Fight over budget ready to heat up at City Hall

ANALYSIS: Election-year politics, jobs and pay raises, and a tax-increase proposal all come into play in the struggle over city finances.

By Johnny Brannon
Advertiser Staff Writer

The annual City Hall spending brawl has reached the halfway point, and now it's time to get serious.

Mayor Jeremy Harris has made his proposals, the City Council has taken a first whack at changing them and constituents have had a chance to weigh in with concerns.

Tens of millions of dollars are in dispute, along with property tax rates, sewer fees and other revenue sources. But there's more than that on the line.

This is Mayor Jeremy Harris' last year in office, and it's important to leave amid an aura of solid achievements and responsible money management.

At the same time, five council seats will be up for grabs this fall, and it's equally important to those running for re-election or higher office to stake out voting records they can promote and defend.

When the stage clears after a final vote in June, the city budget for the fiscal year that begins in July may be very similar to the one Harris proposed in the beginning.

Some changes are likely, however, including:

• Designating $6.9 million to raise salaries for 3,000 white-collar city employees. Harris says the arbitrated raises should be rejected, but the council is almost certain to approve them.
• Cutting up to $2.7 million for city jobs that have recently been vacant and from some arts and cultural programs. Much of the salary money has been used to pay other workers' overtime or hire contract employees.
• Modifying Harris' plan to expand curbside residential recycling islandwide. Running the program as designed would cost $2.7 million per year, and equipment would cost another $12.6 million over seven years.

"There's no doubt the council wants to do this, because we're definitely in favor of recycling," Council Chairman Donovan Dela Cruz said. "It's just a matter of making sure it's cost-effective and planned out well."

Another possibility is the rejection of Harris' call to raise commercial trash disposal fees. That would leave a $4.3 million gap to be filled by cutting the budget elsewhere or finding another way to generate revenue.

Council budget chair Ann Kobayashi said she favors rejecting the fee increases if the difference can somehow be made up. That would save money for condominium dwellers and small businesses that can't afford to pay more for rubbish disposal, she said.

The council must present its second draft of the spending plan by May 24. That's usually the last version, so the real number-crunching will be between now and then.

In the meantime, there are a few other issues to grapple with, including tax rates and sewer fees.

Harris originally proposed a 7 percent increase to tax rates on commercial, industrial and hotel properties. But after refinancing $321 million in bonds, he said, a 3.5 percent hike is all that's necessary.

The budget is now in the council's hands, however. The larger tax rate increase would help offset the salary raises, so there's little room to reject it or scale it down.

There has been no huge public outcry from businesses to stop the tax plan, so the political liability is limited. The council can say Harris is responsible for proposing it to balance his budget, and Harris can say he tried to minimize the impact but was ignored by the council. Both positions would be true.

Kobayashi said she hopes to find a way to exempt small businesses on property that's less than 10,000 square feet.

"I don't know if we can do it this year, but if we pass a 7 percent increase we want to help the small businesses," she said.

The council balked earlier this month at refinancing $10 million in sewer bonds, raising the possibility that sewer fees will be increased to make up the difference.

But that's unlikely in an election year. Instead, council members will almost certainly allow the refinancing but continue to complain that such actions leave future generations with more debt and cost taxpayers more in the long run.

Harris can continue to defend the plan by saying his policy is to keep any tax or fee increases to a minimum, and that the refinancing won't slow down sewer repairs.

Harris expects to raise $34 million by selling the city's interest in two downtown commercial properties known as Harbor Court and Queen's Court.

The council hasn't granted approval yet, but is likely to do so amid warnings that this one-time revenue source will leave a $34 million hole the following year.

That's because the operating expenses covered by the property sale are recurrent. But it's far too much money to scramble for this year if the sales are rejected.

The council's plan to cut $2.7 million from empty jobs and programs such as hula and torch lighting events in Waikiki may be scaled back after it sparked complaints last week.

Kobayashi said some cuts are still likely, but that she wants to end the practice of routinely using money from empty jobs to pay overtime.

"If they need overtime money, let's have a special line item, not hide it," she said. "There's nothing wrong with paying overtime, but let's be upfront about it."

City managing director Ben Lee said he was hopeful that jobs would not be permanently lost.

"The positions that the council is proposing to cut are all badly needed in all departments so they can continue to provide city services," Lee said. "We're going to work with the budget chair to see if we can restore these badly needed positions as well as find ways to provide a balanced budget that's acceptable to the council and the administration."

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

• • •