Governor signs rail bailout bill into law

Gov. David Ige signed a bill into law Tuesday to bail out Honolulu’s rail project.

The governor said he and his team worked through the weekend to complete a full legal and policy review of the bill.

“There were some concerns raised, but our assessment is that there is not fatal flaws and that the bill will be moving forward. We believe that this makes a strategic investment in a most important asset for our community,” Ige said.

Senate Bill 4 addresses the City and County of Honolulu’s rail construction shortfall of $2.378 billion, currently the state’s largest public-works project, by proposing the following:

  • Extend the General Excise Tax on Oahu for three additional years through December 31, 2030 which will provide $1.046 billion.
  • Raise the Transient Accommodation Tax (TAT) by one percent to 10.25 percent for 13 years, to December 31, 2030, which will provide $1.326 billion.
  • Permanently increase the counties’ share of the TAT from $93 million to $103 million.
  • Reduce the state Department of Taxation’s administrative fee on the GET surcharge from 10 percent to one percent.
  • Create a Mass Transit Special Fund to review and disburse funds to the city for its costs on the rail project.
  • Require a state run audit of the rail project and annual financial reviews.

A special session began last week Monday in the Senate, then continued in the House. Despite vocal opposition, lawmakers ultimately approved the measure and passed the bill to the governor.

“We do note that there were concerns raised from the neighbor island communities — Hawaii, Kauai, and Maui counties — but we do believe that it’s a separate issue that we are looking to work toward in the off-season, where we can truly examine roles and responsibilities of the state and county governments and look for a fair apportionment of the transit accommodation tax,” Ige said. “I believe that this measure allows this most important project for the state and County of Honolulu to move forward in a way that will allow it to be completed.”

“I think the Legislature really did a good job of establishing a record that explained what was their rationale for why they were asking for what they wanted and what they included in the bill, and that includes the portion about having four appointees sit as non-voting members on the board. I think it introduces an amount of accountability,” said state Attorney General Doug Chin.

“… in order to ensure the appropriate use of state authorized funds to finance a locally preferred alternative for a mass transit project, the president of the senate and speaker of the house of representatives shall each appoint two non-voting, ex-officio members to the board of directors of the county’s rapid transportation authority…”

With the bailout settled, some major hurdles are still ahead.

The Federal Transit Administration still has to review and approve a recovery plan due Sept. 15, and will hold onto the last half of its $1.5 billion grant until it’s satisfied.

If officials foresee no major shocks to the hotel tax or general excise tax intake, a green light from the FTA is likely.

Tuesday also marked the first day for Andrew Robbins, the Honolulu Authority for Rapid Transportation’s new executive director and CEO.

The governor says he’s already met with Robbins, and says Robbins understands the importance of accountability and transparency with this project.

Honolulu Mayor Kirk Caldwell issued the following statement post-bill signing:

“The signing of the rail funding bill into law shows Gov. Ige’s commitment and leadership in completing the rail project as promised to the people of Oahu, and is proof of the hard work done by members of the state Senate and House during the special legislative session.

Once fully built this driverless train will add fuel to the economic engine that helps power the entire state of Hawaii by promoting smart development, generating much-needed affordable housing and creating multi-modal communities that all of us are striving for.

The city is working closely with HART on an updated financial plan that takes this new funding mechanism into account, and we stand ready to answer any questions the Federal Transit Administration may have about completing the elevated rail line from East Kapolei to Ala Moana. Gov. Ige’s signing of the rail funding bill also allows the Honolulu City Council to approve Bill 45, which extends Oahu’s half-percent surcharge to the state general excise tax another three years, and is a key component of the updated financial plan the FTA requires by September 15.

Meanwhile, my administration continues to work closely with our federal, state and city partners on implementing all of the mandates of the rail funding bill, in particular more state oversight of rail construction and the timely transfer of tax revenues to the city.”

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