Honolulu

Civil Beat Analysis: City’s Rail Tax Plan Optimistic

·By Michael Levine

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Civil Beat Staff

Michael Levine

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Will GET surcharge revenue reach the city's $3.5 billion projections? Join the conversation.


1. Construction of the 20-mile line will be funded by two main sources: A GET surcharge of 0.5 percent and grants from the federal government. The city expects to receive $1.55 billion in federal New Starts rail grants — a figure that was largely left alone by the state consultant. Infrastructure Management Group (IMG) predicted the full amount would be released, but said on Pages 36 and 37 [pdf] of its report that it would take 12 years instead of nine to get the money because the city is unlikely to receive more than $150 million per year in New Starts funding.


2. Each quarter's surcharge revenues are received by the city from the state around the last day of the month following the last month of the quarter. For example, surcharge revenues earned between January and March 2010 were received by the city from the state on April 29, 2010.


3. A report was published by the city in November 2006, two months before the GET surcharge went into effect. The table shown below, which appears on Page 94 of the report, projected that that tax would generate $687 million in the four years beginning Jan. 1, 2007 and ending Dec. 31, 2010. If the 4th quarter of 2010 performs on par with the rest of the year, the city will have generated $617 million during the four-year period, which represents 89.8 percent of projections. The August 2009 financial plan replaced earlier models produced in May 2009 and November 2008. Civil Beat used the city's most recent projections in evaluating Carlisle's statement.




4. Figure 2-5 and subsequent paragraphs on Page 18 [pdf] of the city's financial plan explain that "FY2009 actual collections are expected to be followed by a year of low, negative nominal growth in FY2010 equal to -0.4%." The actual FY2010 collections represented a negative growth rate of -1.0 percent. In Fiscal Year 2011, the report said, "the economic recovery is expected to begin ... with a growth rate of 5.2%." In the first half of Fiscal Year 2011, the GET surcharge revenue has instead decreased by 7.0 percent versus the same two quarters in Fiscal Year 2010.


5. Parsons Brinckerhoff's Tax Base Forecast [pdf] begins on Page 70 of the financial plan and continues until the document ends on Page 90.


6. CB Richard Ellis' model covers pages 22 through 29 [pdf] of the IMG report provided to the state in December 2010.


7.



8. Page 56 [pdf] of the Hawaii Department of Business, Economic Development and Tourism's quarterly report [pdf] for the fourth quarter of 2010 includes annual statewide GET revenues dating back to 1990. Civil Beat pro-rated the first three quarters of 2010 to determine an annual figure for its table of annual growth rates below.


Statewide GET Revenues 1990-2010





























































































































Year GET (billions) Year-Over-Year Growth
1990 $1.25 N/A
1991 $1.29 3.0%
1992 $1.30 0.9%
1993 $1.31 0.7%
1994 $1.35 3.0%
1995 $1.39 2.9%
1996 $1.47 6.0%
1997 $1.43 -2.5%
1998 $1.44 0.3%
1999 $1.45 1.3%
2000 $1.61 10.8%
2001 $1.66 3.1%
2002 $1.68 1.1%
2003 $1.82 8.4%
2004 $1.99 9.4%
2005 $2.26 13.7%
2006 $2.46 8.6%
2007 $2.62 6.8%
2008 $2.57 -2.1%
2009 $2.30 -10.6%
2010 $2.40 4.6%
Average
3.5%
Median
3.0%

Source: Civil Beat analysis of DBEDT data

9. There was some confusion about the actual projected shortfall. The table shown below, which appears on Page 44 of the consultant's report, shows that the "base case" would represent a shortfall of $823 million from the city's financial plan. That number was part of the $1.7 billion shortfall figure reported by media outlets across Hawaii. But the $823 million number is an apples-to-oranges comparison, because the city projected 15 years of revenue while the IMG report is projecting only the 13 fiscal years remaining before the surcharge sunsets at the end of 2022. The $324 million actually collected during Fiscal Years 2009 and 2010 was included in the Transit Fund balance by IMG. However, IMG also updated that fund balance to deduct nearly $100 million in expenditures made from that account in the past two years. Because it did not reduce the projected remaining construction cost of the project by the amount already expended, the projected shortfall in revenue is overstated by IMG by approximately $100 million.




10. For the "base case," the GET surcharge would have to be raised from 0.5 percent to 0.68 percent. Alternatively, the surcharge could remain flat but the sunset date could be extended from Dec. 31, 2022, to 2030. The table shown below, which appears on page 41 of the report, includes the potential impact of each of the three scenarios.