Rail funding proposal passes second reading in Senate as lawmakers continue special session

A bill to bail out Honolulu’s rail project passed a second reading in the Senate Tuesday.

Day two of a special session at the State Capitol began at 9:30 a.m. and lasted for about 30 minutes before lawmakers approved SB4 and adjourned for the day.

The following senators voted no: Josh Green, Breene Harimoto, Lorraine Inouye, Kaialii Kahele, Gil Riviere, Russell Ruderman, and Laura Thielen.

The bill is scheduled for a final, full Senate vote Wednesday before it crosses over to the House.

Representatives in the House committees of finance and transportation will hear public testimony beginning at 1:30 p.m. Wednesday in the Hawaii State Capitol auditorium.

Written testimony on the bill will be accepted up to 24 hours prior to the start of the hearing.

Interested individuals may submit testimony online via the Hawaii State Legislature’s website here. Testimony may also be emailed, faxed, or delivered to the committee and will be posted on the Legislature’s website

To accommodate as many individuals interested in presenting testimony at the hearing, oral testimony will be limited to no more than two minutes.

The following proposals are currently on the table:

  • Increase the state’s Transient Accommodations Tax (TAT) by 1 percent, which will generate $1.32 billion,
  • Extend Oahu’s existing general excise tax until 2030, for $1.04 billion,
  • Permanently increase the counties’ share of hotel tax to $103 million from $93 million to make up for increasing hotel taxes,
  • Require a state-run audit into the Honolulu Authority for Rapid Transportation’s past finances, management, and operations, and
  • Create a mass transit fund from the tax money instead of giving it directly to HART.

Click here to view the latest version of the bill.

The special session began Monday in the Senate, with public testimony before the Ways and Means Committee held in the State Capitol Auditorium from 3 to 8 p.m.

Following public testimony, the committee narrowly passed the bill with a 6-5 vote, with the following senators voting no: Kalani English, Harimoto, Inouye, Kahele, and Riviere.

State lawmakers are not seeing eye to eye with representatives on the county level, and not just from Oahu. Neighbor island representatives joined forces with Honolulu Mayor Kirk Caldwell to let lawmakers know they cannot accept this bill.

Flanked by county council members from Maui, Molokai, and Kauai prior to Monday’s public hearing, the mayor said while they appreciate the Legislature’s hard work crafting the bill, it will have serious repercussions to city taxpayers if it passes.

Caldwell said it would force the city to make huge cuts to the police, fire, and parks departments, which would cut down on public safety, trash pick ups, and fixing the roads.

“I don’t want to cut down on the core critical services that the city provides,” he said. “If the Legislature would only change one number, the GET number, and a couple more years by five instead of three, that’s all it would take, and we believe we would have the money sufficient to fund rail without jeopardizing the city finances.”

The city also threatened to raise real property taxes.

At the public hearing, U.S. Sen. Brian Schatz and Rep. Colleen Hanabusa, who previously served as HART’s chair, took different stances than Caldwell, saying the numbers the city came up with — that the proposal would leave a $600 million to $900 million shortfall — are incorrect.

“It is not solid money. That’s not it. It is in the event something like this happens, then what do you do? That’s what the stress test is,” Hanabusa explained. “So then to say that the money is needed now, it’s like saying — I’m sure we’d all love to have that. In other words, ‘I think it’s going to cost me more in the long run, so give me the money upfront.’ That’s not how this does it.”

Meanwhile, neighbor islands say they cannot support the part of the bill that would raise the TAT statewide by one percent. They stood behind the mayor’s stance to extend Oahu’s already existing GET.

“The first hearing is, and I hope it’s not a rubber stamp we’re talking about, but that there is a chance for give and take and negotiation to make it better bill,” Caldwell said. “I know some have said perhaps this could mean an extension of the session, because you can’t amend the bill, but for the most critical project in generations, I ask, isn’t it worth getting this right?”

“I have not yet found anyone on my island that is interested in paying for the TAT for rail,” said Maui County Council chair Mike White. “The atmosphere is that our constituents want our representatives and senators to stand up and say this is an Oahu issue. We’re happy to help in other ways, but TAT is not the way to go.”

George Szigeti, president and CEO of the Hawaii Tourism Authority, says he feels raising the TAT will hurt Hawaii’s hotels.

“Anytime you take a price from the private sector, a price increase on anything, I think you need to — there is possible consumer push back, and I think that’s all we’re concerned about. There may be consumer push back to going to alternative places,” he said.

“Do you know what the room rate is in Las Vegas, what the room rate tax is in Las Vegas?” asked Sen. Donna Mercado Kim, D, Kapalama, Alewa, Kalihi Valley.

“No, I don’t, senator,” Szigeti replied.

“Okay, and that’s my point. Most people don’t know what the rate is,” Kim said. “Most people don’t. When they go somewhere, they don’t know what the room tax rate is. In fact, Las Vegas just raised their rate about one percent in March 2017. It didn’t stop any local residents from going there.”

According to Szigeti, the average hotel room in Hawaii costs $254 a night.

So if the TAT went up one percent, tourists would have to pay three dollars more a night.

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