LOS ANGELES — The Hawaii Supreme Court will hear oral arguments July 6 in a case that argues the state is taking too large a share of the tax earmarked for Oahu’s $8 billion elevated rail project.

The case brought by the Tax Foundation of Hawaii alleges that although the law authorizing the diversion allows the state to retain the cost of administering the surcharge, the 10% taken is many times those costs – representing an illegal, hidden state tax of $25 million for Oahu residents and businesses.

The Supreme Court agreed to hear the case after the Tax Foundation appealed an adverse ruling from the state’s First Circuit Court.

“This year, both the House and Senate advanced bills that would have reduced the skim prospectively to 1% from 10%,” said Tom Yamachika, president of the Tax Foundation of Hawaii, a 60-year-old organization private, nonprofit, advocacy organization.

That is a recognition that lawmakers realize they are diverting far too much money, Yamachika said.

Construction of Honolulu's rail transit project.
A Hawaii case argues that the state is taking too much of a tax levied to build rapid rail transit on Oahu. Honolulu Authority for Rapid Transportation

“Unfortunately, unless both sides can agree on a bill without delay, taxpayers in Honolulu will continue to be cheated because of the 10% skim,” he said. “We will press forward in our efforts to demonstrate that the skim unconstitutionally burdens hard-working taxpayers and businesses in the City and County of Honolulu.”

The Foundation’s lawyer, Paul Alston of Alston Hunt Floyd & Ing, which is now affiliated with Dentons, said he is “very pleased that the Court accepted this case for direct review and scheduled oral argument so quickly.”

Hawaii lawmakers will hold a special session in August an effort to close the funding shortfall on Oahu’s elevated rail transit project.

State Senate President Ronald Kouchi and House Speaker Scott Saiki emailed a letter to the Federal Transit Administration saying that they are committed to convening a special session this summer.

Honolulu Mayor Kirk Caldwell has said the lack of resolution on how to pay for the estimated $1.5 billion to $3 billion shortfall on the $8 billion project is putting federal funding in jeopardy.

The City Council agreed to issue $207 million in bonds for the project on June 7.

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