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Tuesday, July 25, 2017
$1.6B Available to Pay for Rail -- Without Raising Taxes
By Andrew Walden @ 4:54 AM :: 8756 Views :: Rail, Taxes

by Andrew Walden

According to the powers that be, Honolulu rail is suffering a $2B shortfall and in its upcoming Special Session, the Legislature must choose between a Transient Accommodations Tax hike or a General Excise Tax hike. 


Rail can be completed to Ala Moana without raising taxes and without changing the technology.  The money is right here in Hawaii.  Instead of raising taxes or shortening rail, the money must be taken back from the people who have taken it from HART.

Where is the money?

HECO, HIDoT, DoTax, the Caldwell Administration, and politically-connected TOD developers. 

Do the math: 

$540M – HiDoT

Much has been made of the $750M in federal funds which have not been disbursed to HART because the Caldwell Administration has failed to submit a financial recovery plan for rail since 2014.  What nobody is talking about is $540M in federal funds which the Hawaii Department of Transportation is sitting on. According to the Feds, this $540M in Highway Funds can be spent on Rail if HiDoT so chooses.  Instead HiDoT scoops up a free redesign and reconstruction of the sections of Farrington Highway and Kamehameha Highway which run under the rail line from Fort Weaver Rd to the Airport.  HiDoT was even threatened with loss of future federal funding because of their inability to spend the money the Feds had already given them—this in spite of (or because of) HiDoT leading the nation in administrative cost per mile of highway.

$500M – City Borrowing

While Rail Hangs in Balance, Caldwell Plans to Splurge $500M on Blaisdell.  The Administration has plenty of money to borrow to spend on unwarranted and overpriced rework of the Blasidell Center War Memorial, but Caldwell claims the State Legislature must again soak taxpayers or gut the tourism industry to solve his self-created rail funding problem for him.

$400M – DoTax

According to the Tax Foundation of Hawaii, the DOTAX 10% Skim totaled $177M as of Feb 2017.  In a case now before the State Supreme Court, the Tax Foundation is suing to put an end to the practice.  The Tax Foundation estimates DoTax skim at $25M per year.   Over the 20 years from 2007 to 2027, that adds up to $400M.

$120M plus unknown Millions per year forever for HECO

In 2016, HECO soaked HART for $120M worth of capital improvements for substations and ‘undergrounding’ of powerlines—an investment HECO knew it would have to be making anyway with or without rail.

But that’s just the beginning.  HECO still hasn’t formed an agreement on the electric rates which HART will be paying.  HNN June 5, 2016 reports, ‘Rail annual operating costs pegged at $100M” and “electrical costs represent the biggest chunk of those costs.” queried HECO about the rates for Rail and HECO responded with a statement: “The rate for HART, like any other new commercial customer, will depend on the project’s kW requirements. We don’t have any proposals for a HART transportation rate.”

In other words, the one thing HECO is sure of is that they will NOT be offering a discounted ‘Transportation Rate’ to HART.  According to the US Department of Energy, utilities in 28 states are required by their PUCs to offer a discounted ‘transportation rate’ which averages 9.44 cents per kwh -- 26% lower than the the US residential average of 12.7 cents per kwh and 58% lower than the 23.31 cents per kwh average rate for Hawaii industrial users.

Meanwhile the State’s latest green energy plan allows another 44% in rate hikes and mandates the closure of the State’s cheapest electricity producer, AES at Kahe Point Oahu.

And HART’s electric-utility point-man Brennon Morioka just scored a cush job with HECO.

$35M plus Unknown Billions from Lost TOD Opportunities

The Ulupono Initiative sponsored a March 20, 2017 report on Rail’s lost Public-Private Partnership opportunities.  The report explains that Rail planners limited their use of eminent domain to take property around the sites of future rail stations.  This decision maximizes the profits of banks and property developers.  In exchange the “Reduced footprint limits commercialization and monetization opportunities” for Rail.  In other words, Rail could have been funded in whole or in part by use of New London-style eminent domain seizures which could then be resold to TOD developers to fund rail.

The report authors point out: “When originally conceived in the early 2000s, a conscious decision was made to minimize the system’s footprint to reduce impacts on property owners and diminish the need for land acquisition. This condensed footprint significantly limits monetization and commercialization opportunities, such as joint development, advertising, retail, etc., which might otherwise potentially generate revenues to offset some of the capital and operating costs of a similar system. That said, even where commercialization and monetization opportunities may exist within the existing footprint, revenues are dependent on rail operations, thus making them ill-timed for bridging the capital funding gap. Instead, these revenues will be crucial for funding ongoing operation and maintenance of the system (particularly in light of limited farebox revenue).”

One case we already know about: First Hawaiian Bank is keeping ownership of a large parcel across the street from Middle Street station.  At an additional cost of $35M, HART will pay for a station to be built above the Kalihi River. 

Of course none of this has anything to do with former First Hawaiian Chairman Don Horner’s former position as Chair of the HART Board of Directors.

Do The Math

$540M + $500M + $400M + $120M + $35M = $1.595B plus unknown millions and billions



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