The Rail tax special session: what happened to our representative democracy?

At the end of the 2017 legislative session, the Hawai‘i House and Hawai‘i Senate were struggling to come to agreement on a mechanism to continue funding the over-budget Honolulu Rail project, which the City and County of Honolulu under the Caldwell administration seems to have let spiral out of control.

A proposal to use a statewide Transient Accommodation Tax (TAT), in combination with a General Excise Tax (GET) extension in Honolulu County, as a means to make up the $3 billion project shortfall came from the newly installed House leadership in the final weeks of the session. It was presented as a “take it or leave it” proposal, according to a source inside the State Capitol building at the time. But the Senate rejected this proposal, as it had not been heard by any Senate committee.

After negotiations behind closed doors to bring the House and Senate together, Governor Ige called a special session in August. A new bailout bill was introduced advocating for, essentially, the same proposal: a funding mechanism based on a statewide TAT in addition to a half percent GET extension for Honolulu taxpayers. Only small details had changed.

Fearing that inaction might jeopardize the whole project, the Senate capitulated. To outside observers, it appears that the new House leadership said ‘jump,’ and the Senate leadership—under President Ron Kouchi of Kaua‘i, and Senator Donovan Dela Cruz as the new Ways and Means Chair—asked, ‘How high?’ This strong-arming seems to have originated with the new House Speaker Scott Saiki and House Finance Chair Sylvia Luke for the purpose of demonstrating their power. That the Senate refused to call their bluff is harder to explain.

House leadership said that a bailout must be passed—and it must happen now. But this was never true. If the Legislature did not pass this bill, the City and County of Honolulu could have stepped in with other solutions. But special interest groups that support Rail—contractors, members of the construction industry, developers and anyone else who stands to make money on the project—demanded that the Legislature bail the City out, and leadership in both chambers caved to these demands.

The Senate never held a public hearing on the proposed statewide TAT funding mechanism for Rail in the regular 2017 session, and held a public hearing in the special session only after the bill was written and presented in its final form. At the very least, this violates the standard of conduct for the Senate, and flies in the face of the intent of Hawai‘i’s sunshine laws.

The only Senate public hearing on this new tax was therefore a farce. Almost every testifier from the neighbor islands asked for the tax to be restricted to O‘ahu. All the neighbor island County Council chairs testified in opposition. But it was announced by leadership at the start of the special session that there would be no changes made to the bill.

The House Finance Committee members developed their own arithmetic about how a fully GET-funded bailout mechanism would be much worse, even for neighbor islanders, and it’s true that the GET is a regressive tax that always impacts lower income residents disproportionately. But the arithmetic they produced was so convoluted and illogical that it is hard to do it justice in a description. It changed daily, lacked coherence, used false assumptions and relied on faulty logic to arrive at fanciful conclusions.

At several points in their hearing, and in the press, House leadership basically said that people should be thankful they are only getting this tax and not something worse.

During the House Finance Committee hearing on the Special Session bailout bill, the committee members were argumentative with testifiers, in violation of House standards of conduct. The committee members even asked a neighbor island County Council Chair to retract a statement because it contradicted the conclusions drawn by the Finance Committee’s numbers. This treatment is in violation of rules of conduct for the legislature. Testifiers at public hearings are there to share their mana‘o. Committee embers are there to listen and to ask clarifying questions, not to argue with testifiers.

During at least two different points in the special session, a neighbor island legislator could have effectively killed this bill but chose not to.

Rep. Joy San Buenaventura could have voted ‘no’ in the Finance Committee hearing, creating a 5-5 tie and sending the bill back for revision or reconsideration, which could not have been done during the special session. Instead she voted ‘yes with reservations’ and allowed it to proceed.

Her reasons given at the time, and in Facebook comments afterwards, were based on the same arithmetic produced by that committee, and further suggested that her district would do better if she did not oppose leadership.

Translation: ‘If I bow down to the bullies, I will get rewards to help my district. If I oppose them I will be punished.’

And she might be right. This is a major problem with the way our politicians function within the square building and, often times, results in less-than-ideal policy being advanced in exchange for power or position. But legislators shouldn’t have to cave to bad policy advancement from leadership in exchange for the ability to help constituents. Legislators’ votes should not be held hostage by leadership.

The option was to go along and be rewarded but be part of the corruption, or stand for something better but at some risk. House Reps were allegedly threatened with loss of all funding to their districts and all positions if they opposed.

