Honolulu To Take Out Short-Term Loan Of $44 Million To Keep Rail Going

Honolulu To Take Out Short-Term Loan Of $44 Million To Keep Rail Going
Honolulu unveils latest rail plans – Honolulu, Hawaii news, sports & weather
Beginning in January, homeowners on Oahu will start paying for rail through property taxes.  That will be in addition to contributions made through General Excise Taxes. It will all go towards the $44 million portion of the project, a required amount by the Federal Transit Administration, in order to get more federal money. Honolulu Mayor Kirk Caldwell is making the payment using a short-term commercial loan, that will be turned into General Obligatio…

Beginning in January, homeowners on O'ahu will start paying for rail through property taxes. 

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Mayor outlines most prudent route to fund rail by federal deadline

It will all go towards the $44 million portion of the project, a required amount by the Federal Transit Administration, in order to get more federal money.

Honolulu Mayor Kirk Caldwell is making the payment using a short-term commercial loan, that will be turned into General Obligation bonds in January.

Further, Caldwell argued, the city’s new obligation to help pay for rail construction technically isn’t an “emergency” covered by its rainy day fund. Instead, Caldwell told Council Chairman Ernie Martin, the fund is reserved for severe downturns, natural disasters or other such emergency situations.

Real property taxes will pay for the bonds, but Mayor Caldwell claims tax rates are not going up. 

Last year’s multibillion-dollar rail bailout package from the state, which is expected to generate at least $2.4 billion for the beleaguered transit project, forced the city to put more “skin in the game.” It required the city to contribute $214 million toward rail’s construction budget.

"We're not raising real property taxes, we continue to see increases in collection from real property taxes because rates have stayed the same but values have gone up," Mayor Caldwell said. 

The federal agency hasn’t specified what those consequences might be, but it continues to withhold the remaining $744 million in federal money dedicated to the project. Caldwell and other city officials fear they might lose that money outright if they don’t appease the FTA.

According to the Mayor, there were other options like tapping into the $114 million Rainy Day Fund,  but he wants to leave that money for a financial or natural disaster. 

The short-term bonds, essentially a bridge loan, should be floated in the coming week. The move, Caldwell said, was already authorized by the council. City officials plan to use general obligation bonds early next year to pay off the short-term loan.

The $44 million loan is not the only thing that has to be paid, there's also another million dollars in fees and interest.

Last week, some City Council members, including Kymberly Pine, suggested the city consider using its so-called “rainy-day” fund to cover the $44 million in the short term, surmising the move could help the city save on interest payments.

In addition, the City may have to come up with a total of $214 million, not counting any additional construction costs.

Caldwell rejected that idea, however, saying the move could put the city’s AA-plus bond rating at risk. If the bond rating sinks, costs for the city to borrow on all of its long-term projects — not just rail — would increase.

HONOLULU (KHON2) – Honolulu Mayor Kirk Caldwell says the city will take the safest and most prudent route to pay for rail.

The $44 million represents the first two years’ payments, and exactly how to cover that amount has consumed much of the council’s time and energy this year. Now, the FTA is demanding that the city pony up or face consequences.

There were four options to meet the Federal Transit Administration's deadline, which included pulling money from the city's rainy day fund.

But on Monday, the mayor announced the city will use short-term borrowing to get $44 million into the transit fund.

Honolulu city officials will float short-term commercial paper to swiftly raise $44 million for Oahu’s rail project before Nov. 20, a deadline set by an increasingly impatient Federal Transit Administration.

"The cost for short-term commercial paper is projected to be somewhere around $4,000 and $5,000 for two months," Caldwell said. "At this point, we're so close to the end of this deadline, we don't want to miss it, so we're taking the safest route, fiscal route, most prudent route to get the money over to HART."


Posted in Honolulu