State lawmakers are divided on how best to bail out Honolulu’s over-budget and underfunded commuter rail project that, when completed, will be the nation’s first fully driverless transit system.
On Tuesday, leading members of the House and Senate finance and transportation committees met for the first time to discuss how the two sides will come to terms on a bill to extend the general excise tax surcharge for rail.
Currently, the project relies on a 0.5 percent GET surcharge on Oahu to pay for the project. But city officials say that won’t provide enough money by the time the surcharge expires in 2022 to build the full 20-mile system from Kapolei to Ala Moana Center because revenues are coming up short and costs have increased more than expected.
House Finance Chairwoman Sylvia Luke offered a draft bill to cut the 0.5 percent surcharge to 0.25 percent and extend it 25 years past 2016. That’s a far cry from the latest version of House Bill 134 passed by the Senate, which would only extend the 0.5 percent surcharge for five years past 2022.
As Sen. Clarence Nishihara noted during the conference committee hearing, the Senate’s version “provides a full tank of gas rather than a half tank.”
Luke said the House wanted to limit the GET surcharge so that city officials take part in finding a solution to the project’s woes.
Most Honolulu voters don’t want lawmakers to extend Oahu’s 0.5 percent general excise tax surcharge to help pay for the city’s cash-strapped 20-mile commuter rail line planned from East Kapolei to Ala Moana Center, according to the latest Civil Beat poll results.
And half of those polled on Oahu still have negative feelings overall about the $6 billion project that’s struggling financially due to lower-than-expected tax collections, higher-than anticipated construction costs and legal expenses related to lawsuits.
The statewide picture is rosier for rail given strong neighbor island support and a general feeling that voters on Kauai, Maui and Big Island don’t mind as much that Honolulu residents might have to pay more taxes.
“In some ways it’s one of the oldest stories in the book,” said Matt Fitch, executive director of the Merriman River Group, the company that conducted Civil Beat’s poll. “In general, people are somewhat favorable of rail, but they don’t want to pay for it. More to the point, there’s more support on the neighbor islands than there is on Oahu.”
Civil Beat surveyed 780 registered voters April 7-9. The poll included landlines and cell phones, and has a margin of error of 3.5 percent. The margin of error for Oahu-only respondents is 4.2 percent.
Statewide, 48 percent of voters oppose extending the GET surcharge for rail beyond its 2022 sunset to help pay for an estimated $1 billion project shortfall. Only
Hundreds of contractors and consultants working on Honolulu’s $6 billion rail project are raking in tens of millions of dollars in taxpayer funds, yet there’s little accounting of what they’re actually doing for the money.
It’s a glaring oversight that state lawmakers and city council members are struggling to reconcile before approving an extension of a half-percent General Excise Tax surcharge that could last anywhere from five to 25 years depending on what shakes out at the Capitol.
But even with calls for more transparency, the Honolulu Authority for Rapid Transportation has been reluctant to release information about how much these companies, which have been hired as subcontractors, are being paid.
Subcontractors are companies or individuals who have separate contracts or other agreements with prime contractors to provide specific services or materials.
For example, Glad’s Landscaping of Honolulu has a subcontract to perform tree work for Kiewit Infrastructure West Co., the prime contractor building the West Oahu Farrington Highway guideway section, while Ramtek Fabrication of Kapolei has a materials agreement with Kiewit to supply precast concrete structures.
Dan Grabauskas, HART’s Executive Director and CEO says it’s not within his legal authority to know how much the project’s main – or prime — contractors are paying the subcontractors helping them complete work on the 20-mile rail line between East Kapolei and Ala Moana Center. Getting such information, he has said, would be based upon “voluntary” disclosure by
The Senate Ways and Means Committee on Tuesday voted to extend a 0.5 percent General Excise Tax surcharge for Honolulu’s rail project another five years beyond its Dec. 31, 2022, expiration.
The vote on House Bill 134 indicates that lawmakers are supportive of helping the city complete its $6 billion driverless commuter rail project despite cost overruns and questions of lax oversight.
But by limiting the extension to five years with additional caveats, the senators also showed that they don’t want to write a blank check to the city and the Honolulu Authority for Rapid Transportation without more assurances about how those taxpayer dollars are being spent.