Despite this pressure, which extended to senators as well, four of seven Hawai‘i Island reps, and all four Hawai‘i Island senators chose to vote ‘no.’ They chose to represent their districts instead of following orders. Of neighbor island Senators, only Kaua‘i Senator Ron Kouchi and Maui Senator Gil Keith-Agaran supported the bill.

Rep. Cindy Evans (North Kona and Kohala) even resigned her newly acquired leadership position as House Majority Leader in order to vote ‘no.’ She knew that a ‘yes’ vote would cost her an election next year and, shockingly, House leadership did not support her choice, even with more than enough votes in hand. Rep. Evans was removed as Majority Leader 6 weeks later, prolonging O‘ahu-versus-neighbor island animosity and establishing the iron-fisted style of the new House leadership.

In the final House floor session, an amendment was offered to limit the new TAT increase to O‘ahu only, a logical revision that could have created unity between the neighbor islands and O‘ahu. A voice vote was held and, even though most people in the gallery and on the House floor heard more ‘ayes’ than ‘nayes,’ leadership declared that the amendment had been defeated. Any member of the House could have asked for a roll call vote, or even a vote by count by hands. Curiously, no one asked. Inside sources who wish to remain anonymous explained that leadership had warned there would be dire consequences for anyone who “derailed” the bill. The threat was apparently taken so seriously that even House Republicans did not dare to ask for a roll call vote.

Meanwhile, in the Senate WAM Committee, Senator J. Kalani English could have killed the bill with a ‘no’ vote as well. To protect Sen. English, who is up for reelection in 2018, from unhappy constituents, he was allowed to vote ‘no’ in the end, and Senator Glenn Wakai, a longtime opponent of rail, was forced to vote ‘yes’ to get it passed in WAM. Sen. Wakai dutifully did as he was told and kept silent.

Big Island senators Lorraine Inouye and Kaialiʻi Kahele, both part of Senate leadership, were apparently allowed to vote ‘no’ but told they must not speak out against it. Both remained silent during the floor debate despite strong opposition behind closed doors.

The whole special session pitted neighbor island legislators against their O‘ahu colleagues, against their own constituents and against their better judgement. The session also resulted in House-versus-Senate divisiveness that is worse than it has been in many years.

It was frequently stated by reps during the special session that leadership is “out of control.” It seems Rep. Luke directed this show as a demonstration of who is really in charge. No one in the Senate dared to stand up to her. This episode was designed to put the new WAM chair, Senator Dela Cruz, in his place after apparently emerging victorious from a fight with Senator Jill Tokuda, Luke’s close ally and the former WAM chair back in May. Rep. Luke succeeded completely.

So the bailout will proceed, and the ballooning capital improvement project that has come to define the career of Honolulu Mayor Kirk Caldwell will receive new funding sources from a statewide TAT increase.

Meanwhile, the neighbor islands have their own unmet transportation needs, many of which are equally or more severe than O‘ahu’s freeway traffic problem. Now residents on the neighbor islands will shoulder, at least partially, the burden to pay for Honolulu’s problem and to bailout a project that has been, by most independent accounts, horribly mismanaged.

Honolulu desperately needs some form of rapid transit system. But the way the Caldwell administration and the Honolulu Authority for Rapid Transit have handled the project is, frankly, offensive. The way in which city politicians, dating back to the Hannemann administration (for which Kirk Caldwell served as Managing Director), have treated the Rail project as a career-maker rather than as the important infrastructure project that it is, is offensive. This project should have offered positive economic impacts and traffic reduction without squandering the hard-earned money of tax paying constituents.

But the real blemish on this whole special session episode, whether you support the concept of Rail or not, is the continued reliance on backroom dealings, strong-arming, old boy networking and pay-to-play mentality that dominates our politics and holds sway over policy decisions that have real effects on working people’s lives.

No public meetings were ever held on any neighbor island about this statewide TAT funding proposal. It has been stated that only tourists pay into the TAT and that, as a result, neighbor island residents shouldn’t care. But an increased TAT on neighbor islands has the very real potential to reduce the amount of money visitors can spend on local businesses. Additionally, there are many neighbor island residents that use our state’s visitor accommodations and who will be impacted by the TAT increase, as well as the need to increase rental fees to cover the new tax.

Shouldn’t those neighbor island residents have at least had a voice? Shouldn’t their elected officials have had, at the very least, a fair opportunity to stand in opposition, if that’s where their consciences lie? Our residents deserve better from our elected officials, particularly those who are already under-served on the neighbor islands. Too often, they end up with less than Honolulu residents: less opportunity to speak; less opportunity to work; less opportunity to thrive. Now they’re on the hook for a Honolulu problem; and the process our elected officials went through to get them there was anything but democratic.