 Welcome to this special edition of Moving Hawaii Forward. I'm your host, Tim Appichella. In about a month from now, the state legislature will come together in a special session to decide how to best fill up the $3 billion deep hole for the Honolulu Rail Project. This still remains to be seen what tax funding strategy will be chosen, if any at all. No matter what path is chosen to come up with a $3 billion, hold on to your wallets. Thanks to the persistent efforts of the outspoken critics of this rail project from the very start, the voices of Randy Roth, voices of Cliff Slater, voices of Ponos Prevedoras, voices of Governor Ben Canetano and Scott Wilson, all voices either printed in newspaper editorials or spoken on TV, radio, or internet interviews tried to warn all of us of this place we now find ourselves in. Only now the state legislators, certain council members, and the public are hearing their warnings, their voices, their stand against truth to power. With me today is one of those clear and strong voices who has taken a steadfast position to talk to anyone who's willing to listen. Our guest, Randy Roth, who is a recently retired law professor at the University of Hawaii, Minoa, tax attorney and author of two important publications, The Price of Paradise and Broken Trust. Mr. Roth has spent years of his time and resources to shine a light upon Mayor's bold and broken promises of 10,000 new jobs for locals, or Hart's hyperbolic rail ridership projections of 116,000 trips per day, or the recent claims of rail stations that will be desirable centers for affordable housing. Most recently, Mr. Roth attended a city council committee meeting to testify and debate that the tax funding strategy of choice, the general excise tax, is a regressive tax, is a tax hardship on those who can least afford it, the poor and middle class of this island. Today we examine the tax alternatives of the legislature we'll look at and Hart's ridership numbers. Randy, thank you very much for coming on the show. I know you're getting ready to go on vacation, so spending time here before that is very much appreciated, and you share your time and your thoughts with us. It's my pleasure. Thank you. You know, in the introduction I said you've spent a lot of time and a lot of resources. You had a full-time job being a professor and all the other activities that you do. How did you have time for all this, and what keeps you motivated? I got a call from Cliff Slater one day asking if I would get involved in a lawsuit that he was contemplating in an attempt to stop rail. And I was opposed to rail, but I hadn't really done anything out of the ordinary in trying to help people understand it or to oppose it. And I remember him saying, oh, it won't take much of your time. Well, many, many, many thousands of hours ago. What motivates me, and it motivated me on what some people call the bishop estate controversy of the late 1990s that the book Broken Trust is about, and it's motivated me on a number of other things that I've done during my life, is that I really expect our elected and appointed officials to at least be honest with us. I can disagree on whether rail is good or bad, whether heavy rail is better or worse than light rail, those sorts of things. But when it becomes clear to me that people who are representing us in these powerful positions, when it becomes clear to me that they are intentionally misleading the public, that gets my juices going. And that's the answer to your question on rail, is once I figured out that this was intentional deception on the effect on traffic congestion, on the effect on energy use, you go down the long list, and so that's what keeps me going. Well, it's interesting because in the previous show I used the term voice in the wilderness. Because I feel like you've been out there, you and Cliff Slater and Panos, Prevedores and Governor Cayetano, been out there as a minority voice and although you've gotten a lot of newsprint editorials and things like that, it just seems like you're up against a gargantuan concrete wall. We've had our names out there because we've written a lot of things that have appeared in the newspaper and elsewhere, but especially recently I've become aware there's just a tremendous number of people out there who are very upset about rail. Some of them were for it from the beginning, but they don't like the way it's been done and many of them have been against it from the beginning. And I got to be fully aware of that recently when I retired, I decided I would get involved with Facebook. And so I did my first post, which was a three-minute video of me giving testimony against rail at the City Council meeting, and the darn thing went viral. It's been viewed 47,000 times. Fantastic. And there have been... Your first post? My first post! Wonderful. And there were countless comments and I've read every single one, and some of them are mean-spirited and some of them use bad language, but the vast majority, these are people who are paying attention, who really care overwhelmingly are opposed to rail at this point in time. And it's made me feel less as though those of us who've had our name in print, less that we're out there voices in the wilderness and more we've just been the ones who've had a higher profile. But there are a lot of people who are following this closely who are very upset about how it's going. That's good. And finally, it's filtering through our legislators. I think so. Very slowly, but it's getting there. Yeah. Just later, Panos Prevoderovich and I have met with some members of the legislature and slowly but surely, they're getting it. And I'm hopeful, almost guardedly optimistic, but I'm hopeful that if and when