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The Honolulu Advertiser
Posted on: Wednesday, May 19, 2010

Honolulu rail tax revenue falling short of predicted growth

 •  EIS, cost concerns could derail construction plans

By Sean Hao
Advertiser Staff Writer


No growth in rail tax collections:

2008* $161 million

2009 $164 million

2010** $157 million

*all years are city fiscal years

**projected collections

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Tax collections needed to pay the city's share of a planned elevated commuter rail line are running flat year-over-year with two months to go in fiscal 2010. If they continue at their current pace, transit tax collections are headed for a third straight year of little to no growth.

The city had originally counted on tax collections climbing every year for 16 years.

However, the current flat trajectory of transit tax collections reflects a slowing state economy that continues to grapple with reduced construction and visitor arrival activity. That reduced economic activity has cut into tax collections needed to build the $5.5 billion project and forced the city to adopt several coping strategies. These include:

• Diverting $300 million in federal funds for TheBus to build rail.

• Relying on increased federal contributions, which now are projected at an inflation-adjusted $1.6 billion.

• Possibly absorbing reduced tax revenues within a $1 billion buffer set aside to handle contingencies.

Through April the half-percentage-point rail surcharge on the general excise tax raised $130.7 million, versus $131.8 million raised during the same months a year earlier, based on figures provided by the state Department of Taxation. That's down from the $138.8 million raised during the first 10 months of fiscal 2008, which ended June 30, 2008.

If collections continue at the current monthly average of $13.1 million for the remaining two months of fiscal 2010, collections could reach about $157 million by June 30. That's down slightly from the $164 million the city expected to collect, according to the city's August financial plan for the rail project.

Total transit tax surcharge revenues were $161 million in fiscal 2008 and $164 million in fiscal 2009. So far the tax has raised about $515 million. Those figures exclude a 10 percent administrative fee retained by the state, which collects the tax surcharge for the city.

Overall the city needs to collect an inflation-adjusted $3.9 billion from 2007 through 2022 to pay its share of the train's costs under current revenue and cost projections.

The city's current revenue projections anticipate transit tax collections will rebound strongly next fiscal year and continue to climb through 2015, with growth then moderating until the tax sunsets on Dec. 31, 2022.

City Transportation Department Director Wayne Yoshioka did not return two phone messages left with his assistant yesterday, seeking his comment on the tax collection situation.