The rail from August 2009 anticipated $501.5 million would be collected by April. Instead, the city has received $499.3 million through the 0.5 percent general excise tax surcharge dedicated to rail construction and operation.

The city’s financial plan anticipated tax revenue would dip slightly this fiscal year, which ends June 30. The city’s projections call for economic recovery in the next fiscal year under a model that shows revenue growth every year through 2022.

Mayor Mufi Hannemann put an optimistic spin on the project finances. “GET revenues are on track despite the state of the economy, and we have saved $90 million in construction costs for the first rail contract. We could realize additional savings on three major rail contracts that will be awarded later this year.”

GET tax receipts are critical for the project at this stage. The city needs to prove to the Federal Transit Administration that it can pay for its share of the project — about $3.5 billion — in order to qualify for $1.55 billion in federal funds. In addition, Gov. Linda Lingle has called for a thorough review of the project’s financial plan before she signs off on the final Environmental Impact Statement.

What do you think about rail financial projections? Share your thoughts.

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However, not all City Council members are convinced raising the real property tax rate 30 cents per $1,000 of assessed value for just one class of homeowner goes far enough to protect Honolulu residents.

While Mayor Mufi Hannemann has described the as a way to distinguish “owners who live in their homes from the many speculators, investors and others who don’t,” some council members have raised objections about the burden the tax hike would place on renters and families who occupy more than one unit on the same property.

What’s been little discussed is that the other three Hawaii have already created separate tax categories for different types of residential properties. On the neighbor islands, homes that aren’t eligible for homeowner exemptions have higher rates than what is proposed for Oahu — from $4.55 to $8.10, or at a minimum 33 percent higher than Honolulu’s $3.42.

In the years leading up to the 2008 economic collapse, home values soared and Honolulu was able to lower the tax rate. Hannemann points out that his proposed rate increase would still keep the real property tax rate 3 cents below the 2006 rate of $3.75. The rate was lowered to $3.59 in the 2007 fiscal year and to $3.29 in 2008 to offset higher property assessments.

Hannemann said about 120,000 properties fall into the created last year. Raising the tax rate on those properties to $3.72 from $3.42 would generate an additional $18 million in revenue, enough to cover almost 18 percent of the city’s $98 million budget shortfall. For a home worth $450,000, assuming no exemptions, the annual property tax would rise to $1,674 from $1,539 — a difference of $135. Of course, if the assessed value of the property changes, so will the tax bill.

When he presented the budget to the City Council in March, the mayor said he didn’t expect the tax increases to be passed on. “While some were concerned that owners of rental units would pass on any increase during the time of rising real property tax payments, we have contended that rents are market driven. This appears to be confirmed insofar as it has recently been reported that landlords are lowering their prices,” Hannemann stated in the . Rental trends in Honolulu showed a decline through the first half of the fiscal year, despite the 13 cent rate increase for all residential property owners last year. After the non-homeowner tax increase proposal was introduced, however, updated shows Honolulu’s fair market rent for a two-bedroom apartment increased by about 6 percent in 2010 over 2009.

Property taxes aren’t the only costs landlords may take into consideration when setting rents. The city is in the midst of incremental hikes in sewer and water fees, which are often folded into monthly rents. Honolulu Electric Co. also increased its rates about $1.34 a month on average in February. With other revenue generators on the table — including a 3 cent per gallon gas hike — along with threats to cut services due to furloughs, the move to insulate Honolulu residents (and voters) by presumably going after out-of-state or high-income property owners could fall flat.

Council members who oppose the property tax increase note that the broad “non-homeowner” classification doesn’t only include landlords and more affluent owners who can afford second homes. Some 5,300 properties occupied by owners fall under the non-homeowner classification because the city uses homeowner exemptions as a way to distinguish between the two types of residential owners.