they come into special session, they will look at the issues with their eyes wide open. Great. Telling themselves, you know, this is a city project and the city has an ability to raise the funds it says it needs. It's got a variety of alternatives that it could do and not need any additional money. If the legislature says, look, if they think taking heavy rail all the way to Alamoana is worth doing, then let's let them raise taxes. Why would the legislature get involved in doing that? And especially what is resonating with legislators that we've been talking to is the city has made no effort to try to figure out what's gone wrong thus far. It's six years behind schedule. The estimated cost is virtually doubled. And the heart board and the city council and the mayor don't know why it's out of control, why everything's gone so wrong. And I went to a heart board meeting several weeks ago, first one I'd ever attended and my jaw dropped into my lap when one of the board members actually said, we don't want to muck around in the past. So they're quote. Why look at what went wrong? We just want to look forward. That's not my goodness. That's the dumbest thing I've ever heard. And then two seconds later, another board member chimed in. He said, yeah, and maybe what we would find is that we've already fixed whatever it was that went wrong. Now, this is the heart board whose primary job is to provide oversight. And they're saying, we don't want to see what's going wrong. Don't look behind this curtain. I'm going to make the old Einstein quote and bend it a little bit. If you don't figure out what you've been screwing up so far, you're going to continue to screw it. I saw those quotes, actually, the other day. And if I may, I'd like to quote it directly. This was from Amber Shin, I believe, and it was quoted, it's not my intent to muck around in the past and try to figure out what we did wrong in the past. I'm just trying to get forward. And I saw that quote. She said, we may have made some screwy, stupid mistakes. Yeah, that's your tool. But that's in the past. Well, I memorized your line. If you were writing a farce, you couldn't have come up with something. And we're not, you know, we're not dealing with a few million. We're dealing with ten billion. And that's why it's not funny. Some farcicles are funny. I try to laugh occasionally. Otherwise, I'll just be crying all the time. It, especially now that the council has authorized the issuance of general obligation bond, only 350 million right now. But the director of finance was there testifying and they expected to go up to $2 billion. This is a mortgage on our kids and grandkids' future. So it's wrong. Yeah. And it would be wrong for us who recognize that it's wrong for us not to be doing something. And I think we're at a tipping point. I really do. I feel it when I talk to legislators. Certainly, I feel it when I read the comments on that Facebook post I was telling you about. I think we're at a tipping point. And once we hit it, things are going to change quickly. And someday people are going to look back and they're just going to marvel at how this rail fiasco could go on so long. And it'd be so obvious that it makes no sense whatsoever. It'll be good that we will have turned it around, but people will marvel at how long it took. You know, there was a meeting on Friday from the Honolulu Transit Task Force or Salvage the Rail. And one of the clear messages that they left on my mind was if we stop at Middle Street, it's not too late to fix it. To do something different that's going to cost a lot less money, less time, and do something that won't regret down the line. So that was a big message on that part. You know, I attended that same program. I thought they did an excellent job of presenting their idea. I've been influenced by Panos Prevaderis to where I don't think that's the best of the options that are available. But clearly that's something that the city has as an alternative where it could complete a rail system that goes, you know, through the city, including to Manoa. They could do basically the route they're talking about now and come in under budget on the monies that have already been provided for without any new tax increase. And I thought they presented it well. Panos says an even better alternative involves using the guideway that's been built, you know, extending it a little bit further to Middle Street, but using it for specially designed buses and he's gone through all the numbers. They're fitted to those tracks. Oh yeah, it's like if you're in a car wash. Right, you're not going anywhere. Only it's going to be going 60 miles an hour. So Panos, because of his credentials and just his personal gravitas on anything having to do with transportation, I'm convinced that's a much better alternative. But there are additional ones. There was an article in Civil Beach on Kalamoto, wrote an article that said, you know, nobody wants to tear down that guideway, but we could use it the way some other cities have used that sort of space for a bikeway, for a walkway, and you could have solar panels, you know, just aid people. It could be a real tourist attraction. Nobody would ever set out to spend billions of dollars to end up with that. Yeah, it would be one that would save. But that's not the question. It isn't do we start from scratch. It's what the heck are we going to do with that guideway if we stop heavy rail? And my point is that whether it's the group you mentioned on Friday, it's Panos, or it's John Kalamoto, or there are several other possibilities. The city has some options. One of which is to do what it seemingly wants to do, which is plan A, full speed ahead, heavy rail all the way to