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Up to 50% of a new hotel tax fund could go to the Honolulu rail — which has an estimated cost of $11.4B

Kualaka`i Station’s center platform construction. honolulu rail
Andy Stenz/Honolulu Authority for Rapid Transportation
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Honolulu Authority for Rapid Transportation
Kualakaʻi Station’s center platform construction on May 3, 2018.

A Honolulu City Council committee Wednesday agreed to allocate between one-third to one-half of revenues from a proposed visitor bed tax to the city’s rail transit project. The council action came as city officials said rail’s potential budget shortfall is not as bad as previous projections.

Earlier this year the Hawaiʻi State Legislature voted to strip the counties of revenues from the state’s transient accommodations tax, or TAT. The move blew a $45 million hole in the city’s annual budget.

The legislature did, however, allow the counties to levy their own TAT of up to 3%.

While Maui and Kauaʻi quickly approved bills to establish the tax, Honolulu’s efforts were bogged down by discussions over whether some of the money should be directed towards the beleaguered rail project.

The Blangiardi Administration asked the council to earmark 1% of the TAT to the Honolulu rail for two years, then increase that to 1.5% thereafter — that's 50% of the TAT funds.

The rest would go into the city’s general fund, with a portion to be used "to mitigate the impacts of visitors on public facilities and natural resources, including the restoration, operations, and maintenance of beaches and parks."

City Managing Director Michael Formby told committee members the TAT revenues were critical to completing a functioning rail system.

"It’s really about our communities, our neighbors, our fellow residents, especially our transit-dependent rural communities — those outside urban Honolulu where housing is more affordable and abundant, but often distant and separated from jobs," Formby said. 

"The city long ago made a commitment through its public transportation system to subsidize the cost of connecting these communities, these fellow residents, with their jobs, with relatives, with resources, with service providers, with hospitals, with government, with churches, temples — we made that commitment.  And this is about honoring that commitment," he said.

Officials with the Honolulu Authority for Rapid Transportation say after a preliminary independent audit, the fiscal shortfall for rail is now estimated at just under $2 billion. That’s down from an estimate of $3.5 billion announced in March.

HART Interim Executive Director and CEO Lori Kahikina says the revised figure reflects the conservative nature of the earlier estimate, as well as reductions in staff and consultants, and savings from the so-called Mauka shift, which would move the rail track to the opposite side of Dillingham Boulevard as compared to original plans.

Kahikina says they currently have enough money to run the rail line just past Chinatown, but HART is not wavering in its determination to complete the full line to Ala Moana.

The new estimated cost to reach Ala Moana is $11.4 billion including financing costs, she said. The previous estimate was $12.4 billion.

The 4 miles from Middle Street to Ala Moana is the most complicated part of the project, mainly due to the necessity of moving utilities and securing rights of way.

The Budget Committee voted 5-to-1 to move the hotel bed tax measure to the full council for final approval in December. Councilmember Heidi Tsuneyoshi, who has criticized the use of TAT revenues for rail, was the lone no vote.

Honolulu rail transit map stations
Honolulu Authority for Rapid Transportation
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Click here to read the Nov. 17 committee version of Bill 40.

Scott Kim is a news editor at Hawaiʻi Public Radio. Contact him at skim@hawaiipublicradio.org.
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