“First and foremost, the Senate is very clear that it wants to make sure that the job that was started is completed,” said Sen. Jill Tokuda, who chairs the Ways and Means Committee. “In terms of the information that we’ve been provided we feel that this is giving HART and the city a great deal of opportunity.”
The bill will likely go to conference committee, where House and Senate members will hash out a final version. Legislation can dramatically change or even die during conference committee, which is conducted largely out of the public eye.
Another proposal related to the GET, Senate Bill 19, appears to have stalled out in the House Finance Committee as there has been no hearing scheduled for the measure, meaning HB134 is the likely
Hawaii Gov. David Ige isn’t saying whether he will approve or veto any extension of a General Excise Tax surcharge that is being earmarked for Honolulu’s $6 billion rail project.
But he does acknowledge that he’s worried an estimated $910 million shortfall in construction costs will continue to balloon. And he’s not sure taxpayers should be penalized for potential mismanagement.
At an editorial board meeting with Civil Beat editors and reporters last week, Ige noted that until very recently rail project officials had assured the public that the project was on time and within budget. But a few months ago, Honolulu Authority for Rapid Transportation officials said the project was coming up significantly short of money.
“There’s a big difference between on budget and on schedule and a $1 billion shortfall,” Ige said. “That’s a concern. An extension would essentially embrace the notion that if in fact the project was mismanaged from a financial perspective, that we are authorizing or condoning that activity.”
Although Ige supports rail, he’s skeptical about extending the 0.5 percent GET surcharge this legislative session. The Legislature is considering two proposals that would keep the tax going beyond its Dec. 31, 2022 sunset date to pay for the growing deficit.
Some lawmakers have expressed similar concerns over extending the GET surcharge and Sen. Jill Tokuda, who chairs the Senate Ways and Means Committee,
Officials are looking at a tag-team effort to audit Honolulu’s $6 billion rail project, which has come under intense scrutiny of late for being over budget and in desperate need of cash.
On Tuesday, Honolulu City Council Chairman Ernie Martin called for the probe in a resolution that piggybacks on a similar request for more oversight from the Legislature.
Martin’s resolution says that should both measures pass, the city and state auditors should “act synergistically to maximize resources, findings and recommendations.”
Resolution 15-90 instructs the auditors delve into the project and its finances at a level that has yet to been seen. This includes an investigation into contracts, spending, cost increases and when exactly the Honolulu Authority for Rapid Transportation learned of a pending shortfall.
The resolution notes city and state lawmakers’ “continuing frustration over the lack of detailed financial information, definitive construction costs, and solid financial plans.”
It also states that an audit could “provide accountability and public transparency, particularly at a time when public and government discussion, deliberation, and decision-making are focused on the soundness and continued viability of the project and its impact upon the residents of Honolulu.”
The Legislature is being pressured by the city and HART to pass an extension of a 0.5 percent General Excise Tax surcharge this session to help pay for rail.
You can read the full resolution here:
Resolution 15-90 from Civil Beat
Honolulu Mayor Kirk Caldwell and his top transit official took their licks from a decidedly anti-rail crowd during a boisterous town hall meeting at Washington Middle School on Wednesday.
While much of the frustration stemmed from the city’s desire to extend a half-percent surcharge on the General Excise Tax to pay for a nearly $1 billion project shortfall, many critics rehashed old concerns, including worry that rail is a financial boondoggle and won’t ease Honolulu’s worsening traffic congestion.
But there was also a very real sense of mistrust among attendees, with several challenging the assertions made by the mayor and Honolulu Authority for Rapid Transportation Executive Director and CEO Dan Grabauskas.
In fact, one man who was videotaping the event on a cell phone stood up after the first written question from the audience was read aloud to Caldwell and Grabauskas. He doubted its authenticity.
“This ain’t a town hall meeting,” H. Doug Matsuoka said to a crowd of more than 100 people. “This is a public relations event.”
Only one man spoke out in favor of the project during the two-hour meeting, saying he didn’t understand all the “bellyaching.” He also wanted to know if more money could be spent to speed up construction and open the rail line sooner.
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A community town hall meeting to discuss the rail project is scheduled for Monday, March 30, at 5:30 p.m. at Washington Middle School 1633 S King St.
Honolulu Mayor Kirk Caldwell and Honolulu Authority for RapidTransit (HART) officials are expected to be in attendance.
