Following a third and final reading, House lawmakers approved Friday a bill to bail out Honolulu’s rail project.

It took more than four hours for lawmakers to reach a decision over what many repeated as a very, very divisive bill.

Despite forceful pleas from the opposition to reconsider, the majority of representatives ultimately voted in its favor.

Rep. Sylvia Luke (Pauoa, Punchbowl, Nuuanu), chair of the House Finance Committee, said careful thought and consideration went into this bill.

“After hearing testimony from city officials, neighbor island residents and the public, we looked in detail at how to fund rail while creating the least amount of increase on our taxpayers,” she said.

Rep. Henry Aquino (Waipahu) said it is important to support the rail project to relieve traffic congestion for West Oahu residents.

“This bill is a compromise that provides the funds to get rail built. When completed, rail will be a great relief for the thousands of people stuck in traffic every day,” Aquino said. “This bill not only provides much needed oversight on spending by the State Comptroller, it also mandates accountability though audits and financial reviews.”

The following representatives voted yes with reservations: Bertrand Kobayashi, Richard Onishi, Marcus Oshiro, Joy San Buenaventura, and Justin Woodson.

The following representatives voted no: Tom Brower, Romy Cachola, Richard Creagan, Lynn DeCoite, Cindy Evans, Sam Kong, Nicole Lowen, Angus McKelvey, Sean Quinlan, Calvin Say, Cynthia Thielan, Chris Todd, James Tokioka, Andria Tupola, and Gene Ward.

Representatives Isaac Choy, Sharon Har, Mark Hashem, Lauren Matsumoto, and Scott Nishimoto were excused.

Senate Bill 4 now heads to the governor for his signature. Gov. David Ige released the following statement:

“I thank everyone who took the time to testify this week, including the leaders from the counties. The special session has not been easy, but the Legislature did not give up. I especially thank the Legislature for passing this compromise measure, which allows us to complete the rail line to Ala Moana. The entire state will benefit from this strategic investment. My cabinet members and I will be doing a final review as we do for all legislation, but I fully anticipate signing the bill before the Honolulu City Council meets on Tuesday.”

The special session began Monday in the Senate, which approved the bill in three readings. After public testimony Wednesday afternoon, the House Finance and Transportation committees voted in favor of the measure, which then passed a procedural floor vote Thursday.

SB4 addresses the City and County of Honolulu’s rail construction shortfall of $2.378 billion, currently the state’s largest public-works project, by proposing the following:

  • Extend the General Excise Tax on Oahu for three additional years through December 31, 2030 which will provide $1.046 billion.
  • Raise the Transient Accommodation Tax (TAT) by one percent to 10.25 percent for 13 years, to December 31, 2030, which will provide $1.326 billion.
  • Permanently increase the counties’ share of the TAT from $93 million to $103 million.
  • Reduce the state Department of Taxation’s administrative fee on the GET surcharge from 10 percent to one percent.
  • Create a Mass Transit Special Fund to review and disburse funds to the city for its costs on the rail project.
  • Require a state run audit of the rail project and annual financial reviews.

Honolulu Mayor Kirk Caldwell says he has already started arranging plans on the city’s end once the bill becomes law, and met with the governor to work out how the state will give money to the city in a timely manner.

“By making sure that coordinating with the state, they will be timely in how they transfer the funds over here. Part of that depends on the state’s ability to prepare to review invoices,” Caldwell said. “They’ll be getting invoices that have a lot of detail and they’re going to have to check them out.”

If the city doesn’t get the money on time, Caldwell says his administration will look into where it can cut money from the city budget to pay for rail.

Lawmakers consistently expressed disappointment over how the rail project has been handled.

“This issue has divided many of us, and I agree it has become a poorly run project,” said Rep. Dee Morikawa. “So now we can make sure that this project is audited and safeguards are in place to assure accountability.”

As a way to ensure mismanagement doesn’t happen again, a mandatory state-run audit into HART’s finances, management, and operations is set to begin immediately once the governor signs the bill into law.

More hurdles ahead

With the bailout settled, some major hurdles are still ahead.

The Federal Transit Administration still has to review and approve a recovery plan due Sept. 15, and will hold onto the last half of its $1.5 billion grant until it’s satisfied.

Federal officials want to see where the money is coming from to cover an $8.165 billion project cost, with no stress test or extra pad required up front in the plan, which the FTA confirmed to Always Investigating Monday and reiterated to U.S. Rep. Colleen Hanabusa Wednesday.

The special session money covers the couple billion dollars rail was short on cost, plus some interest.

If officials foresee no major shocks to the hotel tax or general excise tax intake, a green light from the FTA is likely.

Once it’s built, it has to be operated. The cost of operating rail and bus is estimated to be as much as $542 million a year within a decade. TheBus is actually the lion’s share, with rail at least $125 million of that.

Officials plan on fares bringing in about a quarter of the cost to operate both, but haven’t yet said what a ride will cost.

As we uncovered in a recent Always Investigating report, there’s been a big drop in public transportation ridership around the nation and in Honolulu. Honolulu bus rides are down as much as a million a month over the past couple years, partly because of an Uber-effect.

If fares cover only a quarter of the operations and maintenance costs, the rest must be covered by taxpayers. City taxes already subsidize TheBus.

The question is where exactly will the added rail subsidy come from. Caldwell said Wednesday about earmarking some property taxes: “We are considering different ways because rail has enhanced the value of real estate around stations to use some of that to operate and maintain the rail system.”