Council not sold on user-fee hike

By Treena Shapiro
Advertiser Staff Writer

City Council members appear reluctant to approve Honolulu Mayor Jeremy Harris' proposal to increase user fees, beginning July 1, for such services as adult bus passes, counter assistance at satellite city halls and processing permits for developments.

But some members say they may have no choice but to approve the increases to bring in an estimated extra $24 million a year to help deal with a projected $100 million shortfall and balance the city's $1.178 billion budget for the fiscal year starting July 1.

"They kind of have us over a barrel because they included the fees as a way to balance the budget," Council Budget Committee Chairwoman Ann Kobayashi said. "I don't think that's proper. It may be legal, but I don't think it's good to balance the budget with money that you don't have."

Harris' proposed fee increase, as well as his request to raise property tax rates, reflect the city administration's bid to deal with hard times. Neighbor Island counties have faced similar problems. The Big Island increased property taxes for the first time in 30 years and Maui and Kaua'i counties are grappling with a decline in their budget surpluses.

But the city administration's bid to raise fees and increase property tax rates will likely come under scrutiny during a budget committee hearing on Tuesday.

The council has until July 15 to approve the budget, including the fee increases and the property tax rates.

The city administration's rationale for the fee increase is based on people who use the services "absorbing the expenses incurred in providing those services," said Ivan Lui-Kwan, the city director of budget and fiscal services.

The fee increases range from a few dollars to several thousand dollars, with businesses bearing most of the burden. But many O'ahu residents will see some changes. For instance, it will cost $2 for some types of counter service at satellite city halls; an extra $1.25 for a motor vehicle registration will go to the Highway Beautification Fee; and a city program for spaying or neutering will run an additional $22 to $46 per operation.

Barbara Marshall, a Budget Committee member, has been carefully scrutinizing every line item. "Like most people I would just as soon not see the taxpayers and the residents of the island have to pay more for anything, but it's a real problem," she said.

Although she is still looking for an alternative to raising fees, Marshall pointed out that the city has no control over increases in salaries and payments into the health fund and retirement system.

"I think some fees may be necessary, but I'm not ready to give up the ghost," she said.

Given a choice, Marshall would put more effort into avoiding the property tax changes.

Under that proposal, apartment and condominium owners would see a 4.5 percent reduction in property tax rates, while other property owners would see increases ranging from 2.7 percent for single-family homes to almost 15 percent for commercial properties.

Marshall said the fees only target people who use the facilities, but the widespread property tax hike would hit almost everyone, including those who have already seen an increase in the assessed value of their property.

The fee increases include an end to taxpayer subsidized spaying and neutering of cats and dogs. The city sells discounted "Neuter Now" certificates at satellite city halls and the Hawaiian Humane Society, which can be redeemed through participating veterinarians. The certificates will still be available, but the new $40 to $75 price will cover the veterinarian charges.

"The costs of purchasing the certificate is still less than what the veterinarians would ordinarily charge," Lui-Kwan said. Veterinarians normally charge $175 to $300 for the operations, according to a city official.

The fee increases will have the biggest impact on individuals and businesses who do business with the Department of Planning and Permitting. When he unveiled his budget proposal earlier this month, Mayor Jeremy Harris said the fees had been increased to cover the costs of running the department.

With self-sufficiency as the goal, fees have been raised in every area from a $2 increase in the price for a black-and-white reproduction of maps, plans or diagrams to an increase from $500 to $15,000 for the permit fee for a planned commercial and resort development.

Many of the permit fees will increase by hundreds, if not thousands of dollars. For example, the maximum charge for zoning changes has increased to $12,000, while the caps for several building application permits have doubled to $10,000. Several new fees will also be introduced, including a $200 charge for appeals to the Zoning Board of Appeals and contested case hearings.

Kobayashi said she was concerned about the application fee increases and wants to make sure the fees are fair. "The thing is they aren't supposed to be making money on this," she said. If the resort fee increase was to cover costs, she asked, does this mean the city has been losing $14,500 every time a resort has been planned?

According to city spokeswoman Carol Costa, the answer is yes. The process requires an environmental impact statement, meetings with the developer, public hearings and staff review, which can sometimes take six months to one year, as in the case of the $100 million Hilton Kalia Tower, and the $300 million Outrigger Lewers project.

Consequently, $500 does not adequately reflect the amount of staff time needed to process requests and $15,000 is more appropriate, Costa said.

Councilman Charles Djou, another member of the Budget Committee, said he doesn't like user fees, suggesting that they are often just another means of increasing taxes. But he said not all user fees are necessarily bad and indicated he'd support one that is structured well and designed for a narrow specific purpose.

"What I'm looking forward to reviewing is to see how these fees are actually structured," Djou said.

He singled out the $2 for counter assistance at satellite city halls as a fee that strikes him as a "backdoor tax increase." After all the administration's fanfare over the opening of satellite city halls, Djou said the new charge discourages people from using them.

When he unveiled his budget, Harris said the counter fees were a way to encourage people to use the mail or Internet for many transactions, particularly motor vehicle registration, which leads to unnecessarily long lines at the end of each month.

"There's no need for people to come to satellite city halls" to pay the fee, he said, pointing out that the registration bill comes with a preaddressed envelope.

The bus pass increase for adults is to comply with a City Council policy that requires the city to adjust rates to cover at least 27 percent of the costs for the bus service. "This year, unexpectedly, bus revenues dropped off," Harris said, blaming the Sept. 11 terrorist attacks and the resulting drop-offs in tourism and employment.

At Hanauma Bay, nonresidents will have to pay $5 instead of $3 in admission fees. The city will also reinstate commercial vehicle fees at the bay ranging from $5 for cabs, $15 for minivans and $35 for buses. Lui-Kwan said the nonresident admission fee is still less than what the state charges for entry to Diamond Head State Monument.

Budget committee member Councilman Romy Cachola said he is interested in seeing if the city can reduce the additional charges to taxpayers by selling off its 1,200 rental properties, which would save the administration $12.8 million in expenses.

"That's not even including other expenses associated with that," he said.

Councilman Rod Tam, who also sits on the budget committee, said he was not ready to take a position. "I'm exploring all the fees and his request for tax increases. I'm not convinced by the mayor's request ... until I see a complete financial audit of the city."

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