Property owners who have “ohana” (family) housing on their land will pay the lower property tax rate only for one of their units, even if relatives reside in the other dwellings. Apartment and co-op building owners could also be charged the non-homeowner rate, even if they live in their units. When it comes to multi-family housing on the same parcel of land, the current law requires every unit in a building to be occupied by its owner. If one apartment is used as a rental, the entire building will fall into the non-homeowner class, explained Robin Freitas, property technical officer for the city’s Real Property Assessment Division.

Council Budget Chairman Nestor Garcia said he wasn’t sure the property tax increase would survive a third, and final, full Council vote next month.

However, if the Council approves the increase, it will bring Honolulu in line with the rest of the state. Hannemann noted that the other three counties in Hawaii have already created different classifications for residential property owners.

Maui, Hawaii and Kauai counties also have higher property tax rates for “non-homeonwers” — $4.55 to $4.85 on Maui; $5.55 to $8.10 on the Big Island and $3.44 to $7.90 on Kauai. Only Maui’s $2 homeowner rate is lower than Honolulu’s.

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Nighttime soil samples will be collected for the first phase of construction — a 6.5 mile section from East Kapolei to Pearl City. The tests will determine soil stability so the city can refine the design and placement of concrete pillars that will support the steel wheel on steel track system.

The city said work in residential areas will be done primarily along the Farrington Highway median between Waipahu High School and Fort Weaver Road. The testing is expected to be finished by early September. Kiewit Pacific, the contractor for the initial stage of construction, will do the testing.

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In a section called “All the Right Moves,” reporter Jason Soeda lets local construction industry leaders weigh in on how the city has moved the project along. They seem to agree that a project of this magnitude is always going to generate controversy.

“For most, any change is difficult. It is easier to stay in our comfort zone and stay with what we are accustomed to. Past examples that met resistance include the Honolulu International Airport’s Reef Runway project and the H-3 Freeway. Both of which are of great benefit to our people today,” Glenn Nohara, president of Koga Engineering & Construction, said in the article.

Is the opposition to the rail line rooted in anxiety about change, or is more at stake? Share your thoughts on the rail project.

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But it’s unlikely that the mayor who’s been the force behind the project will be in his office for the groundbreaking.

Mayor Mufi Hannemann has propelled the project forward for most of his term-and-a-half tenure, but is expected to announce this month that he will resign his city post to run for governor. Even if he remains in office until the July 20 candidate filing deadline, its unlikely the project will receive all the approvals it needs to begin construction by then.

The city this month submitted its final Environmental Impact Statement for the proposed $5.3 billion rail project to the Federal Transit Administration. For construction to begin, the FTA and Gov. Linda Lingle need to sign off on the plans.

Uncertainty over the timing is a big change from last year. In October, Hannemann showed so much confidence in the project that he approved a $483 million construction contract for the first leg of the rail route, which would be funded entirely by a dedicated surcharge on the state’s general excise tax. At the time he announced the Kiewit Pacific contract, he predicted the project’s groundbreaking would come by the end of 2009.

Now the city will wait for a commitment of federal funding to begin building. The Environmental Impact Statement is required before the city can compete for funding through the FTA’s New Starts program. But the city also must submit a separate financial plan that will be evaluated to determine whether the city’s proposal qualifies for $1.55 billion in . The federal contribution could dictate whether the city can afford to build the 20-mile elevated line.

City Department of Transportation Services Director Wayne Yoshioka said the financial plan is an evolving document and will be updated to reflect new developments, such as new contracts, before it is submitted to the FTA. Completion of the financial plan awaits approval of the final EIS, because that will solidify the route. Yoshioka pointed out that the rail budget has already changed, citing the Kiewit Pacific contract that came in $90 million below the estimate.

“We have several other RFPs (requests for proposals) stacked up and ready to be awarded. When those get awarded a similar thing may occur. You constantly have to adjust for these things,” he said.

Once the city brings the EIS up to federal muster, the public will be given 30 days to comment on the official document before the FTA and governor decide whether to formally accept the document. Approval from the governor or a designated representative is required because the environmental review process falls under the state Office of Environmental Quality Control’s .

