The Honolulu Authority for Rapid Transportation (HART) received $55.1 million in General Excise and Use Tax (GET) surcharge revenue for the third quarter of calendar year 2016. The quarterly installment of GET surcharge revenue covers the months of July, August and September, and is about $4 million dollars less than was estimated for the quarter based on the project’s current financial plan. HART is presently updating the financial plan and project budget
HART has now received a total of $1.8 billion in surcharge revenue for the rail project. Overall surcharge revenue is tracking about 1.47 percent below projections, which amounts to roughly $48.4 million less than projected. The half-percent GET surcharge for Oahu, which by law can only be used for the rail system, was first levied in January 2007. The surcharge revenue is expected to fund more than 70 percent of the project’s costs. The remaining balance is to be paid using federal funds.
Resolution 238, introduced by Council Member Brandon Elefante, expresses council support for rail and urges the state legislature to extend the GET to fund rail. According to the resolution, rail has experienced increased construction costs, but a number of other factors impact the future of the project including:
1) A GET revenue collection shortfall of $100 million as of July 2015, due to an uneven recovery from the recession of the late 2000’s and other economic uncertainties
2) The deletion of $210 million in federal 5307 funds in 2015 when the council determined that these funds would only be used for Honolulu’s bus and Handi Van system
3) Delays caused by lawsuits, including a Hawaii Supreme Court challenge that stopped the rail project for thirteen months while the city was required to perform additional and expedited archaeological survey work, a federal lawsuit challenging the project’s Environmental Impact Statement, which required the city to address three areas of concern to the U.S. District Court, and a succession of bid challenges by contractors unhappy with bid results
4) Unpredictable swings in the economy, as reflected in the fact that in 2009 and 2010, the recession resulted in an economic environment of negative inflation, where costs were actually going down. In 2011 and 2012, during an initial recovery period, construction inflation climbed between three and five percent per year, but by 2014, the annual rate of construction inflation had jumped to an unforeseeable and unprecedented fourteen percent on Qahu
5) One of the most expensive construction markets in the U.S. According to state economists, the construction industry currently leads Hawaii’s economy with the fastest growth rate of any industry, with a year-to-year employment increase forecast expected to top twelve percent by 2016-1 7, the third-fastest growing construction market in the U.S.
The resolution is slated for a hearing by the Budget Committee chaired by Council Member Ann Kobayashi.