Hawaii lawmakers plan to convene a special session in July or August to again try to reach a deal on how to fund the remainder of Honolulu’s 20-mile rail project, which is now billions of dollars over budget.

Senate President Ron Kouchi and House Speaker Scott Saiki have sent a joint letter to Federal Transit Administration Executive Director Matt Welbes in an effort to assure federal officials of the Legislature’s commitment to meet later this summer after ending in a stalemate in May.

“The purpose of this letter is to communicate the strength of our collective resolve to craft a legislative solution that will provide the City and County of Honolulu with a dedicated revenue stream,” Kouchi and Saiki wrote in the letter they emailed Friday to Welbes, who had not responded as of Monday.

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The FTA is kicking in $1.55 billion to the project. It could withhold some of those funds, particularly if the rail line has to stop short of its plan to go from Kapolei to Ala Moana Center. The project was expected to cost $5.2 billion just a few years ago but is now estimated to cost as much as $10 billion with financing.

Saiki told reporters at a press conference Monday that the city’s latest figures, provided two weeks ago, project a $1.384 billion shortfall from now to 2024. That’s up to $200 million more than what the city had provided during the regular session. Saiki said the figures are different due to changing assumptions, such as interest and discount rates.

Frustrated With The Mayor

State lawmakers have been frustrated by Honolulu Mayor Kirk Caldwell coming back to them for more money.

In 2015, Caldwell convinced the Legislature to pass a bill that, with City Council approval, extended the 0.5 percent general excise tax surcharge on Oahu for five years so it would expire Dec. 31, 2027. That was to shore up a nearly $1 billion deficit while avoiding raising property taxes, the city’s main revenue source.

Caldwell told lawmakers during the 2015 session that this would handle the project’s financial problems. After the Legislature approved the bill, he said, “I think with this extension we have sufficient money to complete the 20 miles with a pad in case we see increased costs.”

That obviously turned out not to be the case, which sent the mayor back to the Capitol in search of more funding.

But this time around the House and Senate were unable to agree before adjourning May 4, and they are still far apart on what to do.

The Senate ended with a bill to extend the GET surcharge for 10 years, until 2037, to help complete the rail project. That’s the option Caldwell and the tourism industry support.

The House pushed a bill that would have allowed the GET surcharge to be levied for just one additional year, to 2028, while increasing the state’s 9.25 percent transient accommodations tax for 10 years.

“The mayor needs to explain how a 10-year (GET) extension will address the shortfall that we will see between now and 2024,” Saiki said. “He has not done that yet.”

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Caldwell said in a statement Monday that the city and Honolulu Authority for Rapid Transportation “have provided lawmakers with the most current financial estimates about the project.”

The mayor said he was “pleased” with the announcement that a special session is planned.

Kouchi was unable to attend the press conference because he was on Kauai, Saiki said.

One thing that’s off the table, Saiki said, is extending the GET surcharge permanently. The starting point for negotiations will be the Senate and House positions as of the end of the legislative session.

Residents Prefer TAT Increase To GET Surcharge

At end of the session, the Senate replaced Jill Tokuda with Donovan Dela Cruz as chair of the Ways and Means Committee, making him the de facto lead negotiator. It remains to be seen how Dela Cruz will work with his counterpart in the House, Finance Chair Sylvia Luke.

Saiki said lawmakers will have had an opportunity to cool off since the regular session ended, noting that “the issue got pretty emotional.” He said he’s committed to working with Kouchi to find a compromise, and will be talking to the tourism industry before the special session convenes, since hotels would be affected by a TAT increase.

In a recent Civil Beat poll, 30 percent of Oahu respondents preferred increasing the TAT and getting the tourism industry to foot more of the bill, while 24 percent preferred a mix of tax increases and 23 percent supported extending the GET surcharge. Another 18 percent said they did not want any sort of tax increase, even if it meant that the project would not be finished.

Congresswoman Colleen Hanabusa, the former HART board chair, commended legislative leaders for announcing their intent to call a special session.

“I know Sylvia Luke, and others, worked very hard last session to craft such legislation and I am sure that Donovan Dela Cruz’s historical knowledge of the rail project from his days on the Honolulu City Council will be helpful during this special session,” she said in a statement Monday.

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Saiki said he and Kouchi’s letter to the FTA was done in an effort to help Hawaii’s congressional delegation assure the feds that the funding issues will be resolved and the project will be completed.

U.S. Sen. Brian Schatz called it “a highly encouraging sign.”

“It is important that state and local governments continue to work together to ensure funding obligations under the (federal) full funding agreement will be met so that work on rail will be completed as agreed,” Schatz said in a statement. “I will continue my efforts to ensure that FTA understands our commitment to this critical project.

Other Session Topics Possible

Saiki underscored that “rail is a city project.”

“It is not a state project,” he said. “It is the city’s responsibility to provide the financing to complete this project.”

City Council Chair Ron Menor said in a statement that the council was encouraged by the Legislature’s intent to hold a special session.

“The City Council recently approved up to $350 million in new bond financing for the project but we need more help,” he said. “Our members will continue to work with our colleagues across the street to come up with an agreement that is acceptable to a majority of the project’s stakeholders and the community.”

Saiki said the council’s vote on issuing bonds did not factor into the decision to announce the intent to call a special session. He noted the council would still need to vote again to issue any bonds, and that the bond amount actually totaled $207 million, not the $350 million that was reported.

The special session will last at least five days, the minimum needed procedurally for the House and Senate to consider a bill and vote to approve it, Saiki said.

The public will have an opportunity to testify on whatever measure is proposed, said House spokesperson Carolyn Tanaka.

It’s unknown if the Legislature will take up any other issues during the special session, such as appointments or potential veto overrides.

Gov. David Ige, whom Saiki said “quietly asked” legislative leaders to resolve the rail issue, has until Monday to announce the list of bills he intends to veto. He then has until July 11 to actually veto any of those bills — or let them become law.

Saiki said there are no “optimal dates” to hold the special session. He said that he and Kouchi are working with House and Senate members to see what dates might work best.

The special session will likely cost at least $10,000. Last year, the Legislature met for three days to override a veto and it cost $10,150. Each non-Oahu member who was counted as present during a floor session is paid $175 a day.

Read the letter from Kouchi and Saiki to the FTA chief below.