Alamoto, which I think makes no sense whatsoever. But if that's what they want to do, let them raise the money on their own. Legislature, stay out of it, or if the legislature wants to get involved, say first you figure out what's gone wrong so far, you figure out why this is out of control, and then we'll think about raising taxes some more. Right. Well, we're going to go to break here pretty soon. But one of the things that I think that the city and heart and the supporters of rail just can't get off and they use it as a primary argument that we shouldn't touch it at all is the FTA, the Federal Transfer Administration, and the $1.55 billion they've committed to the project. We've received maybe $600 million, and so the rest of the money has not been allocated. But they seem to be using it as an argument that just can't be tampered with. And when we get back from the break, I'm going to dive into that a little bit and figure out why that argument is really kind of a fallacy. And it is. And it is. There we go. I'm Tim Appichelle. I'm here with Randy Roth, and we're going to take a commercial break, and we'll be right back. Welcome to Sister Power. I'm your host, Sharon Thomas Yarbrough, where we motivate, educate, empower, and inspire all women. We are live here every other Thursday at 4 p.m. and we welcome you to join us here at Sister Power. Aloha and thank you. Hi, I'm Tim Appichelle. This is Moving Hawaii Forward. Welcome back. I'm here with Randy Roth, and we're talking about real potential rail funding here that's going to be coming up in a special session. And we're going to talk about right now is about FTA and the argument that they use why we can't divert from any other plan on this rail project. And you wrote an op-ed for Honolulu Civil Beatback on October the 10th, 2016. And the title of it, and I love the title, pay FTA back, question mark, we should not pay up any. I love the title. And in there, it says FTA failed miserably to provide oversight for the rail project. That makes it complicit, not just morally, but legally. And I think the just that you were getting to is that if all the critics that say we can't touch the rail project, it has to go as is or else we're going to have to pay all this money back. Correct me if I'm wrong, but I think your point is maybe we don't have to pay it back. I think that's right. It's, as you said, $1.55 billion. Approximately half has been delivered to us already, and another half hasn't been, roughly speaking. As the article addresses, the half that we've already received, I just don't see any way in the world that the federal government is ever going to have to, is ever going to come after that and say pay it back, because the record is real clear. Our federal lawsuit that didn't stop rail, because of the discovery that you're able to do when you get involved in litigation like that, we have e-mail within the FTA back 10 years ago when they had a statutory responsibility to provide oversight to the city on rail, and they're e-mailing each other saying these guys don't know what they're doing. They're saying these guys are being very dishonest. You know, they've got false statements and, you know, on and on and on. Let me go through a couple of those quotes. I want to interrupt you here because some of the quotes I find jaw-dropping. I love this quote. It's about their culture, about the heart culture and the culture of this rail project. They never have enough time to do it right, but lots of time to do it over. I mean, they have this, as you said, a statutory producer responsibility to oversight on this project, and yet these e-mails are indicating that this thing's off track from the very beginning. Yeah, I think they got some political pressure from our senior senator at the time who was the chair of the money committee in the Senate, and not that it matters anymore, but in making sense out of why the FDA would sit on their hands knowing that the folks in Honolulu didn't know what they were doing on the rail project and weren't being honest with the public, the only explanation that makes sense to me, because these are professionals at the FDA, they know where their budget comes from. So I think it was basically political pressure that they were succumbing to. Regardless of the reason, they failed miserably in fulfilling their oversight responsibilities. So the chances of them coming back now and saying, give us that money that was given to you during that period of time, I think are basically nil. The half that we haven't gotten yet, number one, as this estimated cost goes higher and higher and higher and is $10 billion now, the panel says you're looking at at least $13 billion to all of them want to... Whatever it's going to be, the percentage that the federal money consists of that total amount is getting smaller and smaller, but what's going to happen on the half that we haven't received, no matter what we do at this end, that's a total wild card. You just can't predict once the Trump administration has their FDA administrator in place. All I can say for sure on the politics is that they're not going to feel a whole lot of aloha for us on a political level. I personally don't like politics in the thought of whether it's the Republicans doing it to the Democrats or vice versa. I just don't like the thought of it. As a practical matter, the FDA administrator appointed by Trump is not going to go out of his or her way to help the folks in Hawaii, maybe the opposite, but in any event, this is such an unusual situation that nobody can predict what they're going to do, regardless of whether we do the city's plan A or we do some other approach to dealing with this situation that we have now where