In addition to approval of the EIS and financial plans, procedural challenges may also delay the project. The city has conducted an archeological inventory for only the first of four phases of construction — with plans to complete the remaining surveys before beginning each subsequent portion of the rail line. The Oahu Island Burial Council has appealed to the U.S. Department of Transportation and the state Department of Land and Natural Resources to compel the city to survey the entire route for Native Hawaiian burial remains and cultural resources before any construction is allowed to begin. It fears that once construction is underway it will be impossible to make any adjustments for historical or cultural sites.

Another obstacle could be a legal challenge. Rail opponents have said they plan to file a lawsuit if the FTA issues a record of decision, signaling the end of the environmental review process. Sensible Traffic Alternatives and Resources Inc, a vocal anti-rail group, has raised about the city’s ability to finance the project, as well as whether all alternatives were adequately addressed before the city moved forward in its planning.

The proposal is currently in its preliminary engineering stage, which includes hammering down the design and critical project elements. The city cleared one hurdle recently when it adjusted the route near the airport and received the blessings of the Federal Aviation Administration, which had raised concerns about the proximity of the line to the runway.

But Yoshioka said the state Historic Preservation Division still needs to determine whether the more than 60-year-old buildings that line the new route are historic, or, as he believes, just aging warehouses.

When the route and design are fixed, the city will have the detail it needs to justify whether it can afford not only to build the rail line, but operate and maintain it after the GET surcharge sunsets at the end of 2022. This information is a required part of the financial plan the federal government will review to determine whether to give a financial green light to the project.

At the state level, the governor says she’s going to scrutinize the city’s financial plan before she signs off on the project. The governor has already solicited bids from companies interested in analyzing the plan, but her spokesman Russell Pang pointed out that at this point there is nothing to review. “We have not yet received anything from the city,” he said.

As for how long it might take the governor to make a decision, Pang said, “The governor has said before that we will do a careful and thorough analysis of the EIS and the financial portion and we’re not going to be dictated by any artificial deadline, i.e., a registration deadline to file for a particular office.”

However, the state has been working with the city to move the project forward. State Department of Transportation Director Brennon Morioka said the state helped the city bring the route near the airport into compliance with Federal Aviation Administration guidelines. “We’ve always been trying to be a partner in trying to make sure the rail route serves the best interest for all parties,” he said.

On his side, Morioka said the two levels of government are trying to coordinate on how the route will cross state properties, including highways and airport area. “We’re trying to complete the agreement which outlines the terms and conditions of having the route go through the state’s right-of-ways,” he said.

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But public works projects that receive federal dollars will be exempt, including two of the largest — rail and highways. The federal government has earmarked $200 million for state highway and bridge improvements and the city’s $5.3 billion rail proposal hinges on a $1.55 billion federal contribution.

Supporters of the bill acknowledge that federal law supersedes the new state regulations. However, they note the state Legislature budgeted $4.5 billion for more than 2,300 public works projects in 2008 and 2009 and not all are bound by federal procurement law.

Whether the bill will achieve its intended effect on locally-funded jobs is up for debate. State Comptroller Russ Saito suspects the quota might discourage competitive bidding and open contracts up to legal challenges. A number of industry groups shared Saito’s concerns.

“The cost of jobs will go up and they’ll be delayed,” Saito said. “It’s not likely to increase jobs.”

Dubbed the “Local Jobs for Local People” , Act 68 requires that Hawaii residents must comprise 80 percent of the workforce for government contracts. Since 2007, construction jobs have fallen by 20 percent, according to a report commissioned by the Painters Local Union 1791, a primary supporter of the initiative. by the University of Hawaii Economic Research Organization predict that construction spending this year will be down 17 percent from 2009, but will start rising again next year, in part because of government projects.

Until the economy recovers, the local jobs law is intended to ensure that the majority of local construction jobs go to people who live and spend their wages in the state, said state Sen. Robert Bunda, who introduced the bill. (The law doesn’t have a sunset.)

