Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Transportation and Government Operations and Intergovernmental Affairs, to which was referred S.B. No. 1731 entitled:

beg leave to report as follows:

The purpose of this measure is to allow the counties to establish a county surcharge on the state excise and use taxes to fund public transportation in the counties.

Your Committees received testimony in support of this measure from United States Congressman Neil Abercrombie, Honolulu Mayor, two Honolulu City Council members, Leeward Oahu Transportation Management Association, Committee for Balanced Transportation, WESLIN Consulting Services, and four individuals. The Department of Transportation submitted testimony in favor of granting counties taxing authority and against mandating counties to spend those funds on public transit improvements. Testimony in opposition was received from the Department of Taxation, Hawaii Association of Realtors, National Federation of Independent Business-Hawaii, and Retail Merchants of Hawaii. Comments were submitted by the Tax Foundation of Hawaii.

The Honorable Neil Abercrombie, United States Representative for urban Honolulu, urged your Committees to pass a "local funding initiative" to have a "funding mechanism in place" to demonstrate to the Federal Transit Administration that Hawaii is serious about constructing a rail mass transit system. Hawaii is competing with the other states to secure federal monies to subsidize the costs of construction of a mass transit system. There are currently 226 projects nationwide seeking to have their projects accepted for funding. Hawaii may be able to obtain half of the cost of the system paid with federal monies. However, there is a deadline of March 3, 2005, in the U.S. House of Representatives to pass out of the House Transportation and Infrastructure Committee a federal mass transit appropriations bill covering a six-year period, and a deadline of June 1, 2005 for a conference committee to act on the measure. Mr. Abercrombie is confident the Federal Transit Authority stands ready to include Hawaii in its list of favored mass transit projects if this measure is passed. The Honorable Congressman told your Committees, "You're doing something that will shape the future of urban Honolulu for the next 100 years."

The capital costs for a fixed rail system with an initial trunk line extending from Kapolei in West Oahu to Iwilei in the central business district was estimated in 2004 to be in excess of $2 billion by the Department of Transportation. A portion of the costs is anticipated to be paid with federal funds. Your Committees find that a fixed rail mass transit system is not possible without additional dedicated funding from a county mass transit surcharge.

Your Committees further find that the apparent haphazard development of mass transit development and financing plans over the years is due to the fact that a solution to transportation problems on all islands has eluded the State for many years. Every attempt has fallen short, despite the best efforts of many informed and knowledgeable people, including a multitude of experts. Bigger highways, more buses, and ferries are inadequate over the long term to serve transportation needs, and are unsuitable for many areas of the largest county. In contrast, a fixed light rail system has possibilities but the costs are prohibitive without a heavy investment of revenues. Nevertheless, light rail is not suitable for every county.

Your Committees are reluctant to, in effect, provide for a raise in taxes. However, your Committees believe that there is no alternative if mass transit is to become a reality. The costs are simply prohibitive. The time is now, following fifteen years in the making, to decide to implement light rail or not. Your Committees find that the past unsuccessful attempts by the counties to levy an excise tax surcharge were due not to the lack of adequate planning, but rather to ambivalent attitudes of policymakers at that time. Testimony by the Mayor of the City and County of Honolulu and two Honolulu City Council members indicates that the time is now ripe for the city to pass such a measure.

Your Committees urge the counties to contemplate carefully if an excise tax ordinance is justified for their respective county. This entails adequate planning of a mass transit system suitable for the particular county. Your Committees urge the Department of Transportation to provide advice, insight, and expertise to assist the counties in making the right decisions in planning for mass transit. For example, Hawaii County could probably best be served by an efficient, timely, and integrated bus system within and between towns.

The intent of your Committees is to provide the counties with assistance in mass transit design and planning, and with construction financing ability. The Department of Transportation as well as the Honolulu Department of Transportation Services have assured you Committees that in fact they are working collaboratively to that end.

Your Committees have amended this measure by:

As affirmed by the records of votes of the members of your Committees on Transportation and Government Operations and Intergovernmental Affairs that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1731, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 1731, S.D. 1, and be referred to the Committee on Ways and Means.