Hawai'i businesses seem to agree something needs to be done to improve public transit and alleviate traffic congestion. What they don't agree on is whether a planned $3.7 billion elevated commuter rail line linking East Kapolei to Ala Moana is the answer.

The Chamber of Commerce of Hawai'i supports the new transit system. Small Business Hawaii opposes it. The Hawai'i Hotel and Lodging Association doesn't want an elevated train in Waikiki. The National Federation of Independent Business Hawai'i Chapter is against the general excise tax increase adopted to pay for rail, but hasn't taken a position on the transit project overall.

The lack of consensus among the business community probably reflects skepticism about the costs of the project, offset by a recognition that something needs to be done about worsening traffic, said Outrigger Enterprises Group President and CEO David Carey.

"There's a very strong view that we need to create a better traffic solution than what we have," said Carey. "My sense is that people are just nervous about the magnitude of costs and impact that rail has and whether, if we spend all that money, it actually will work."

Mayor Mufi Hannemann hopes to break ground on the 20-mile East Kapolei to Ala Moana rail project in December 2009. The project is expected to cost an inflation-adjusted $5 billion and take nearly a decade to complete.

Rail proponents argue the city needs to give commuters an alternative to highly congested H-1 Freeway. They contend that the commuter line with its 19 stations will encourage more sustainable urban development, reduce suburban sprawl and spur Hawai'i's flagging economy.

Rail opponents point to the costs, aesthetics and noise as potential problems. They argue that not enough people will use the trains and that cheaper alternatives would do more to reduce traffic congestion.

The Chamber of Commerce of Hawai'i, which has 1,100 members, sees the train as providing a needed transit option, said Jim Tollefson, president and CEO of the Chamber of Commerce of Hawai'i.

"It is a quality of life issue," he said.

Small Business Hawaii, which has nearly 1,000 member businesses on O'ahu, opposes the transit system because of the high cost and because many businesses will have to move or be shut down to make room for the train. The Hawai'i Hotel and Lodging Association, which represents about 170 hotels, opposes building an elevated train through Waikiki because of the aesthetics.

The city hopes to eventually build a spur through Waikiki; however, it's not part of the first phase, and it's unclear whether there will ever be money available to build the extension.

In the meantime, the city wants to contract with a trolley company to provide service to Waikiki from a future train station at Ala Moana.

'BROAD SUPPORT' CITED

Hannemann's office, when asked about support from the business community, responded with a list of 43 contractors, unions, trade groups and other businesses that favor building the transit line. The list included: the Kamehameha Schools, the Filipino Chamber of Commerce, the Hawaii Korean Chamber of Commerce, Alexander & Baldwin, Castle & Cooke and Campbell Estate.

"Honolulu's planned rail transit project enjoys broad support from both business and labor and for good reason," said Wayne Yoshioka, director of Department of Transportation Services, in an e-mail. "Construction of the rail system will provide more than 90,000 person years of employment over the next 15 years. With its steady stream of federal money into O'ahu's economy, this project will bring economic stability at a time when our No. 1 industry, tourism, is increasingly vulnerable.

"Once operational, rail transit ... will help facilitate healthy economic growth by providing people a reliable, efficient way to travel from home to work, to shop, to attend recreational events," Yoshioka added.

Major trade groups — including the Retail Merchants Association of Hawaii; the Tax Foundation of Hawai'i; and the Hawaii Business Roundtable, which is comprised of the chief executives of 50 major local companies — have yet to take a position on the commuter rail project.

In general, businesses prefer low taxes and less regulation, particularly at a time when economic growth is slowing. Still, businesses want effective public transportation even if they can't agree on the means to achieve that goal, the Outrigger's Carey said.

"We care about our employees," he said. "If they could magically figure out a way to get our employees quickly and cost-effectively to Waikiki, we're all in favor of that from a business perspective because it helps us from a recruiting standpoint (and) from a retention standpoint and (improves) the quality of life."

Carey, who is also chair of the Business Roundtable, said the organization's board is split over whether to support the transit project. Concerns about the project include its high per-capita costs, aesthetics, and the route, which does not have a timetable for serving the University of Hawai'i-Manoa campus. In addition, it is not clear that the city has a plan to deal with long-term operating costs and transit-related real estate development, Carey said.

TAX CONCERNS

For many business groups, the increase in the general excise tax to fund the train is the biggest source of concern. That 12.5 percent tax hike was passed by the Legislature in 2005 and became law after Gov. Linda Lingle declined to veto the measure.

"It's one of the worst taxes to raise, period," said Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i. "This is a general tax increase on everybody so it doesn't look to the persons who will utilize the system or those contending with the traffic. It's looking at all taxpayers, period."

According to a report released by the Washington-based Tax Foundation last week, Hawai'i residents have the fifth-highest state and local tax burden in the nation.

Between January 2007, when the surcharge took effect, and May of this year, the train tax raised $203 million, excluding $23 million kept by the state to cover tax administrative costs. Overall, the surcharge is expected to raise $3 billion by the time it expires in 2022.

Among the groups opposed to the tax is the National Federation of Independent Business Hawai'i Chapter, which claims the title of the state's largest business group.

"We strongly oppose the general excise tax increase," said NFIB-Hawai'i director Melissa Pavlicek. "We have not taken a position specifically on the Honolulu rail project."

The NFIB's position is based on polls of the group's 1,200 members, who, among other things, expressed concern the transit tax may need to be raised or made permanent at a future date, Pavlicek said.

"It was very overwhelming," she said. "More than 75 percent of members who responded opposed the general excise tax increase, and I still continue to hear members voicing their concerns about the general excise tax increase."

RETAIL OPPOSITION

The retail industry, which is a major generator of general excise tax revenue, also opposes the transit tax, said Carol Pregill, president of the Retail Merchants of Hawai'i. The group, which has about 190 members, has no position on the transit project itself.

Business community concerns are due in part to the uncertainty surrounding the project, said Jack Suyderhoud, a professor of business economics at the University of Hawai'i's Shidler College of Business.

"It's an indication of the fact that this is a difficult decision to make and that there's a lot of uncertainty associated with the costs and the benefits," he said. "These guys should be able to read financials and they know what cash flows and debt are all about so they should have a pretty good idea (of whether rail is a good idea)."

However, "there may not be an enormous amount of trust that the same people that gave us Aloha Stadium and the convention center and H-3 and all the hassles associated with that are going to give us a rail system that is going to be economically viable," Suyderhoud said.