Honolulu county can't afford to borrow more for rail, Grassroot Institute says

News Release from Grassroot Institute, July 7, 2020

HONOLULU, July 7, 2020 >> The City and County of Honolulu is already on track to breach its debt-service limit by fiscal 2026, and borrowing up to $26 million more to help fund its over-budget and behind-schedule rail project would only make things worse, according to the Grassroot Institute of Hawaii.

The independent, nonpartisan institute submitted testimony today for the Council to consider at its 10 a.m. hearing tomorrow, July 8, on Resolution 20-144, which would authorize the additional borrowing. 

Joe Kent, institute executive vice president, said in the testimony that exceeding the county's debt limit, set at 20% of its operating budget, would threaten the county's credit rating and ultimately harm Honolulu taxpayers.

The proposal to sell bonds to raise money for the rail project comes at a time when county officials also are considering borrowing money from the federal government, to deal with an estimated $130 million in decreased tax revenues caused by the state and county coronavirus lockdown measures that have devastated Hawaii’s economy.

"Honolulu’s economy will take years to fully recover from its current weak condition, so it’s unclear where the additional revenues will come from to repay any of these proposed loans," Kent said.

Not only that, but the Honolulu Authority for Rapid Transportation is looking at easing its financing and speeding up its construction of the rail project by entering into a public-private partnership.

"In the end," he said, "that also might result in more debt, since taxpayers will be on the hook to pay back extra money to the private partner for any financing capital it provides."

Kent said the county is "clearly not in a strong position to carry more debt, yet it increased spending by 3% in its fiscal 2021 budget."

He recommended that rather than borrow more money, the Council should reassess the rail project and focus on reducing spending and paying off debt. 

"Doing so," he said, "would ease pressure on the county’s budget — and on Honolulu taxpayers who are struggling to balance their own budgets."

 # # #

The Grassroot Institute of Hawaii is an independent 501(c)(3) nonprofit research and educational institution that seeks, in the spirit of “E hana kakou!” (Let’s work together!), to educate people about the value of individual liberty, economic freedom and accountable government.

LINK: Read the Testimony