Grassroot Institute: Bond plan for rail a bad sign for taxpayers, would violate city ordinance

From Grassroot Institute, March 19, 2018

HONOLULU -- Honolulu Mayor Kirk Caldwell’s plan to use $44 million in bond debt is an ill-founded, potentially illegal attempt to payoff administrative costs related to the construction of the over-budget, behind-schedule Honolulu rail system, according to the Grassroot Institute of Hawaii.

Keli‘i Akina, Ph.D., president and CEO of the Grassroot Institute, said the plan is a sign of poor financial management, and, unless current law were changed, would be illegal.

“Caldwell’s proposal is not a good sign for the rail project or taxpayers. Bond financing of the rail to cover administrative costs is unwise because we’re already going into debt for the acquisition of the rail, and piling on more debt at this time might be risky,” Akina said.

“This move could set a dangerous precedent as a funding mechanism for budgets in future years,” Akina said.

“Not only that,” he added, “the mayor seems to be putting the cart before the horse, since city law doesn’t allow city funds to be used for the project.”

Ordinance 07-001 Section 3, says rail expenses “shall be paid entirely from general excise and use tax surcharge revenues, interest earned on the revenues, and any federal, state, or private revenues.”

The ordinance does not say “city” revenues can be used, which is why some members of the Council have been seeking for some time to change the law.

“Using debt to pay for administrative expenses is a poor financial management strategy that’s likely to sink us,” Akina said.

Caldwell’s bond proposal was part of his fiscal 2019 executive and capital programs budget that was submitted to the Honolulu County Council on March 2. The $44 million is being requested to help pay for $214 million in funding that the city assured the Federal Transit Administration it would pay.

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The Grassroot Institute of Hawaii is an independent, 501(c)(3) nonprofit research and educational institution devoted to promoting individual liberty, economic freedom and accountable government.