“It’s to keep the money here in Hawaii. You have 80 percent of the residents on projects from in state,” he said after the state Legislature overrode a veto of the by Gov. Linda Lingle.

from labor unions during the past legislative session reflected their frustration that Hawaii tradesmen have faced rising unemployment numbers while government contractors have hired workers from out of state.

“If there are jobs outside the scope of duties for existing government employees, such as for these large public construction projects, the tax dollars that are used to pay for the work should be thoughtfully directed to heal our economy,” wrote Nora Nomura, deputy executive director of the Hawaii Government Employees Association.

But industry groups expressed concern that the legislation could lead to litigation and payment delays. The General Contractors Association of Hawaii, representing 570 firms, concluded in written testimony that “these provisions will lead to increased project costs, bid protests and delays in executing contracts. All of these will not be in the best interest of the public or the residents who would like to work on these projects that will be delayed by bid protests or cancelled due to lack or lapse of funds.”

While there’s little debate over whether it’s important to get tradesmen back to work, some of the biggest projects in the pipeline are exempted from the state quota because federal law prohibits discrimination or preferential hiring on any grounds, including geography. Since the proposed Honolulu rail plan will use federal funding, the hiring restrictions won’t apply to the thousands of jobs the project would create — as many as 10,000 by city estimates. Others estimate a lower total, but still acknowledge that it will create jobs.

In November 2009, Mayor Mufi Hannemann and 12 private sector labor unions signed the Rapid Transit Stabilization Agreement that ensures contractors will offer comparable pay and standardized work conditions to all its employees, whether they are union or not. The intent is to stave off potential labor disputes and take away incentive for contractors to bring in out-of-state workers who might work for lower wages.

No such agreement is required for many other government jobs that rely entirely on local funding. Supporters of the law expect it will keep millions of dollars in wages and taxes in Hawaii. “In an economy like this, every job counts and a mandate like this does more than tries (to create jobs). It guarantees a certain level of local people will be put to work on these projects,” said Nathaniel Kinney, a labor attorney and organizer for the International Painters Union and Allied Trades, District Council 50.

Kinney provided a by two mainland university economists who analyzed the economic impact of hiring local construction workers over bringing them from out of state. In one section, they looked at an alternative rail route that had been considered in 2008. According to the report, that route — longer than the one ultimately chosen — would have created 12,000 construction jobs. If 67 percent of workers were imported, the state would lose out on $299 million in economic activity and $22 million in tax revenue. By contrast, if 80 percent of workers were Hawaii residents, it would add $210 million to the local economy and only $7 million in local taxes would go out of state, the economists estimated. In addition, 1,670 local jobs would be saved, they said.

Nevertheless, the city can only encourage rail contractors to hire locally without running afoul of federal law. The same applies to the state transportation highway, harbor and airport projects that received $199 million under the American Recovery and Reinvestment Act (stimulus funds).

“Whenever we use federal funds, we cannot have prohibitions on contractors,” said state Department of Transportation Director Brennon Morioka.

But Morioka pointed out that being exempt from the law doesn’t mean that local workers won’t be hired. In fact, he said it’s generally more cost-effective to work with local contractors who have equipment and laborers here than to bring equipment and people over from the mainland, he said. “Almost all of our contracts are with local contractors,” he said.

Craig Nishimura, director of the city’s Department of Design and Construction, has concerns projects could be delayed due to potential legal challenges, but said “for normal types of projects, it’s not all that much of a concern.”

Like Morioka, Nishimura said even without the law, local workers should be hired. “We do have mainland contractors, but they’ve been here a while, so they hire locals who supplement the mainland hires,” Nishimura said. He expects that there are enough Honolulu workers for the city to meet the quotas in the new law.

Nishimura raised concerns about problems that could arise if necessary skill sets can’t be found in the local worker pool, but the law makes an exception for shortage situations.

Kinney, the labor lawyer, said the push for the local jobs initiative was a result of contractors hiring out-of-state workers for projects such as a $10.5 million renovation project at Aloha Stadium that employed 50 workers — most from out of state, according to legislative testimony.

