Beginning in January, homeowners on O'ahu will start paying for rail through property taxes.
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.
Real property taxes will pay for the bonds, but Mayor Caldwell claims tax rates are not going up.
"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.
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.
In addition, the City may have to come up with a total of $214 million, not counting any additional construction costs.
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."