Harris budget calls for shifting money
| • | Changes in trash pickup outlined |
By Johnny Brannon
Advertiser Staff Writer
Mayor Jeremy Harris' spending plan for the coming fiscal year relies largely on two money-managing methods that have proved controversial before: long-term borrowing and tapping into the city's sewer and garbage funds.
But Harris, who also wants to raise most property taxes, bristled at critics' suggestions that he was exacerbating the city's debt burden and improperly "raiding" the special funds for the proposed $1.178 billion operating budget to cover the year that starts in July.
Harris wants to borrow $189.6 million in general obligation bonds for construction projects, road repairs and garbage handling, and $63.2 million more in revenue bonds for sewer system improvements.
At the same time, he wants to shift $48 million from special garbage and sewer funds into the general fund. Such moves sparked heated debate between the mayor and City Council last year, when Harris' plan also included refinancing more than $50 million in outstanding debt.
That allowed the city to spend less to pay off its debts this year, but means more will be spent in the future and the total cost to taxpayers will increase over the longer term.
Harris said he is not calling for any such refinancing this year, despite a passage in his proposed budget which states that sewer bond debt would be restructured to save $10 million in debt repayments next year.
The statement refers to new debt the city will incur, and should not have been characterized as restructuring, he said.
The other borrowing is necessary, Harris said, because the cost of major projects should be spread out over their useful life. That way, current taxpayers are not unfairly saddled with the full expense of infrastructure that others will benefit from later.
But others say the city borrowed too much earlier, and has avoided raising taxes or cutting spending while the burden grew heavy.
"All his extravagance with all the wonderful parks and vision team projects, it's all coming home to roost," said Tax Foundation of Hawai'i president Lowell Kalapa. "That was borrowed money. People acted like it was free money, but it's not."
Indeed, paying back the city's debts would consume a greater portion of the city's budget next year under Harris' plan, while spending a smaller portion on police and fire protection.
The $209.9 million to be spent on debt service would be 17.8 percent of the total budget, up from 13.7 percent this year. Public safety would be 21.3 percent, down from 22.4 percent.
"We had a 28 percent increase in the size of our parks last year, and that's fine as long as you can maintain them and still pay for police and fire protection," City Council budget chairwoman Ann Kobayashi said.
Harris countered that the city has increased the size of its police force while cutting the overall number of city employees. His proposed budget would eliminate nearly 1,000 vacant positions but trigger no layoffs.
Tapping into the sewer and garbage funds has also been controversial, but Harris said he has no qualms about doing it again.
Money collected through sewer fees has been shifted to the general fund every year since 2001, to be spent for purposes unrelated to sewer construction and repair.
Harris characterizes the money transfers as "reimbursements" for general fund cash spent on sewers in earlier years, when sewer fees did not cover the costs.
But the practice is controversial because the city continues to borrow money for sewer work, which is expected to cost more than $1.8 billion during the next two decades.
The situation is the reverse with the garbage fund, Harris said, because general fund money continues to subsidize the cost of garbage collection.
The garbage fund contains a hefty surplus stemming from the city's construction and sale of the H-Power garbage-to-energy plant, Harris said, but the city has chosen not to spend it all at once.
Critics say the special funds should be used only for their intended purpose, and questioned whether the city was simply borrowing money to indirectly pay for operating expenses rather than construction projects.
"Certainly dipping into these funds is flirting with danger," said Councilman Charles Djou. "If we need to upgrade, the lack of money will put the city in a bad position. It's a financial shell game here that's going on."
Harris said it will be a challenge to care for the city's parks while cutting the park maintenance budget by more than $1 million, but that he was confident it could be done with hard work and good management.
Cutting vacant positions could be more difficult, he conceded.
Historically, the city has used money from empty job slots to pay for the overtime of other workers. That saved the city money by eliminating the cost of benefits for the workers that weren't hired, but now there will be neither the workers nor the money.
"It's going to be tough," Harris said. "There's no getting around it. But the alternative is more tax increases, and we're just trying to keep tax increases to a modest level."
The mayor's budget also includes $140,000 for the city's popular Sunset on the Beach movie festivals, about $10,000 less than last year. Some council members have questioned whether the events are necessary, but Harris said the spending is justified because the film screenings draw crowds to Waikiki and stimulate the tourism economy.
