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Resolve differences
on rail transit tax

THE ISSUE Gov. Linda Lingle has said she might veto an increase in the general excise tax to pay for a rail transit system on Oahu.

REPUBLICAN Gov. Linda Lingle and the Democratic controlled Legislature are at the crossroads on the issue of raising the state's general excise tax to fund rail transit on Oahu and public transportation systems on neighbor islands. Mayor Hannemann has offered a compromise that should satisfy both sides and allow the city to go forward with a solution to end Honolulu's traffic nightmare.

At issue is whether to have the counties collect the 0.5 percent tax increase, expected to result in $150 million annually in revenues, or assign the task to the state tax director, which collects the present 4 percent excise tax proceeds. State collection of the increase makes more economic sense, but Lingle understandably opposes the absorption of those administrative costs to fuel the state's general fund, as provided in the bill, and is considering a veto.

In a guest column in last Sunday's Star-Bulletin, the governor questioned the wisdom of the state "skimming 10 percent off the top" of the increased revenue, "seemingly to pay for the cost of collection, but in reality to help fill the state's general fund to pay for nontransit-related projects." Once revenues are included in the general fund, they are fair game for any use.

Hannemann has proposed that the bill be changed so the 10 percent of the revenues would go directly to the state Tax Department, protecting against its misuse for nontransit functions. The change could be made in a special session, which the Legislature may authorize to override vetoes of other bills, or in next year's regular session.

The mayor sees no need to "cram" the issue into a special session. Lingle has indicated she will withhold a veto if given a written pledge from legislative leadership to make changes in the next regular session.

Kurt Kawafuchi, the state tax director, testified to the Legislature in opposition to the state collecting the tax. Each county has the option of accepting the tax revenue, which could result in different excise tax rates and be "really expensive" to administer, he said.

However, it would be nowhere as expensive as assigning the tax to the counties. Hannemann estimates that computer expenses could cost the city up to $12 million at the outset and administrative costs could come to as much as $30 million over the first four years. Kawafuchi estimates the state's startup costs to be $3.6 million and the yearly cost of tacking the increase onto the present tax at $2.5 million a year.

Hawaii needs to give Congress early assurance of its plans in order to compete for federal funds for the project. Rep. Neil Abercrombie has warned that Congress will balk at authorizing federal expenditures for a local transportation project unless local funding is in place.

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