Honolulu Rail Construction Halted; What Will Happen to the 1/2 Percent GET County Surcharge?

Honolulu’s elevated rail project appears to be at serious risk.  Last week, the Hawaii Supreme Court ruled that the Honolulu rail project must complete an archeological survey of Native Hawaiian burial sites along the proposed rail’s path.  This ruling has essentially halted construction until such a survey is completed.  Another lawsuit pending in federal district court may also halt construction of the rail.

Honolulu Rail’s most formidable foe, former Hawaii Governor Ben Cayetano, is the favorite to win the upcoming general election for Honolulu Mayor.  While public opinion also appears against rail 57% want it stopped vs. 34% in favor, Hawaii’s most powerful political figure, Sen. Daniel Inouye, is one of the few remaining advocates (still firmly in power) of continuing the rail project.

In 2005, the Hawaii legislature and the Honolulu City Council imposed a 1/2 percent GET county surcharge to pay for the rail system.  For nearly 5 years, the people and businesses of Honolulu (including a lot of tourists!) have been paying this surcharge to fund the Honolulu rail project, bringing in revenue of more than $900 million.  The total cost of the project is expected to be $5.2 billion with the federal government paying $1.55 billion.  Soon to be ex-Mayor Peter Carlisle has reported that 50% of the rail contracts have already been entered into and about 25% of the GET revenue has already been collected.

So what happens to all this money if the Honolulu rail project is killed?   Act 247 (2005), which authorizes the county surcharge, requires that the revenues be used for a “mass transit project” and cannot be used to build or repaid roads or to support a public transportation system in place prior to July 12, 2005.  In place of rail, Cayetano has proposed a Bus Rapid Transit system which could possibly satisfy this requirement; however, it sounds similar to TheBus system that was in existence prior to July 12, 2005.  If an alternative “mass transit project” can’t be implemented, it appears likely that the legislature will need to amend Act 247 to allow for more uses of the county surcharge revenues which, by then, will exceed $1 billion.

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