Marking a major but not unexpected shift in city policy, Mayor Kirk Caldwell’s 2019 budget package proposes using city funds for the first time for construction of the financially strapped East Kapolei-to-Ala Moana rail project.

Up until now nearly all of the $9 billion rail project’s funding has come either through a $1.55 billion funding agreement with the federal government or through a 0.5 percent Oahu-only surcharge on the general excise tax. In order to spend money from city coffers for rail as Caldwell is proposing, the City Council will need to change a law.

The overall $875 million capital improvements projects (CIP) budget for fiscal 2019, which begins July 1, is actually smaller than the $1.07 billion package he presented for this fiscal year.

The proposed $2.61 billion city operating budget for fiscal 2019 is roughly 6.4 percent, or about $157 million, more than the current year’s budget. The mayor is required to submit an annual budget package to the Council on March 2 each year. The Council typically gives final approval to the budget in June.

It’s the CIP budget for fiscal 2019 that’s sure to raise eyebrows because it includes $44 million to help cover an apparent $214 million hole in the Honolulu Authority for Rapid Transportation’s recovery plan that was given to the Federal Transit Administration in September to assure federal officials that the city was committed to paying any additional funding that the city might need.

“We’re at a fork in the road,” Caldwell told the Honolulu Star-Advertiser. “The city is now committed as never before to help pay for rail.”

A 2007 ordinance approved by the City Council and signed by then-Mayor Mufi Hannemann Opens in a new tab bars the city from using general fund money to pay for the rail construction. Bill 42 (2017) Opens in a new tab, which was deferred by the Council at its meeting Wednesday, would allow for the use of city funds for rail and would need to pass before Caldwell’s commitment to the FTA can become reality.

Caldwell, in a budget preview given to the Star-Advertiser on Thursday, said the $44 million represents part of the city’s commitment to cover what’s now projected to be a $214 million hole that HART and city officials think would be left unfunded after the Legislature’s decision last fall to extend the excise tax surcharge by three years.

Caldwell said he pleaded with state lawmakers to provide an additional year of GET funding in order to avert the need to use city money but was rebuffed.

The city is expecting to spread out paying the $214 million over the next 13 years, and the $44 million represents the projected administrative cost for the current fiscal year and next year, the mayor said.

Caldwell detailed the allocation in a Feb. 23 letter to FTA Acting Administrator K. Jane Williams. Caldwell met with FTA officials in Washington, D.C., last month. “They wanted to see a commitment by the city that we actually will do it, and we’re making a commitment to doing it by putting it in the budget,” he said.

The letter, which is co-signed by Council Chairman Ron Menor and Budget Chairman Joey Manahan, states its purpose is “to reconfirm the city’s commitment to the project and to propose an even stronger demonstration of the city’s commitment to the project beyond your discussions with Mayor Caldwell at your meeting last month.”

The promise to fund the $214 million puts “Honolulu’s total local share” of the funding at 82 percent, the letter said.

The letter also assures FTA officials that $54 million described in the financial plan as coming from “unattributed additional funds” is actually coming out of city coffers. The $54 million amount is already built into the $214 million, Caldwell said.

The budget package being released today also:

>> Includes no plan to increase property tax rates, but again proposes a fee for residential refuse collection, this time at a rate of $5 a month. A previous proposal by Caldwell to charge residential customers $10 a month was shot down by the Council. Honolulu is the only one of the four counties to not charge for trash pickup. Maui and Kauai counties charge, while Hawaii County does not provide curbside refuse pickup.

>> Includes $64 million to begin work on an Ala Moana transit plaza to accommodate riders of rail and TheBus on Kona Street near the Kona Iki Street intersection. Caldwell said he envisions a public-private partnership for a plaza that would include affordable-housing units above the station. An additional $3 million is being tapped for the Pearl City transit plaza, for which the city already has purchased about 4 acres of land on the makai side of Kamehameha Highway between a HomeWorld and Best Buy.

>> Includes $401.5 million for sewer-related projects, nearly all tied to a federal consent decree requiring the city to move to secondary treatment.

>> Includes $27.4 million for park improvements, as well as funding for four new park ranger positions that will be based at Ala Moana Park but have a truck in order to enforce park rules at nearby facilities as well. There currently are five stationed at Ala Moana working until the park closes at 10 p.m. daily.

>> Includes $2 million to study the idea of a commercial ash processor at the HPOWER waste-to-energy facility in Kalaeloa.