

Probably Yes but no one has given us this option and see my objections to any GE tax increase in my prior answers

Senator Kai Kahele’s Response to Questions on Special Session on Honolulu Rapid Transit System

Senator Kai Kahele

Aloha Damon and mahalo for your email. Although we (the Senate) have not seen a bill yet there has been speculation to what a bill may look like to help fund the Honolulu Rail Project shortfall, however I can provide a response to your questions based on the knowledge I have so far.

Question #1: Answer: NO. I do not support increasing the TAT Statewide to fund the rail project. Front loading the rail project with money from a TAT statewide increase is bad policy for the State. Leisure tourism is our number one industry and is what drives GE revenues. Raising the TAT hotel tax statewide has the potential to hurt our tourism industry. In addition, I have heard from many of my constituents in Hilo and they are opposed to raising the TAT hotel tax statewide which would make on island and off island travel for hard working Hawaiʻi Island families, youth sports teams and church groups that much more expensive when they need to stay in our island hotels. If it makes Hawaiʻi Island hotels more expensive for local families, to fund the rail project on Oahu, I cannot support that.

Questions #2: Answer: YES. I do support the extension of the GE surcharge on Oahu to fund the rail project. The GE surcharge on Oahu has been paid and collected by Oahu residents since 2007 and is set to expire in 2027. An extension of this broad based tax, which the voters of Oahu voted for seems reasonable to me. It will also not impact the neighbor islands or the tourism industry. I do support a 6 year extension of the surcharge to complete the rail project.

Questions #3: Answer: YES. If front loading the rail project to decrease total cost and interest paid was what the voters and residents of Oahu wanted than I would support that. The Hawaiʻi GE tax is inherently a regressive tax and has the potential to affect lower income individuals and families which we would need to weigh appropriately. However, if this proposal could decrease the amount of years for the GE extension, which also helps lower income families, and ends up costing less in total interest paid, the legislature should consider it. Again, I would like to see what the residents of Oahu think about this proposal, maybe an informal poll could be taken.

Continue reading

Commentary – City Rail Audit Won’t Look for Fraud?

Dear Damon,

This week, the Honolulu City Council Budget Committee approved a widely supported resolution to conduct an “economy and efficiency” audit of the city’s over-budget and behind-schedule rail project, but it didn’t go far enough.

That’s because, if approved by the Council as a whole, it would not be looking for fraud — this despite the fact that City Auditor Edwin Young told the committee “the red flags were there” when he was conducting his own very critical performance audit of the project just last year.

As amended, Resolution 17-199 would direct Young’s office to investigate the Honolulu Authority for Rapid Transportation’s capital finances, which amount to at least $8 billion. This would be a big improvement over Young’s earlier audit, which looked only at HART’s operational finances of about $18 million annually.

During the hearing, Joe Kent, Grassroot Institute vice president of research, congratulated the committee for considering Councilmember Trevor Ozawa’s resolution to investigate the rail project, but expressed concern about its amended version.

“The proposed new language seems to suggest there is no desire to look into whether there has been any illegal activity in the rail construction process,” he said.

After Kent’s comments, Budget Committee members asked Young if any fraud had been found while he was conducting last year’s performance audit.

He responded: “We found that the internal controls were so weak that if fraud, waste or abuse were to occur, HART and (others) would not have detected it, could not prevent it, and could not have taken corrective action, if it had occurred.”

Pressed further, the city auditor said he would be willing to recommend a forensic audit seeking fraud, waste and abuse if the former HART executive director, Dan Grabauskas, were still in charge. However, the current proposed audit, which does not seek out fraud or abuse, would be sufficient for the current leadership.

But this misses the point.

The public deserves to know about fraud, whether it happened now or in the past. The only way to know for sure if Hawaii taxpayers have been getting true and honest returns for their hard-earned tax dollars is to conduct a full forensic audit of the rail project.

All the better if an entity independent of the city were hired to provide the staff and expertise to conduct such an audit — in a reliable, trustworthy and timely manner.

Such an audit likely would require separate funding; perhaps the $250,000 allocated by HART for “special audit services” would be a good place to start.

In any case, Hawaii leaders should not shy away from seeking out illegal or abusive activities in the Honolulu rail project. And only a “deep dive” forensic audit can accomplish that goal. Anything less is playacting.

E hana kakou (Let’s work together!),

Keli’i Akina, Ph.D.
President/CEO Grassroots Institute of Hawaii

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.