City officials were not pleased yesterday with the suggestion that a tax dedicated to Honolulu's $5.3 billion commuter rail project be diverted temporarily to help balance the state budget.

Kirk Caldwell, the city's managing director, called the proposal a "terrible idea."

"It's ill-conceived, ill-timed, and it's a money grab by some in the square building," Caldwell said, referring to the state Capitol.

Georgina Kawamura, the state's budget director, said one year's worth of proceeds from the transit tax — about $165.3 million — could be transferred to the state's general fund to help close a budget deficit. The tax surcharge could then be extended for a year beyond a scheduled 15-year sunset to make up the difference.

State Sen. Brian Taniguchi, D-10th (Manoa, McCully), said he may propose that the state take two years' worth of proceeds from the transit tax and then extend the surcharge for two years. And state Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), said the state might want to defer the transit tax for a year or more as tax relief for Honolulu residents.

Consumers in Honolulu have an extra 0.5 percentage point surcharge tacked on to the general excise tax to raise money for the rail project, which was approved by voters in November and is set to break ground later this year.

The state has collected more than $259 million for Honolulu through the surcharge so far.

Kawamura and lawmakers said Honolulu does not necessarily need all that money now so it could be used to attack the budget deficit without interfering with the rail project.

Caldwell questioned why Gov. Linda Lingle or Hanabusa did not mention the tax during recent meetings with Mayor Mufi Hannemann.

"The Lingle-Aiona administration and the Senate president want to reach across the street and take money from the people of the City and County of Honolulu. Why? Because they don't have the guts or the willingness to balance the budget any other way, so let's take it from the greatest economic stimulus project in the history of the state of Hawai'i?" Caldwell said.

COUNCIL OPPOSITION

City Council members, even one initially opposed to the rail project, said using the transit tax to balance the state budget or for tax relief would be a bad idea.

Council Vice Chairman Nestor Garcia said the proposals "deeply concern" him. Any suspension or diversion of the transit tax, he said, could send the wrong message to the Federal Transit Administration as the state's congressional delegation works to secure federal funding for the project.

"I think there are a slew of other initiatives that the state could consider before taking money away from the rail project," Garcia said. "I think it would send the wrong message to the federal government and, given our history, could cause the FTA to doubt our commitment to the project."

Councilman Charles Djou, who voted against the rail project but has worked to improve it after voters backed rail in November, said he does not think temporarily suspending the transit tax would bring much tax relief. He also does not want to see the state jeopardize a project approved by Honolulu voters.

"I do very much support finding some means of relief for the average taxpayer," Djou said. "I think a better suggestion for the Legislature would be to suspend a portion of the GET (general excise tax), or expanding child tax credits."

State lawmakers who represent districts on the west side of O'ahu that are choked with traffic were also skeptical.

"I'm against that," said state Sen. Will Espero, D-20th ('Ewa Beach, Waipahu). "I believe we need to fund the rail system and I'll do what I can to oppose it."

State Rep. Sharon Har, D-40th (Royal Kunia, Makakilo, Kapolei), said she would want to determine what impact, if any, diverting the transit tax would have on federal funding for the project. She said the state should not do anything that might endanger federal money.

"I think we have to look into what all the possible ramifications are," she said.