we've got some options, but none of them are really very attractive. Well, it is interesting that when New Jersey Governor Chris Christie decided to cancel their big tunnel project, the FDA actually settled on about a third of what was owed to them for a lot less. And they had no complicity there whatsoever. Exactly. They had absolutely nothing wrong. They had just to the T, they had done what they were supposed to do, and they settled quickly for 30 cents on the dollar. I mean, if that and that alone should be overspoken right away as soon as we hear, oh, we can't do anything because of FTA, you know, da-da-da-da-da, we should be saying, well, you know, D, it's funny that FTA with no issues at all settled for a third less. And frankly, and I can't predict how other people are going to behave, but I would bet the farm, as we say in Kansas when we feel pretty sure about something, I would bet the farm that the city's approach on all of this would not change one bit even if the Fed said you're not going to get another penny. Mayor Caldwell, I think for political reasons, who knows why? I don't want to question the fact of the matter is everything from his actions thus far suggests that if the legislature gives him anything else, he's just going to go full speed ahead. If they have to live off of borrowed money for, you know, the next year or so, and if they have to raise property taxes after that in order to keep going, that and that alone is going to get them to look seriously at these other options. And once they look seriously at those other options, especially if the public hits that tipping point and lets its feelings be known by members of the city council and whatnot, I really think the city will eventually decide to do something other than its plan A, but it's got to be forced into that. If the legislature just gives them more tax money, it's just like giving drugs to somebody who's addicted. Keep on going. They're just enabling it. Well, that's the genius of how this whole thing was set into play because a general excise tax is that slow boil that you just don't realize it's occurring. As the term's been, it's been baked into everything. And it's genius. I mean, that's how you're going to fund this and no one really feels the pain directly but maybe indirectly they feel it. That's the genius of a get. Everybody, when you say general excise tax, they say, oh, the half percent for the rail, that's only a half penny for the dollar I'm spending at the cash register. It just doesn't sound like much at all. But if every time you bought something, a good or a service in Hawaii, in addition to the 4.71% that gets stated on many transactions, if in addition, if we were told, oh, by the way, this item that you're buying is X dollars more because of this business tax. See, that's the other thing you and I don't fill out as consumers. We don't fill out an excise tax return because it literally is a business tax. It is a tax on the gross receipts, on the sale of goods and services in Hawaii. Well, some of that gets passed at the point of sale to the consumer, but most of it is just as you put it baked into the cost of goods and services. But doesn't it get replicated over and over again? For example, let's say I make stools. I'm the manufacturer of stools. Well, if I'm going to ship this stool to my retail outlet, the shipping company is going to, because it's a business, they mark it up a half percent, right? And then when you get it to the point of retail, they have an obligation to address the excise tax on that one stool. So isn't it replicated several times before you actually purchase it? It is, and we use the term parameting. Unfortunately, it's actually more complicated than that in the sense that we have experts for the Hawaii State Tax Review Commission that come in periodically, that study this and analyze it, that report on its findings. And when you read those studies, what you come away with is a realization that this is not simple. For example, you've got to make a distinction between who pays the tax and who bears the burden of the tax. And with respect to any taxing mechanism, take property taxes, for example. If you raise the property tax on some landlord and their property tax goes up, let's say, $500 that year, so they turn around and they increase the rent. $40 a month, let's say. Well, $40 a month is $480. They have shifted the burden of that $500 tax increase. They've shifted $480 of that burden to the person who's renting the place. Now, what I've just described isn't earmarked as property tax, but in that example, you can see how the landlord has effectively shifted the burden to the renter. So the people who study are taxing... Which causes an inflationary effect. Well, that and you get into this question of, okay, now once we've pinpointed where the burden of the tax is, is that regressive or is that progressive or is that somewhere in between? And most people, when they talk about a fair tax structure, they're talking about something that is disproportionately burdensome on the rich as opposed to the poor. Well, Hawaii's general excise tax system is notorious for being certainly the most regressive tax system in Hawaii, one of the most regressive systems across the United States. And what that means is that on a proportionate basis, based on a person's income, how much ends up directly and indirectly being paid or the burden of it born by low-income people, what you find is that the excise tax is the least fair of any possible taxing mechanism. Because they have smaller incomes, therefore it's a bigger portion of their income. Exactly. And further complicating all of this, you get into the question of what the experts call