$300 million tax hike for rail transit gathers steam

By Mike Leidemann
Advertiser Transportation Writer

A plan that could lead to almost $300 million a year in new taxes to pay for a Honolulu rail-transit system yesterday received key legislative approval and a strong endorsement from city officials including Mayor Mufi Hannemann.

The state tax department said a 1 percent surcharge would generate $296 million a year in Honolulu to pay for the estimated $2.6 billion cost of building a rail system from Kapolei to Iwilei.

"You're doing something that will shape the future of urban Honolulu for the next 100 years," U.S. Rep. Neil Abercrombie told members of the Senate committee.

The measures approved yesterday (Senate Bills 1366 and 1731, and House Bill 1390) would allow the counties to use the money for public transportation projects, but not to build or repair roads or highways.

If the measures are approved by the full state Legislature, members of the Honolulu City Council would still have to vote to increase the taxes on Honolulu residents.

A similar measure to raise the excise tax by a half-percentage point passed the Legislature in the 1990s, the last time Honolulu considered building a rail mass-transit system, but the tax increase was defeated by a 5-4 vote at the City Council.

Officials yesterday, however, were confident that a new tax increase would be approved, and Hannemann and Council Transportation Chairman Nestor Garcia said county lawmakers now have a unified will to pursue the funding.

"There seems to be a chorus of approval growing for it," Garcia said.

Hannemann called traffic congestion the "No. 1 quality of life issue in Honolulu," and said "the only long-term thing we can offer to help is rail."

The most significant opposition to the tax measures yesterday came from the state tax department. Director Kurt Kawafuchi said the department opposed the bill because proceeds from the surcharge were restricted to one purpose and because his department would be required to administer the county-imposed tax.

The Hawai'i Association of Realtors, the National Federation of Independent Business and the Tax Foundation of Hawai'i also opposed the bill. The excise tax, which is charged every time a product is sold or resold in the state, "imposes a serious burden on businesses and individuals alike," the Tax Foundation said. The state imposes a 4 percent excise tax on all business activities, including retail sales, commissions, rental income and services. The state collects just under $2 billion annually in excise taxes, which amounts to about half of its total general fund budget.

A poll conducted last fall found that a majority of O'ahu residents were willing to pay more in taxes to improve mass transit.

Seven out of 10 people reached in the September survey by the O'ahu Metropolitan Planning Organization said a rail rapid-transit line should be built as a long-term solution to the island's traffic problem.

Of those, almost eight in 10 — which translates to 55 percent of all survey respondents — said they would support a tax increase if it were the only way to build the rail system.

'Ewa Beach resident Daniel Boucan, who left his house at 5:30 yesterday morning and needed more than an hour to commute to Pearl Harbor, said he would prefer the state pay for the transit system with an increase in the gasoline tax, "but anything is OK as long as we get the rail system."

Although the proposal primarily affects O'ahu, other counties would be able to pass similar tax increases to deal with their own transportation problems.

Abercrombie said passing a local funding mechanism for the rail system by late March is essential if Honolulu wants to be considered along with more than 200 other projects around the country for federal matching funds within the next six years.

"Nothing can be done unless you have the local funding mechanism in place first," Abercrombie said.

Bryan Delp of 'Ewa Beach said the state and county should act quickly.

"I'm willing to have them tax anything to get some of the cars off the road," he said. "The cost is cheaper today than it will be in 10 years."

Makakilo resident Frank Genadio, who said the growing traffic congestion on the island played a part in his decision to retire early, also urged lawmakers to approve the funding increase.

"Rail is the only viable alternative," he said. "Please prevent another opportunity from being lost."

The House version of the funding bill contains a sunset clause, which would rescind authority to impose the tax after 10 years. The Senate versions of the bill do not include a sunset clause, but committee members said it could be added as the bill moves to other Senate committees or into conference committee.

The Senate Transportation and the Intergovernmental Affairs committees also killed a bill that would have established a new Hawai'i Transportation Authority with the power to raise taxes for and run a new rail system. The authority, which was proposed by Senate President Robert Bunda, would have added an unnecessary new level of bureaucracy to the rail-transit process, opponents said.

Reach Mike Leidemann at 525-5460 or mleidemann@honoluluadvertiser.com.