Honolulu, Hawaii



RE:    S.B. No. 19

       S.D. 1




Honorable Donna Mercado Kim

President of the Senate

Twenty-Eighth State Legislature

Regular Session of 2015

State of Hawaii




     Your Committees on Transportation and Public Safety, Intergovernmental and Military Affairs, to which was referred S.B. No. 19 entitled:




beg leave to report as follows:


     The purpose and intent of this measure is to make permanent the county surcharge on state tax.


     Your Committees received testimony in support of this measure from the Office of the Mayor, City and County of Honolulu; Honolulu Authority for Rapid Transportation; International Brotherhood of Electrical Workers Local Union 1186; Hawaii State AFL-CIO; Hawaii Laborers-Employers Cooperation and Education Trust; Faith Action for Community Equity; Hawaii Construction Alliance; Castle & Cooke Hawaii; Pacific Resource Partnership; Hawaii Regional Council of Carpenters; Hawaii Masons' Union Local #1; Hawaii Operating Engineers Stabilization Fund; and two individuals.  Your Committees received testimony in opposition to this measure from twenty-four individuals.  Your Committees received comments on this measure from the Department of Taxation, Department of Budget and Finance, and Tax Foundation of Hawaii.


     Act 247, Session Laws of Hawaii 2005, enacted a county surcharge on state tax in the amount of one-half percent on excise taxes.  The surcharge is for operating or capital costs of a locally preferred alternative for a mass transit project in Honolulu and for public transportation in the other counties, as well as expenses in complying with the Americans with Disabilities Act.


     Your Committees find that the rail transit project of the Honolulu Authority for Rapid Transportation is in serious financial jeopardy which threatens the likelihood of completion of the project by 2022, when the surcharge is set to expire.  The financial difficulties are attributable to:


     (1)  Lawsuits that have caused planning and construction delays;


     (2)  Declining general excise tax revenues;


     (3)  Higher construction bids than were forecasted in the construction budget several years ago; and


     (4)  Escalating material and labor costs for construction in Hawaii.


     According to testimony of the Honolulu Authority for Rapid Transportation, the construction costs next year alone will be ten to fifteen percent over budget.  The Honolulu Authority for Rapid Transportation must prove to bidders that it has sufficient money to pay the selected contractors five to seven years from now, since major construction projects such as the rail project typically have long horizons.


     Your Committees further find that if the rail project is not completed, then the City will have to pay back federal grant monies of $1,550,000,000.  The federal Full Funding Grant Agreement provided the City with that amount in new starts funding.  The agreement states that the City has an obligation to complete this project under the time frame specified in the agreement, regardless of any financial challenges the City might encounter.  If the City defaults on this agreement, then the City will face even greater fiscal challenges, including repayment of these federal funds.


     Your Committees further find that traffic on Oahu is continually getting worse.  Each year, there are thousands of new vehicles on the road creating additional gridlock, increased frustration, and more time spent in a vehicle instead of at home with loved ones or engaging in other preferred activities.  Increasingly, commuters from West Oahu face the daunting reality that traveling to Honolulu and back to West Oahu can take upwards of three to four hours.


     Your Committees further find that rail transit construction, as well as eventual operation, provides jobs, efficient transportation, more quality time for families by avoiding traffic congestion while also saving families the costs of wear and tear on their vehicles, helps control urban sprawl, and enhances the creation of affordable housing through transit oriented development.


     Your Committees have amended this measure by:


     (1)  Adding a purpose section;


     (2)  Diverting half of the ten percent administrative fee collected by the State to transit oriented development projects;


     (3)  Extending the opportunity for other counties to adopt an ordinance to levy a county surcharge on state tax to an unspecified date;


     (4)  Extending the sunset date of the county surcharge on state tax to December 31, 2047;


     (5)  Requiring the Honolulu Authority for Rapid Transportation to complete the entire rail transit project by December 31, 2047, including extensions of the project to Ala Moana Center, the University of Hawaii at Manoa, and downtown Kapolei;


     (6)  Requiring that buildings comprising each rail transit station be integrated so that all buildings are physically connected, except at Honolulu International Airport and Pearl Harbor rail stations;


     (7)  Requiring the City and County of Honolulu to plan transient oriented development to accommodate the anticipated growth in population;


     (8)  Requiring the Auditor to conduct a financial and management audit of the Honolulu Authority for Rapid Transportation and its rail transit project;


     (9)  Inserting an effective date of July 1, 2050, to encourage further discussion; and


    (10)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.


     As affirmed by the records of votes of the members of your Committees on Transportation and Public Safety, Intergovernmental and Military Affairs that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 19, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 19, S.D. 1, and be referred to the Committee on Ways and Means.


Respectfully submitted on behalf of the members of the Committees on Transportation and Public Safety, Intergovernmental and Military Affairs,