by Andrew Walden

Would HART directors and Legislators compromise rail finances to win passage of a GE Tax hike? 

Minutes of a December 18, 2014 Executive Session of the Board of Directors of the Honolulu Authority for Rapid Transit seem to suggest they would.  The Executive Session was held the same day that HART CEO Daniel Grabauskas began peddling the story that HART is running a $500M-$700M deficit.  

The minutes show HART Directors talking tax hike in private--not to overcome 'deficits' but as a measure to extend Rail to UH Manoa.

The minutes, made public yesterday as part of a public records request from the Civil Beat Law Center, show that Executive Session, called under the guise of 'consulting with attorneys' was illegally used to plot political strategy for HART's GE Tax hike push. 

According to the minutes, HART Director Ivan Lui-Kwan admits some see the State's 10% override on the County GE Tax surcharge as "not an administrative fee, but revenue sharing."  The DoTax budget is now largely funded by the rail tax override. 

HART Chairman Don Horner suggests the State's surcharge will be raised to 25% even though such a move would "result in a deficit in anticipated GET revenues."

This was the only mention of a HART deficit in the entire minutes--and it would come only as a result of the tax hike HART is pushing on the basis of its loud public claims of a deficit.

Board member Carrie Okanaga discusses mitigating the deficit risk by tying the 25% spread to the funding of another rail kickback to the State: "the costs HDOT was recovering from HART for oversight of the rail project."  This would explain the talk of raiding $100M Federal highway funds.  The State DoT would be willing to consider giving up its own funds because HART is able to offer an increased GE Tax override as an alternative funding source for DoT. 

Here is the key paragraph from the minutes--broken up into six subject-matter components:

Mr. Horner emphasized that the City Council and Mayor were relying on HART, and that all members should get involved with the efforts at the legislature, emphasizing the importance of explaining to lawmakers that rail is an investment.

He said that the outcome of the GET measures would affect the Memorandum of Understanding with the City regarding debt financing.

He said that a suggestion that the 10 percent retained by the State of Hawaii be raised to 25 percent over time may find support with some Senate members, and he reminded members that the Senate had been supportive in the past, and had advocated for passage of the 0.5 percent GET surcharge for rail. This arrangement, however, will result in a deficit in anticipated GET revenues.

Board member Carrie Okinaga discussed with members about the delta between the 10 percent retained by the State and the proposed 25 percent, and whether that would cover the costs HDOT was recovering from HART for oversight of the rail project. 

Mr. Horner spoke about the effect of a potential change to the Transient Accommodations Tax on the City’s revenues.

Mr. Lui-Kwan discussed with members about the opinion of some legislators that the 10 percent is not an administrative fee, but revenue sharing, given that GET is the State’s single largest revenue source and that transportation is viewed as a county responsibility.

Board member Bobby Bunda next discusses planting tax hike proposals in speeches by various politicians.  George Atta suggests using a possible rail extension to Manoa as an argument in favor of the GE Tax hike:

Board member Robert “Bobby” Bunda opined that extension of the surcharge will be difficult, and that opening day speeches of the Speaker of the House and the Senate President would be important. The Governor’s state of the State address would be the following week, and he should be asked to include the GET in his address.

Mr. Atta suggested a statement about extending rail to Manoa.

Governor Ige did not directly call for a GE Tax hike in his State of the State address.  Instead he said:

This governor wants rail to succeed and I’m committed to it. Having said that, let’s also make sure we do things the right way for the right reasons, including cost containment, before we ask for more money.

Rather than selling the GE Tax hike as a means of financing the extension of rail to Manoa, HART has claimed to be suffering an acute financial shortfall.  But the truth slipped out after the Senate Transportation Committee February 12, 2015 approved the GE Tax hike extension bill SB19.  KITV reported: "Senate Transportation Committee voted 8-0 to extend the rail tax, but not permanently. They settled on a 25 year extension, which the transit authority believes will generate enough money to fund the current $910 million dollar shortfall as well as extensions to UH Manoa and Kapolei that will cost another $4 billion."

In spite of that slip, HART has primarily focused its tax hike strategy on efforts to amp up the illusion of massive debt.  Most recently, the Honolulu Council pretended to remove TheBus funds from Rail finances as a way to create the illusion that the deficit was $910M rather than the originally clained $500M - $700M.  The Council does not have the authority to "remove" anything from the HART financial plan.

Read the entire document >>> HERE.

SB616 (Text, Status) -- 25% GE Tax Override

SB19: (Text, Status)

December 31, 2014: Mufi: HART Crying Wolf When there is no Crisis

January, 2015: Okino, Djou: End the State Skim on Rail Funds

Feb 13, 2015: Senate Transport Committee Votes for Rail Tax Extension, Admits it's to Build More Rail into Kapolei, Manoa

Feb 19, 2015: Creating Fake Crisis to Push Tax Hike, Council pretends to remove bus funds from rail money plan