Honolulu Mayor Kirk Caldwell told state lawmakers Monday that he is proposing to raise fuel and weight taxes, and city parking fees, and might even ask for an array of other hikes to pay for construction, operation and maintenance of Oahu’s rail line.
The revenue-raising proposals were presented as the city’s “skin in the game” as Caldwell appeared at a joint hearing of the Senate Ways and Means and House Finance committees to ask for an extension of the half-percent Oahu general excise tax surcharge for the $10 billion rail project.
The tax currently brings in about $300 million annually but is due to sunset in 2027.
Caldwell wants the Legislature to extend it indefinitely to pay not only for the completion of the project, but operation and maintenance once it enters service near the end of 2025.
The latest estimates show that the combined cost of operations and maintenance of the rail and city bus programs would run roughly $400 million annually, the mayor said. TheBus operations today alone are subsidized at about 75 percent.
The $65 million in revenue-raising proposals, which were also outlined in documents submitted to the City Council on Friday, call for:
>> Increasing the motor vehicle weight tax rate by 1 cent per pound starting Jan. 1 and then an additional 1 cent per pound in 2019. The plan would have owners of passenger vehicles and trucks weighing 6,500 pounds or less pay 6 cents a pound in 2018 and 7 cents in 2019, and owners of trucks, commercial vehicles and other heavier vehicles pay 6.5 cents a pound in 2018, 7.5 cents in 2019. The penny hike on passenger vehicles would give city coffers an additional $25 million annually and $50 million annually for heavier vehicles, city officials said.
>> Raising the fuel tax rate for nonbiodiesel fuels by 3.5 cents per gallon of gasoline at the pump, to 20 cents per gallon. The hike would boost the city treasury by about $10.85 million, city officials said.
>> Doubling the cost of parking rates at the most popular parking areas in downtown Honolulu, the Honolulu civic center and Waikiki to $3 an hour, up from the current $1.50 an hour. “I’ve been told by our guys that that’s the lowest rate of any major city in the country,” Caldwell said. The proposal also calls for extending the period that motorists would need to pay for street parking in Waikiki to 6 a.m. to 10 p.m., from the current 7 a.m. to 6 p.m. daily. The plan is expected to net about $4 million to $5 million more annually.
“In addition, we will be looking at bills to raise the bus fare, which has not been raised in a long time,” the mayor said, noting that such a proposal needs to be weighed carefully since too large of a fare hike could mean fewer riders.
‘Too important’ to die
After Monday’s meeting, city Deputy Budget Director Gary Kurokawa confirmed that the administration is also looking at the possibility of garbage fees, and perhaps increases in the property tax rate but only for the so-called Residential A property classification.
“At the end of the day, it’s going to be a subsidized system, just like the bus system,” Caldwell told lawmakers. “It’s just like that in any major city anywhere in the world. If you’re talking about public mass transit, the community subsidizes it.”
Caldwell, for the second time in three years, also asked state lawmakers to extend Oahu’s general excise tax surcharge to build the cash-strapped rail project all the way to Ala Moana Center.
“I regret to have to come back here again and ask for a further extension,” he told the joint committee Monday. “I know it’s been extremely frustrating for you … and I’m equally frustrated … but this project is just too important to let it die, let it stop at Middle Street.”
He saw some support for an extension but also faced withering questions — mainly from Ways and Means Chairwoman Jill Tokuda, who blasted Caldwell, the city and rail officials for repeatedly underestimating rail costs.
Lawmakers still don’t have assurances that the city finally has a handle on those costs or a sound, reliable budget, Tokuda said. Rail leaders still have much work to do in less than three months if they’re to persuade state leaders to rescue the project again, she said.
“This committee has been here too many times before, and we don’t know where this ends,” said Tokuda (D, Kailua-Kaneohe).
Outside of the hearing, Caldwell’s revenue-raising proposals got mixed reactions from key Council leaders.
“Given the financial challenges currently facing the project, every option for creating new revenue streams should be on the table,” Council Chairman Ron Menor said in a statement. “That said, the mayor is proposing three significant tax and fee increases that must be thoroughly vetted. Because Oahu residents are coping with an exceptionally high cost of living, the city needs to approach the tax and fee increases cautiously. Public input must be taken into account every step of the way.”
Menor noted that Caldwell and the Council are considering the tax and fee hikes “because key legislators have insisted that the city needs to put more ‘skin in the game,’” adding, “Many of my colleagues on the Council continue to believe that the GET surcharge is the best way to pay for all rail costs including O and M (operation and maintenance) costs, because visitors pay a sizable portion of it, and Oahu residents are already paying it.”
Council Budget Chairman Joey Manahan said state lawmakers are leaving the city with few options. “Just to show them that we’re serious, we have to show revenue enhancement proposals,” he said. “I don’t think anybody’s crazy about revenue enhancements, but it’s something we need to consider at this point in time.”
All proposals, including a graduated schedule of rates for property owners in the Residential A tax category, need to be considered, he said. Asked about the possibility of increasing rates for other residential property owners, Manahan said, “That’s the last, last resort. I don’t think we even want to say that we’re considering that at this point.”
Councilwoman Kymberly Pine said she’s bothered by the proposals because they would likely affect those living in her West Oahu Council district more than others on the island. “It is sad that we are looking at these tax increases and fee hikes when the GET surcharge continues to be the most affordable way for the taxpayer to pay for the construction and the operations and maintenance of the rail system,” Pine said in a statement. “The constituents in my district would be disproportionately affected by these increases.”