Proposed tax hike cut in half

By Johnny Brannon
Advertiser Staff Writer

Mayor Jeremy Harris yesterday cut his proposed commercial property tax increase in half and said the city had unexpectedly saved money by refinancing bonds.

Harris said the tax rate for commercial, industrial and hotel properties should increase 3.5 percent rather than 7 percent next year. The smaller increase would generate $6,750,000 in property tax revenue, he said.

Harris has not proposed increasing the tax rate for homes and apartments. But even if the rate doesn't change, owners will likely pay more in taxes next year because the assessed value of most property has increased.

Harris said the city had refinanced $321 million in bonds at an interest rate of 3.9 percent — the lowest in city history — and would save $28.3 million this year and next.

He said the savings were $10.1 million more than had been anticipated, and that the city's excellent credit ratings had made the bonds very attractive to investors.

City budget director Ivan Lui-Kwan said the refinancing would not extend the terms of the bonds or cost taxpayers more in the long run.

Harris proposed to use part of the savings to add $1 million to the Fire Department's annual budget and to invest $2.3 million in a "rainy day fund" to be available for any future emergencies.

He said he remained staunchly opposed to salary increases that 3,000 city employees were awarded through binding arbitration, and urged the City Council to reject the raises.

The raises for Hawai'i Government Employees Association union members would cost $6.2 million next year, Harris said.

The council has called for a variety of cuts to Harris' proposed $1.2 billion operating budget. The dozens of individual changes would total more than $2 million, largely by eliminating money for vacant jobs.

Harris said the cuts would hurt city efforts to repair roads and sewers and handle garbage.

"It makes very poor managerial sense to cut these vital service budgets for city operations," he said.

The cuts would prevent the city from hiring workers who are needed badly to fill empty positions, city spokeswoman Carol Costa said.

But council budget chairwoman Ann Kobayashi said many of the jobs had gone unfilled for years. She said the council may propose additional cuts later, and would not necessarily agree with Harris to lessen the tax rate increase.

Council Chairman Donovan Dela Cruz said budget cuts must be considered to avoid other problems.

"The mayor sent us an unbalanced budget to begin with," Dela Cruz said.

Harris' proposed spending plan did not include money for the union raises, which were widely anticipated. Lui-Kwan said the budget was balanced because the raises had not been awarded when the numbers were put together. But Dela Cruz said Harris could have worked out a contingency plan even if he didn't support the raises.

"I wish the administration did the responsible thing by budgeting for them," Dela Cruz said. "But we still haven't reached the halfway point in the budget process."

Dela Cruz would not say whether he felt the council should approve the raises, but he praised city employees as "our greatest assets."

Under Harris' plan, the property tax rate for commercial, industrial and hotel and resort classifications would rise to $11 per $1,000 of assessed value, from $10.63.

The budget contains several other variables that council members have questioned.

Harris wants to generate about $4 million by increasing dumping fees charged to commercial trash haulers, but Kobayashi said that may be rejected. The budget also assumes that the sale of downtown city properties will earn more than $30 million.

The council's proposed changes include cutting:

• $549,252 for vacant refuse collection jobs;
• $300,000 for vacant jobs in the real property division;
• $264,000 for vacant sewer maintenance jobs; and
• $251,276 for vacant sewer treatment and disposal jobs.

Reach Johnny Brannon at 525-8070 or jbrannon@honluluadvertiser.com.