The State’s Financial Boondoggle

Rick Hamada
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Wednesday - August 11, 2005

The fat lady is backstage warming up her voice.

Ladies and gentlemen, I present to you, “The Largest Tax Increase Ever for the Train to Nowhere!”

The day is upon us where your elected officials are going to impose the greatest financial boondoggle in the history of the state. All this for a public works project which is more “The New Deal” than a good deal.

The Honolulu City Council is set to vote this Wednesday on Bill 40. This allows the city, via HB1309 (which has since become law), to raise the General Excise Tax from 4 percent to 4.5 percent. This is a 12.5 percent increase. The tax will collect between $140 million and $160 million per year from residents and tourists alike.

The GET is the most regressive tax since it has the greatest financial impact on those who can least afford to pay more.

This increase imposed by the Honolulu City Council and wholeheartedly supported by Mayor Mufi Hannemann is just one of a spate of tax and fee increases imposed by city government. The state has refused to grant any tax relief to residents, although we have record tax collections and surplusses. Despite the increase in revenue, the state still raised the conveyance tax and authorized the increase of the GET.

According to http://www.taxfoundation.org, Hawaii is the fourth most-taxed state (2002). The increases authorized this year are sure to catapult us to No. 1.


The Honolulu City Council is the last stop in this nonsensical tax-and-spend ride. The council’s voting record has consistently been 7-2 in favor of Bill 40. Will there be three levelheaded, thoughtful members who will change their vote this week? Doubtful. Why? Because the stakes are too high. Oh, not the stake in alleviating traffic congestion and bringing relief to thousands who commute via H- 1 every day. The financial stakes are too high because a chosen few stand to reap untold millions at the expense of taxpayers and, yes, drivers.

There is no verifiable plan for rail transit. In fact, there is no route, no financial breakdown, no estimates for maintenance and no projections for ridership. The real issue is passing the law to authorize the tax and collect the money as soon as possible. Imagine having $411,000 each and every day deposited in your checking account for doing absolutely nothing. That’s what the city is going to realize if this tax increase is approved.

How many times did we hear that if we did not authorize the tax, then Hawaii would be vilified in Washington, D.C., and we would never be eligible for federal assistance “in our lifetimes”? This was our last chance. We have such a bad reputation for changing our minds that the federal government would deny us assistance ever again. Do you know who in federal government would refuse to help the state of Hawaii if this increase did not pass right now? Your congressional delegation. The delegation which is fronted by Rep. Neil Abercrombie. Our own senators and representatives were telling us if we don’t play their way, then they won’t ever help you again.

Recently, the passage through Congress of the Transportation Re-Authorization Bill generated much excitement in pro-rail circles. Fanning these flames was The Honolulu Advertiser headline, “Oahu Transit Plans Get Federal Approval” (7/30/05). The story goes on to say, “Hawaii would get federal authorization for a long-debated Honolulu mass transit system …” The story was erroneous and a correction was issued in the online edition.

There is no approval for rail transit. We are at least five years away from even being considered by the federal government for rail funding. In order for us to be considered for actual funding, we must submit an Environmental Impact Statement and associated documentation. According to state Department of Transportation director, Rod Haraga, the average EIS takes an average of 63 months to complete.

The bottom line? We must have a “funding mechanism” in place so the Federal Transit Authority sees how we will pay for a transit system. One parallel reason for a required demonstration of local funding is the anticipated federal subsidy will be far below the touted $500 million figure. There are more than 100 other municipalities with transit proposals before the FTA and 30 projects are in line this year alone. Of these projects, New York has the highest amount of requested grant funding. That means the remainder of the requests will vie for a smaller piece of the financial pie. They are ready to go. We haven’t even reached the starting line. What you’re not being told is the Federal Transit Authority does not require a tax to be actually collected. The effective date of 1/1/07 for the collection of increased GET is not being driven by the federal government. It is the choice of your elected officials.

I want to see the vote on Bill 40 delayed until the language is changed. A provision allowing the collection of any tax money must be contingent upon the FTA approval of Honolulu’s complete transit presentation. This includes the submission and acceptance of a new Environmental Impact Statement. Upon approval, the city can then collect the tax. If there is no approval, the tax increase dies.

I predict that Hannemann will request the GET be increased by a full 1 percent, as he originally desired. Remember, it was the state Senate which reduced the figure to .5 percent. Why? Because the city could proceed with construction immediately without any federal funding. No federal funding means no federal requirements or oversight. Remember that $411,000 daily deposit into city coffers. How does $822,000 a day sound?

Uh-oh, I think I just heard a high “C” backstage.

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