Another year, another rail bailout.
Despite fuzzy financial information on how rail plans to cover its $2 billion construction shortfall, the City Council this week approved a new 3% Oahu transient accommodations tax (TAT), with a sizable chunk of the annual take going to the embattled $11.4 billion transit project. Based on July estimates, the new TAT would fetch an annual $86 million — with 33% of those revenues going to rail for the first two years (about $28 million annually), then a full 50% each year thereafter ($43 million). The city’s general fund would get 58% of the TAT in each of the first two years, then 42% in subsequent years; about 8% annually would go into a special fund for “natural resources,” including parks and beaches. Annual take will fluctuate, of course, based on tourists’ lodging needs; Oahu’s new 3% TAT will be on top of the state’s 10.25% hotel room tax.
Mayor Rick Blangiardi is poised to approve the new TAT — but it is frustrating that the current rush to devote more millions for rail comes before the public has gotten details on the Honolulu Authority for Rapid Transportation’s plan to cover the construction shortfall. In order to not lose pledged federal funds, HART wants to show federal transit officials that it has money commitments from the city.
We continue to see value in the 20-mile rail project to improve traffic, incentivize well-planned growth and needed housing. But at this point, giving over so much of Oahu’s TAT without better fiscal information to the public is akin to throwing good money after bad.
That’s particularly true given immediate, tangible funding needs for other core city operations, such as police and fire operations — and, of course, more vigorous homelessness and affordable housing action.
One notable case in point: Ambulance services, for which city government will now be responsible to fund, after the state Legislature transferred that cost burden amid severe budget shortfall caused by the pandemic. While the transfer does give the city’s Emergency Services Department more autonomy and less bureaucracy, it does also mean a $9 million budget hole for the city starting in July, the new fiscal year. That could cause the city to charge for more services and to potentially raise fees — not good prospects for ambulance users.
Further, within that department is the Ocean Safety Division, which hasn’t been able to have lifeguards on duty at beaches from sunrise to sunset, per recent law, due to lack of funds.
Amid all this, HART will soon be receiving tens of millions more dollars from the Oahu TAT, on top of its normal funding mechanisms via an Oahu general excise tax surcharge and a cut of the statewide TAT. That new revenue will be coming at the expense of other crucial city operations, many with better track records of using funds more wisely.
