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MAYOR SETS THE RECORD STRAIGHT ON RAIL PROJECT FINANCING

 

(Fri., July 16, 2010)—Mayor Mufi Hannemann today released the following statement regarding reports about the potential use of federal transit formula funds—which have historically helped finance Honolulu's bus system—for Honolulu's rail transit project:

 

"Let's set the record straight. Bus service will not be compromised.

 

As I have said many times, the federal government requires us to explore all funding scenarios, and use of transit formula funds for the rail project is a worst-case scenario.

 

This potential use was examined in last year's financial plan to satisfy strict federal requirements meant to ensure the rail project's financing won't fall short. But the city has never stated that it actually intended to utilize this possible revenue source, and there simply is no reason to do so.

 

There is absolutely no indication that those funds will be needed to build the rail system, and we certainly do not expect to utilize the city's general fund for any aspect of rail construction either.

 

Also, some people who say they are concerned about recent bus fare increases have been telling others that the additional fare revenue is being used to pay for the rail project. That is absolutely false. The city has not diverted any money from the bus system to the rail project, and the fare increases are not connected to the rail project in any way whatsoever.

 

Since 2001, the City Council policy has stated that fares provide at least 27 percent of the bus system's operating costs. Without the fare increase, which the Council approved last year, this requirement would not be met. It's also important to understand that fares for seniors and the disabled have not changed. We recognized the need to shelter our most vulnerable riders from added expenses.

 

And, contrary to assertions by some on the Council, we are honoring, in spirit and action, Ordinance 07-001, which calls for rail construction costs to be funded by federal or state sources, the surcharge on the General Excise and Use Tax (GET), interest from revenue, and private capital.

 

                      The rail project is on solid financial footing. Construction costs have dropped by $150 million so far, as bids for two major construction contracts were far lower than anticipated earlier. We have received 99.6 percent of our anticipated revenue from the GET surcharge through Fiscal Year 2010. The project is required to include a $1.3 billion contingency, which is about one-third of the entire rail construction budget.

                      Additionally, the state Council on Revenues has said the economic recovery has begun and predicts five years of increasing state tax revenue, which are very promising signs for the rail project.

                      As I have said, bus service will not be compromised.  The Hannemann administration has always invested in Honolulu's award-winning bus service.  In our continuing effort to improve bus service, we recently broke ground on the Middle Street Transit Center.  To make the bus fleet greener and more sustainable, we have purchased about 70-hybrid-electric buses."

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Media contact: Bill Brennan, Mayor's Office, 768-6928.