The meeting is being held by state Sens. Brickwood Galuteria and Les Ihara, state Reps. Scott Saiki, Della Au Belatti and Scott Nishimoto; and Honolulu Council member Ann Kobayashi.
Should be some fireworks generated at the meeting, no?
The rail project has been in the news a lot lately, especially regarding efforts to extend Oahu’s general excise tax to help pay for the $6 billion project.
I should clarify: $6 billion and growing.
Read Civil Beat’s related editorial, Honolulu Rail: Big Questions Demand a Legislative Special Session.
Ever been accosted by a pushy salesman demanding, “What would it take to get you into this car today?”
That image comes uncomfortably to mind too often these days in the dialogue concerning the troubled, $6 billion (and counting) Honolulu rail project.
In recent weeks and months, we’ve been treated to news of surprise cost overruns and revenue shortfalls totaling nearly $1 billion, troubling assertions by the agency managing the project that it’s not responsible for tracking costs of its hundreds of subcontractors and urgent calls from Honolulu Mayor Kirk Caldwell for the Legislature to pass an extension of the tax providing the lion’s share of project funding. Delaying the extension, we are warned, will only make things more expensive and moving ahead on the project more difficult.
Time is running out! Act now to lock in at today’s rates!
Requests from Caldwell and Honolulu Authority for Rapid Transportation Executive Director Dan Grabauskas to extend the General Excise Tax surcharge have earned widespread criticism from legislators and served as a catalyst for a recent flurry of proposed resolutions — to have the state audit the project, to seek cost-cutting measures, to look into the progress of the project’s completion and more.
Legislators have also publicly wondered why the Honolulu City Council has been relatively quiet in its support for the
Editor’s Note: Civil Beat has spent the past six months examining financial records relating to the Honolulu rail project. “Off Track” is an ongoing series that explores what’s happening to the taxpayer money that is going into the biggest public works project in Hawaii history. Continue the conversation in our Facebook Group, Honolulu Rail Talk, or through Twitter or Instagram using the hashtag #railtalk.
On May 25, 2013, Honolulu rail chief Dan Grabauskas boarded a plane for Europe to check in on the Italian train manufacturer that had signed a $1.4 billion contract with the city to design, build and operate the driverless system.
AnsaldoBreda and AnsaldoSTS, which together form Ansaldo Honolulu JV, were facing a deluge of bad press for shoddy construction and broken contractual promises from Buffalo, New York, to Gothenburg, Sweden.
Ansaldo’s parent company, Finmeccanica SpA, had problems of its own. The company was bleeding money, and its CEO had been accused of offering bribes for contracts. He has since been acquitted.
Grabauskas’ trip, which included stops in Denmark and Italy, cost taxpayers $7,041, according to city budget data obtained by Civil Beat through a public records request.
But Grabauskas, who heads the Honolulu Authority for Rapid Transportation that oversees construction of the city’s $6 billion rail project, is a frequent flier. His travel expenses since he was hired total almost $57,000.
RelatedMath Problem: Does Honolulu Rail GET Shortfall Really Add Up?Mar 04At Least $1.25B
Hawaii lamakers seem poised to bail out Honolulu’s over-budget elevated rail system, but they have yet to find the right tax formula.
On Thursday, a state Senate panel approved a convoluted House measure that could extend Oahu’s 0.5 percent general excise tax surcharge for an additional 25 years.
The tax surcharge is currently set to expire in 2022. City officials say that without an extension they can’t complete the project.
Under the latest proposal the surcharge would be extended to 2027, at which point the Legislature would have to vote to keep it alive for another 10 years. In 2037, lawmakers would again need to approve a 10-year extension.
Sen. Clarence Nishihara, who chairs the Transportation Committee that was part of Thursday’s joint hearing, said the purpose of the reauthorization requirements is to hold the city more accountable.
But he also made clear that the latest iteration of the tax hike will change as House and Senate lawmakers convene in conference committees.
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“We have not beat this horse to death,” Nishihara quipped during Thursday’s hearing. “We’ve certainly knocked him unconscious.”
“We have a job to do ourselves and I think we haven’t done it well enough,
If there was one message state lawmakers wanted to send Wednesday to Honolulu Mayor Kirk Caldwell and others trying to build the city’s $6 billion rail system, it was this: Show us some skin.