exporting. How much of the tax burden can we export? How much of the tax burden can we get non-residents to pay? And tourists come to mind as a classic example, but it's not just tourists. Well, the mayor has said over and over and over with the excise tax, we get up to a third of that that is exported, paid by, born by non-residents. Well, the studies indicate that the export rate with property taxes is at least as high. So in other words, that's not a reason for using excise tax. I am not in favor of raising property taxes to pay for a rail. I think that rail is wrong for Hawaii, but the point, and this is really directed to the legislature, is why in the world would you enable these people who are spending money like crazy on something that's totally out of control? Out of control. Why would you enable that by raising even more taxes with the least fair taxing mechanism available to you when the city, if they really want it, could raise the taxes themselves? They never would because property taxes are too obvious. People know what it's costing them. See, that's, and this, you asked why I got involved in this and why I would spend so much time on this. It outrages me that the city over here is pushing that excise tax and saying, this is a wonderful way to raise the tax, et cetera, simply because the bulk of the burden is hidden. It's inherently dishonest. So it's not just unfair, it's dishonest. And that riles me. That's not right. Well, that's, I hate to say it from a Machiavellian point of view. That's where it's genius to have the GET as the funding source for this thing because no one feels it. Well, they feel it, but they don't know how they feel it. Yeah, that's kind of like saying, if I get your wallet into my pocket and the gun that I put to you, the cameras don't see. See that. That's genius. Yeah, that's not genius. That's immoral. Immoral genius. You know, criminal. Yeah. And that's the other thing. I've stressed that the legislature shouldn't give another penny, especially until there is an audit. People are using the term forensic audit. I shy away from that because some people, they hear forensic audit and they think that you're only looking for evidence of a crime. The audit that needs to be done now, you know, could find a crime if a crime has been committed. But more importantly, we just want to find out why is this thing six years behind schedule? Why is the estimated cost of construction almost double what it was not that long ago? And until the city can give us good answers on that. So far, the first thing I mentioned as well, the litigation, we've pinpointed what the litigation cost, directly and indirectly, as confirmed by heart. This is something that they had to communicate to the FDA. And the point I'm making is the city hasn't begun to explain the bulk of that cost overrun. They haven't begun to apply. Nor do they want to. Nor do they want to. Of course they don't. You know, it was interesting because when they, you know, the legislature came up with this percentage increase on the tourist accommodation tax, everyone thought, oh, that's great. Until, of course, the tourist industry, ex-mayor, Mufi Hanuman, who's the CEO of this organization, said, well, wait, tie it out. Wait a minute. I mean, it's kind of ironic that it kind of ended up in his lap. So, you know. I've got a letter here from a whistleblower, a guy at a high level position on the rail project up until, you know, right at the end of 2016. And he goes on page after page after page of very specific descriptions of a project that is just out of control. He basically is an engineer, and he talks like an engineer. He gets into the detail. You take a step back and he's saying, these guys don't know what the hell they're doing. And he said, until you can pinpoint what's gone wrong, expect to have more of what you've had in the past, more overrun, more delays, more screw ups. Yeah. And another whistleblower got a hold of me and he said, this guy worked for hard, high level. He said, this structure is not going to be safe. He used the word catastrophic. He said, there's going to be a catastrophic, I'm not kidding, there's going to be a catastrophic failure. I said, will you go public? He said, no. Okay. He doesn't want what would come his direction. He could be the deep throat of heart. This is a guy who had a high level position and when he used the word catastrophic. That should catch all of our attention. Well, and I'm still working on him. I'm still working on him to come to go public. Yeah. I hope you're successful because we need to hear these stories and it is scary to be a whistleblower because even though you may have some protections by law, a lot of times they just don't work their way into the reality of you being the whistleblower, terminated, ostracized. And, you know, so keep working on it. Let me quickly say whistleblowing is difficult anywhere in an island community. It's devastating. 2,000 miles from any place else where a lot of these people have very, very deep roots in this community, whistleblowing is a very, very difficult thing to do. You won't be working in this town again, as the old saying goes. We've run out of time and I want to thank you, one, for the motivation that you have in keeping up the fight and trying to keep this project at some level of sanity, which is really difficult to do. So thank you for your efforts. Thank you for explaining the general excise tax to our viewers because it's complicated and it's not easy to understand. So please come back again. Thank you for all your time. Thank you. And have a great vacation. Thank you. I'm Tim Apachello with Randy Roth. This is Moving Hawaii Forward and we'll see you in a couple of weeks.