So much of the discussion around financing Honolulu’s rail project has been centered on its construction, for obvious reasons: Those costs have been going up, causing a deep rift between those who want its completion as designed and those who want to pull the plug at some point along the 20-mile route.
That political clash likely has diminished, for now. The Honolulu Charter Commission voted Dec. 30 to reject proposed amendments that would have ended the $6.57 billion rail project or shortened the route.
And on Wednesday, the Honolulu City Council has rightly approved the extension of the general excise tax surcharge that has underwritten construction, easing concerns about construction financing.
But what does need to be addressed came up in the hours before the Council’s vote: funding the rail system’s operations and maintenance.
Many taxpayers undoubtedly blanched at the statements by city finance officials that, if conditions don’t change, annual rail operations and maintenance would require a 9 percent across-the-board increase in property taxes.
That projection is misleading because, of course, conditions will change: The transit-oriented development (TOD) anticipated around the 21 rail stops will yield a boost in property tax revenue from that growth alone.
In addition, said the city’s TOD Program Administrator Harrison Rue, the more-compact redevelopment along the route will improve efficiency in water, sewer and other city infrastructure expenses, so the economics will change beneath the project.
Still, it’s a good thing the conversation about rail operations and maintenance has begun — discussions that must ramp up in the coming months.
City Councilman Joey Manahan, who chairs the Transportation Committee, said he has always seen the 0.5 percent Oahu surcharge on the GET to be the most practical means of financing operations and maintenance of rail, rather than relying on property taxpayers alone.
In general, that makes sense: Tourists and other users of the rail system also would then be paying into its operation, as they should.
Fares are not going to be enough. The Honolulu Authority for Rail Transportation has estimated operations and maintenance costs at $120 million annually, with fare-box revenues covering 30 percent.
Manahan proposed returning to the state Legislature “when the time comes” to authorize extending the rail tax permanently for operations.
Perhaps. However, clearly the time hasn’t come for that. There are too many unknown variables to lock in a tax plan for operations.
For one, the Charter Commission also is considering an amendment to merge rail and bus operations under a single authority to achieve efficiencies, and that will take voter ratification.
Additionally, there are other options to study.
HART Chairman Don Horner said other sources of revenue could include station and train advertising, rental space for vending and ATM machines, or a fare differential for tourists.
He also cited cost-saving measures like the use of photovoltaic panels.
State lawmakers raised rail operations and maintenance as an issue last year, with the adoption of Senate Resolution 86. It urges the city and HART to develop a plan for raising operations and maintenance funds through TOD and other means.
The city is poised to act on the suggestion, too. Rue said that the city is, in fact, doing a study of using “value capture” as a revenue source.
Value capture is a give-back by developers and others who get higher density allowances or other benefits from building around a rail stop.
In most rail projects, though, that fee or payment takes the form of community benefits — for instance, extra improvements around the station, Rue said. That is the strategy proposed in the draft TOD bills now before the Council.
He also said a TOD value-capture scheme is best used to finance expansions of the rail system, tapping the anticipated increased tax revenues for operations instead.
Still, the Council should consider all options once the study is complete in a few months.
Jurisdictions in Florida and California have used impact fees for transit operations, and they should be given more consideration, a 2008 study for the Federal Transit Administration concluded.
Above all, the city administration and HART should host community meetings on the issue.
Residents need to be engaged in discussions about making Honolulu’s transit system operate more sustainably. They will be the ones bearing the brunt of the costs, if solutions aren’t found.