Committees in the House and Senate passed different measures that would severely limit how much tax revenue the city can collect for its beleaguered rail project, which is now facing a nearly $1 billion deficit.
Neither bill would provide what city officials hoped for, which was a long-term extension of the General Excise Tax surcharge that currently funds most of the project.
The Senate Ways and Means Committee scaled down a previous measure, which would have extended the GET for 25 years past its 2022 sunset date, to a five-year extension.
The House Finance Committee was much more punitive, passing a measure that would cut the city’s 0.5 percent surcharge on the GET to 0.25 percent starting in 2017.
On the bright side for Caldwell, GET bills did clear both committees, and ultimately a measure more to the city’s liking may emerge from the Legislature. But Wednesday’s votes demonstrated the level of discomfort lawmakers have with raising taxes to bail out the rail project.
RelatedMath Problem: Does Honolulu Rail GET Shortfall Really Add Up?Mar 04At Least $1.25B Has Been Spent on Rail So Far, But Where Has All the Money
Officials at the Honolulu Authority for Rapid Transportation had known for months the city’s rail project was headed for serious financial trouble but didn’t fully share that knowledge with the public until last December.
For at least two years HART’s directors received regular updates on the growing shortfall in General Excise Tax surcharge revenues. Two months ago, during an executive session, the board discussed how it planned to lobby state lawmakers to extend the tax past its scheduled expiration date in 2022.
With barely two miles of railroad guideway built, major construction contracts yet to be bid and potential cost overruns and shortfalls estimated as high as $910 million, HART says the current special tax surcharge won’t generate anywhere near enough money to pay for the city’s share of construction or the municipal subsidies needed to operate an integrated rail and bus system that have been estimated to be nearly $6 billion over the next 15 years.
Any extensions of the system, such as to the University of Hawaii at Manoa campus, will also need the higher taxes.
To underscore its argument, HART officials announced a week before Christmas that GET surcharge revenues were $41 million short of what they had expected to receive, and with additional costs blamed on lawsuits that delayed construction and missteps by the administration of former mayor Mufi Hannemann in jumping the gun on construction, those deficits could continue to increase.
Construction proposals to build three rail stations came in millions of dollars higher than expected, yet officials remain optimistic that plans to reduce costs are working.
On Tuesday, the Honolulu Authority for Rapid Transportation opened bids from five companies vying for a piece of the $6 billion railroad project. The lowest bid was $79 million from Hawaiian Dredging Construction Company, which was more than the $65 million to $75 million HART had hoped for in its own estimates.
Other proposals ranged from $85 million to $117 million. HART must now review the bids to make sure all specifications and requirements were met before officially awarding the contract to the lowest bidder. The stations are located at West Loch, Waipahu and Leeward Community College.
HART originally bid the three rail stations last year as part of a larger nine-station construction package, but stopped once the lowest-priced proposal came in about $110 million more — or about 60 percent higher — than expected.
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Much of the cost increase was blamed on the current construction boom taking place around Kakaako, where cranes have become part of the skyline. To reduce the price, HART split the nine-station package into smaller
Newly released records show top Honolulu rail officials were pumping state lawmakers for money before telling the public the project was over budget and facing a nearly $1 billion shortfall.
The documents describe what transpired during a Dec. 18 closed-door meeting between the Honolulu Authority for Rapid Transportation board of directors and city attorney Gary Takeuchi.
The discussion was part of an executive session held shortly after HART Executive Director and CEO Dan Grabauskas announced at the board meeting that rail was in financial trouble.
At the time, HART Board Member Don Horner said he wanted to “huddle up” and have a “pretty candid discussion” about the projections.
But Civil Beat obtained written minutes of the private meeting after challenging HART’s legal basis for secrecy to the Hawaii Office of Information Practices, which oversees the state’s Sunshine Law governing open meetings.
Horner never cited a Sunshine Law exemption when he asked for the executive session. The agenda noted it could be to talk with attorneys about legal matters related to the project.
But the minutes show that the board’s conversation focused almost entirely on the political maneuvering that would be necessary to extend the general excise tax surcharge for the $6 billion project beyond its 2022 sunset. There was little, if any, questioning of Takeuchi reflected in the minutes.
RelatedGot a $700M Shortfall? Set the Cycle to ‘Spin’Dec 30At Least $1.25B Has Been Spent on