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FOR IMMEDIATE RELEASE                                       June 21, 2006

Release M-67-06






            Mayor Mufi Hannemann, State legislators, and City Councilmembers today offered a compromise crafted to break the impasse between the City and State on the collection of the general excise tax surcharge for mass transit improvements.


            Negotiations between the Hannemann and Lingle administrations stalled recently because of disagreements over which jurisdiction will collect the tax, how the system is to be administered, and who will foot the bill.


            Mayor Hannemann said, “We’re again putting this offer on the table in a good-faith effort to preclude any delays in our mass transit planning.  Our residents, particularly those in Leeward and Central Oahu, are crying for relief from traffic congestion.  A mass transit system represents our best near- and long-term solution to this worsening problem and I’d hate to see our efforts derailed because of disagreements over who-does-what.”


            Hannemann convened a meeting on Monday, June 19, with State legislators, City Council Chairman Donovan Dela Cruz, and Budget Chairwoman Ann Kobayashi.  At the meeting, the legislators emphasized that the governor must follow the law and that she has vast powers at her disposal to enable the State to accomplish the task at hand.


            Hannemann said he sought to meet with the governor on Tuesday to inform her of the proposal that came out of the Monday meeting, but she was out of town.  He subsequently had Corporation Counsel Carrie Okinaga convey the City’s counterproposal to the Attorney General.


            Hannemann’s proposal consists of these points:


·       The State Department of Taxation must collect the general excise tax and county surcharge, in accordance with the enabling legislation approved by the 2005 Legislatur


·       The Legislature next session will consider an appropriation of $5 million to the Department of Taxation to underwrite the added administrative costs of implementing the county surcharge.  Key members of both houses have assured Hannemann that they would support such a measure.  That money will be used by the Tax Department to pay CGI-AMS, the private contractor it retains to design and manage its tax collection software.


·       The Department of Taxation will contract for the added work directly with CGI-AMS—not have the City contract and work directly with that CGI-AMS as the State administration had recently proposed.  Moreover, CGI-AMS has expressed a preference to continue working directly with the Tax Department.  (Attached is the Attorney General’s letter of June 15, 2006, describing the State administration’s most recent offers.)


·       The City will provide a guarantee of $5 million to compensate CGI-AMS, if the Legislature fails to provide the appropriation.


·       The mayor will ask the City Council to convene a special session on July 7, 2006, to approve the $5 million guarantee.  The mayor has the authority to call such a session.


            Flanked by State legislators at a Kapolei Hale news conference, the mayor acknowledged the steadfast support State lawmakers have provided in backing mass transit and the City’s position on the tax collection.


            Said the mayor, “The Legislature mandated that the State collect the tax because lawmakers recognized the practicality and relative ease of having the Department of Taxation adjust its existing system to accommodate the county surcharge.  They also set aside a portion of the anticipated revenues to pay for the added administrative costs.


“For the City to have to establish its own tax collection system from scratch, or to work directly with the State’s contractor to set up intricate rules and procedures involving the tax code, as the State administration has proposed, would be counter to the Legislature’s intent.”


            “Senator David Ige, chairman of the Intergovernmental Affairs Committee that has oversight over the county GET surcharge, has stated publicly that the governor already has at her disposal the means to get this job done.  He said the administration could even have asked the 2006 Legislature for money to pay for the added work—but did not.”


            Lawmakers pointed out to Hannemann that the State administration’s foot-dragging on the bottle bill caused delays and confusion among consumers, retailers, and bottling companies.  They warned that a similar failure to act on the part of the State administration could hamper the progress the City has made.


            Hannemann met just last week in Washington, D.C., with Senator Daniel Inouye and Congressman Neil Abercrombie; Senator Kit Bond (R-Missouri), chairman of the Transportation Appropriations Subcommittee; Congressman Tom Petri (R-Wisconsin), chairman of the Highways Subcommittee; Sherry Little, senior staff member of the Senate Banking Committee; and Sandy Bushue, acting Federal Transit Administrator, to apprise them of Honolulu’s progress.


            Said Hannemann, “I vowed to them that we would not repeat our mistakes of 14 years ago.  But if we can’t ensure a local match for potential federal money, then we’ll lose the momentum we’ve generated thus far.”


            “I’m anxious to move forward, in the spirit of cooperation, in partnership with the State Legislature, City Council, and State administration.  The future of mass transit is at stake, and any delays in implementing the tax and completing our planning will delay relief for tens of thousands of commuters who are squandering hours of precious time in traffic.”





Jeff Coelho, Executive Advisor, 523-4834

Gregg Hirata, Mayor’s Office, 523-4051

Wednesday, June 21, 2006

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