Even if federal projects are left out of the equation, having a law on the books should stimulate the industry, Kinney said. “In an economy like this, every job counts and a mandate like this more than tries (to create local jobs). It guarantees a certain level of local people will be put back to work,” he said.

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The water quality is being tested today, but the state won’t have the results of the water sampling until tomorrow, said Watson Okubo of the Health Department’s Clean Water Branch.

“Compared to the big spill we had, this is not so big but you’re still dealing with human sewage so you have to be cautious,” Okubo said, comparing this incident to one in 2006 when some 48 million¹ gallons of raw sewage was dumped into the Ala Wai Canal and closed popular South Shore beaches for days.

This time, the health department estimates that about 700 gallons of sewage spilled into Palolo Stream, which connects to the Ala Wai Canal. Swimmers aren’t being warned about the water quality at Ala Moana Beach Park, but the public is being asked to stay out of waters off Magic Island. “There’s a possibility the tides can push it right back into the lagoon,” Okubo said. “There shouldn’t be swimming where there are signs posted.”

This has been a slow year for waste water spills, partially because of the dry weather. “Whenever it rains, we have problems. That’s expected,” Okubo said.

In addition to spills caused by the weather, Okubo said some sewage problems have been caused when expanding tree roots have cracked the pipes or clogs have caused by cleaning. Grease in an 8-inch line caused this spill.

Weigh in on this and other issues on the Honolulu discussion page.

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Three candidates have already declared their intent to run for the City Council seat currently held by Djou, who will have to leave the council due to term-limits if he does not resign early to go to Congress. Djou is the front-runner in the May 22 special election to succeed Neil Abercrombie in Congress.

The election to fill the Council seat should proceed as normal as part of the November election. The primary would be Sept. 18. If none of the three get more than 50 percent of the vote, the top two would advance to the general election. In the meantime, an appointee would represent the district from Hawaii Kai to Waikiki.

According to the , if a seat is vacated for less than one year, a special election is not necessary. The remaining City Council members have 30 days to give notice that they intend to fill a vacancy and elect a successor at a regular meeting. If they fail do so, the mayor can appoint the successor.

The candidates are Stanley P. Chang, Cameron K. Heen and Jeremy D. Low.

What do you think about the complicated dance that might occur if Djou were to win the special election? Join the conversation about Honolulu politics.

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The city is working on a few different fronts to reduce the waste stream flowing to the landfill — whether by encouraging people to recycle more or using different technologies to reduce the volume of Honolulu’s trash.

On an older thread on curbside recycling, Civil Beat member Olin Lagon suggested opening discussion on a pay-as-you-throw program used in other communities because Hawaii residents throw out perhaps twice as much a day per person as the national average. You can read more of our discussion here, but I agreed that we should break it out into its own topic.

The Environmental Protection Agency he pointed me to explained how that sort of program charges households by the amount of trash they have collected — perhaps charging by the can or bag.

That sort of service gives people more of an incentive to waste less, since it’s a more tangible pocketbook issue than paying a flat rate bill for trash collection or having it folded into property taxes, as in Honolulu.

It’s an interesting idea. Is it something you’d want to see in Honolulu?

Join the discussion on Honolulu-related issues here .

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On Saturday, the National Association of Letter Carriers will conduct their annual food drive as they deliver the mail. Making a donation is simple — just leave nonperishable food at your mailbox.

Not sure what to leave? “We need canned protein, canned goods, canned meat, beef stew, chili, tuna, Spam or luncheon meat, corned beef, soups, vegetables… We need them in cans because so many people don’t have refrigeration,” Grimm said. “This is just a strictly nonperishable kind of drive.”

Grimm noted that only mail carriers should be collecting food, but other people have been caught taking donations during previous drives. “If you see someone coming around and jumping out and taking the food, that is illegal,” he said. “Those people are actually stealing the food.”

Join the conversation on this and other Honolulu topics.

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