Even as the Honolulu City Council approved a plan Wednesday to cover some $44 million in rail costs next year, it learned that it faces a new, unexpected wrinkle.

The proposal that council leaders unveiled last month involved putting this new city share of project costs in rail’s capital budget — but then not actually floating the bonds to pay out those millions of dollars. The Honolulu Authority for Rapid Transportation has said repeatedly that it currently doesn’t need the cash.

Council leaders, including its budget chairman, Trevor Ozawa, were optimistic that rail’s federal partners would accept the maneuver as a sufficient way to show the city is putting “skin in the game.” However, it was never clear whether the Federal Transit Administration would embrace such an idea.

About a week and a half ago, Ozawa said, HART delivered some sobering news: The FTA wants the city to issue those $44 million in bonds — not just include them as a placeholder in the budget.

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“That was news to us, recently, that they seem to intend for us to actually expend this money,” Ozawa said after Wednesday’s council meeting wrapped up. “This is a development that is disheartening.”

Moments before the council’s 8-1 vote Wednesday, Chairman Ernie Martin said, “Now they’ve raised the stakes.”

FTA officials based in Washington, D.C., weren’t available for comment Wednesday afternoon.

If the federal agency’s position holds true as described, the City Council will likely have to take another vote to at least temporarily lift its longstanding ban on using city tax revenues — including property tax dollars — to help fund rail construction.

That move would likely prove controversial.

“If the FTA says to do that, and we can’t get our congressional delegation to go ahead and change their mind, then we have to deal with that reality,” Ozawa said Wednesday. “We’ve explained to them that it makes no sense to float it when we don’t need it.”

At stake is the $744 million in rail’s remaining federal dollars that the FTA continues to withhold until it sees an acceptable project recovery plan from the city.

Ozawa said the council is still looking for more clarity directly from the FTA on what it wants.

“Are they certain we have to do this for the entire $44 million?” he said. That amount originally represented operating costs, but HART and the city recently drastically reduced what they consider operating costs, moving millions of dollars over to the capital budget.

If the FTA absolutely requires that all $44 million has to be bonded, then “I don’t see a way around” having to use property taxes to help fund rail construction, Ozawa said.

Cory Lum/Civil Beat

The council would probably do this by approving 2017’s Bill 42, which would lift the cap on city dollars. That measure still requires two more readings.

Martin had proposed instead a special proviso to the rail-spending bill passed Wednesday to temporarily lift the cap, but the city’s corporation counsel and other members of the council expressed concerns about that action.

During their discussion Wednesday, council members said they preferred to consider a limited version of Bill 42 in order to be more transparent.

HART leaders, meanwhile, hedged their comments carefully Wednesday on whether the FTA would actually require a $44 million bond float.

“I’m not sure they’ve been specific at all,” HART Executive Director Andrew Robbins told Civil Beat during a meeting break. “It’s been more about a city source of funds is what they’re looking for, to demonstrate a commitment from the city.”

“They don’t like to get involved in local decision-making,” Robbins added.

Ozawa said later that HART is being careful because it’s trying to schedule more talks with the FTA to see whether the bonds are absolutely necessary.

He added that he hopes Sen. Brian Schatz, who joined a meeting between city and FTA officials in Washington, D.C., in April, can help confirm whether “this is the only route forward.”

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