Honolulu is taking a great gamble with the taxpayers monies to build an elevated rail system. Federal funding for this project hasn’t been allocated yet. Given the Federal Government’s debt problems, this project may end up being a huge waste of taxpayer’s monies.
The project is an elevated rail system that would run 20 miles from Kapolei in west O’ahu, to Ala Moana center in downtown Honolulu. It is composed of electric, steel-wheeled, trains that would carry about 300 passengers each.
The island of O’ahu has raised the General Excise Tax (GET) a half percent to help pay for the project. Anyone doing business in Hawai’i is required to obtain a GET license. Depending on the business you are in, the GET tax can range from 1/2 of 1% for Wholesaling and Manufacturing, to 4% on Retailing, Contracting, Rentals, Entertainment, and anything else. Add the 1/2 of 1% to any business done on O’ahu and your tax rate can be as high a 4.5%.
Hawaii does not have a sales tax; instead, we have the general excise tax, which is assessed on all business activities. The tax rate is .15% for Insurance Commission, .50% for Wholesaling, Manufacturing, Producing, Wholesale Services, and Use Tax on Imports For Resale, and 4% for all others.
To put all the eggs in the Rail Basket, the City of Honolulu is relying heavily on federal funding to build the rail system. The project is still ongoing despite the uncertainty of federal funding. The Federal Transit Authority (FTA) has even raised the question of the city’s funding abilities:
“Given that GET surcharge revenues are highly leveraged in the financial plan, any shortfall in revenue would have material consequences on the City’s ability to finance the local share of project cost, unless other sources of capital funds are identified.”
The FTA also warned that the financial stress test the agency uses to grade the viability of the city’s ability to meet its obligations would not meet the agency’s standards. Under the rail’s current plan, and the city’s projected financial weakness, the FTA would deny the request to advance the rail project. So where will the city make up for the revenue deficiencies?
In 1879, King Kalakaua inaugurated the first rail system in Hawai’i on the Island of Maui. Kahului Railroad Company was started to operate passenger service between Kahului and Wailuku. Ka’a Ahi Kau I Ka Lewa literally means Elevated Fire Wagon. The song, Ka’a Ahi Kahului speaks of this.
The first question is, does the city of Honolulu need an elevated train service? The second question is, can the city support and pay for the rails construction and upkeep. The environmental impact on the city is enormous. It will mean rerouting sewer line, electric, traffic and roads. There a host of unseen costs that hasn’t emerged from this project.
When the costs overruns begin to drown the city in debt, and when the project has gone too far to stop, I predict the state will step in and take control of the project. Eventually, this will burden the costs of the project statewide. It’s just a matter of time before that happens.
What’s For Dinner?