City budget expected to get final vote today
By Johnny Brannon
Advertiser Staff Writer
After months of heated hearings, the City Council will take a final vote today on a contentious $1.5 billion spending plan for the fiscal year that begins next month.
But Mayor Jeremy Harris' administration says a move to grant a tax break to some large landowners and farmers who lease property from them could throw the budget out of balance, violating the City Charter.
KOBAYASHI
The council is hustling to find a compromise that would allow for some tax relief for agricultural land but include enough flexibility to keep the budget numbers acceptable, at least on paper for the short term.
Some council members say Harris' version of the budget was unbalanced to begin with because it inflated some revenue projections, didn't cover all expenses, and assumed that some city property will be sold later for a higher price than is likely.
If that's true, any tax breaks for agriculture would compound the shortfall and could lead to serious cash flow problems — and spending cuts or new fees.
The budget includes a 7 percent tax rate increase for commercial, industrial and hotel properties. Homes and apartments would see no rate increase, but most property owners in all categories will still pay more in taxes next year because assessed values continue to climb.
The spending plan also increases fees for parking meters and city parking lots. Spaces that cost $1 per hour would rise to $1.50, and those that cost 50 cents would rise to 75 cents.
Yesterday, the council's budget committee voted in favor of the agriculture tax break but members said they remained open to changes before today's final vote.
Council budget chairwoman Ann Kobayashi said a change to the way taxes are calculated for land zoned as agricultural has backfired and hurt farmers it was meant to protect.
But councilman Gary Okino said the real problem is that some big landowners won't agree to restrict their property for farming — and qualify for a tax break that's already allowed — because they can make far more money by developing huge housing tracts later.
Hawai'i Farm Bureau Federation director Alan Takemoto said part of the problem is that there are not enough farmers to work agricultural land that has been fallow since the closure of O'ahu's big sugar plantations.
Landowners that keep their property vacant or won't agree to dedicate their property to agriculture for a set number of years, pay a higher tax and usually pass the cost on to the farmers they lease to, he said.
"Farmers are in the middle of all this," Takemoto said. "We appreciate everyone trying to help us, but we're getting bounced around in all this."
It will take time for the farm industry to transition from a few large sugar plantations to a larger number of small farms that grow a wider range of crops, and tax relief is crucial in the meantime, he said.
A bill Kobayashi introduced would have slashed assessments of agricultural land by 95 percent of their fair market value, whether it was farmed or vacant.
Okino and other critics said that would remove the current tax break's incentive to lease land to farmers on a long-term basis and restrict it to agriculture.
Harris' administration said the bill would open a budget gap of up to $12 million. A modified version, which the budget committee approved yesterday, allows owners of vacant or farmed agricultural land to seek an unspecified "compromise" on their taxes. Backers said they may seek more changes before tomorrow's final vote.
The two leading candidates for Honolulu mayor, Duke Bainum and Mufi Hannemann, are now trading jabs over the dispute.
Hannemann has supported the tax break before the council, and in a radio ad blamed Bainum for triggering higher taxes. Bainum sponsored a 2002 bill while he was a councilman that changed agricultural tax assessments from a formula based on crop yield to one based on land value.
Bainum yesterday said his bill "is doing exactly what we wanted it to do" and called the proposed tax break a "poster-child for special-interest legislation."
The budget committee also voted yesterday to reject pay raises of 21 percent for council members and 5 percent for the mayor and several other city officials. The raises would still take effect unless at least 7 of the 9 council members vote against them today.
The committee also voted against diverting any money generated by Hanauma Bay concessions from a special fund for the nature preserve to the city's general fund.
The administration had called for using $1.1 million from the concessions to balance the city budget. The council considered diverting a smaller amount but killed the plan after an outcry from Hanauma Bay supporters.
Reach Johnny Brannon at jbrannon@honoluluadvertiser.com or 525-8070.
