The machinations at Honolulu Hale to fund a potential $44 million shortfall for rail administration in 2019 portend an even bigger predicament rumbling down the track.
If the mayor and City Council can’t comfortably cover this relatively small deficit that supposedly exists only on paper, how will they pay three times as much every year for rail operations and maintenance once trains start running?
There’s been intense scrutiny of runaway rail construction costs closing in on $10 billion but little focus on the coming financial wallop from train operating costs. Estimates run as high as $140 million a year depending on ridership, and more than a decade into rail planning, city leaders have little idea of how they’ll pay for it.
Funding sources for operations weren’t part of the original rail plan and city leaders have skirted public discussion of options.
Mayor Kirk Caldwell once suggested the half-percent rail excise tax surcharge, intended to pay for construction and expire in 2022, be made permanent for rail operations.
But that was before he had to ask the Legislature for a second rail bailout last year, which resulted in the surcharge being extended until 2030 to cover massive construction overruns, along with a portion of the hotel tax.
State lawmakers earmarked these revenues for construction only and barred their use now or in the future for operations and administration. That left the city needing $44 million from its own funds in 2019 for rail agency administrative costs previously paid from the excise tax surcharge.
Caldwell claims this money isn’t really needed because of a rail agency surplus, but must be budgeted to meet federal demands, which he addressed by putting $44 million into the capital budget to be funded with bonds.
This has been rejected by Council leaders as bad fiscal practice, like a family taking a long-term loan to pay for this week’s groceries.
Caldwell resists Council suggestions to satisfy the feds by designating carryover operating funds to plug the paper deficit, saying this would cause unspecified “pain in many places.”
Such accounting flimflam won’t cut it for the very real rail operating expenses coming up, which need a reliable source of funding.
It certainly can’t be bonds. The excise tax surcharge is committed for construction at least to 2030, and there’s a high probability more construction overruns will stretch it further.
Possibly the only option for the city is property taxes, and even there the Legislature may limit local options by levying a state tax on investment properties to pay for education.
The city has avoided honest discussion of rail operating costs for far too long, and will soon have its back against the wall with the first trains between Kapolei and Aloha Stadium set to start running as early as 2020.
Reach David Shapiro at volcanicash@gmail.com.
