Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Transportation, Military Affairs, and Government Operations, to which was referred S.B. No. 2052 entitled:

begs leave to report as follows:

The purpose of this measure is to enact a mass transit excise tax and use tax to provide a dedicated source of funding for mass transit development in more populous counties.

Testimony in support of this measure was received from the City and County of Honolulu Department of Transportation Services, the Chamber of Commerce of Hawaii (supporting mass transit but taking no position on a tax increase), Land Use Research Foundation of Hawaii, SAH-Subcontractors Association of Hawaii, the Estate of James Campbell, Hawaii Building and Construction Trades Council AFL-CIO, Leeward Oahu Transportation Management Association, Waipahu Business Association, General Contractors Association of Hawaii, and one individual. Testimony in opposition was received from the Department of Transportation, Department of Taxation, National Federation of Independent Business-Hawaii, Hawaii Association of Realtors, and two individuals. Comments were received from Tax Foundation of Hawaii and Gaming Advocacy Partners LLC.

This measure establishes a mass transit special fund to hold the revenues generated from the increased taxes. Moneys in the fund may be expended solely on mass transit development.

Your Committee finds that the federal government is requiring the State to demonstrate a commitment to fund a mass transit system from state or local funds as a precondition to providing federal funding. U.S. Representative Earl Blumenauer (Oregon), a leading advocate of mass transit financing in Congress, on a January 7, 2004 visit told transportation and business leaders in Honolulu that the State needs to have its local fundraising plan in place before Congress acts on a new long-term transportation measure. Action on Capitol Hill could come as early as the end of February 2004. If Hawaii misses that deadline, it might have to wait as long as a decade for another chance at federal mass transit money. U.S. Representative Neil Abercrombie has urged the legislature to expedite a measure to provide a funding mechanism and for the Governor to sign it as soon as possible.

Your Committee further finds that mass transit is a critical element to the alleviation of traffic congestion and is necessary to the full development of West Oahu. Your Committee is cognizant of past failed attempts to fund a mass transit system, and believes that the impetus to get a mass transit system in place has never been stronger than it is right now. However, the opportunity to develop a mass transit system with federal funds is a fleeting opportunity.

Your Committee estimates that this measure would bring in $130 million a year. Within ten years, the tax would generate $1.3 billion, or half the cost of the rail system. This measure will demonstrate to Congress the seriousness of Hawaii's intentions regarding mass transit, and that Hawaii is willing to put in $1.3 billion. Federal officials have informed your Chair that Hawaii should not bother to ask for federal funds without a mechanism in place to fund the local government's portion.

This measure is targeted to a specific county having a large population. Therefore, the Neighbor Islands are not affected, which was the basis of their original opposition.

This measure will make a dream a reality. Your Committee believes that it would be foolhardy to proceed without federal funds when those funds are available.

As affirmed by the record of votes of the members of your Committee on Transportation, Military Affairs, and Government Operations that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2052 and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.