City Council concerned about Harris budget

By Johnny Brannon
Advertiser Staff Writer

City Hall number-crunching is kicking into high gear as the City Council picks apart the new yearly spending plan proposed by Mayor Jeremy Harris.

Harris and council members say they hope to avoid the feuding and financial chaos that led last year to a crippling bus strike, two bus fare increases just months apart, and a vehicle weight tax hike on Christmas Eve.

The mayor's budget calls for a 7 percent tax rate increase on most nonresidential properties and higher disposal charges for commercial trash haulers. Harris said no other taxes or fees should be required during the next year if the council approves the $1.5 billion blueprint for the fiscal year that begins in July.

The budget includes some major financial assumptions that aren't guaranteed to pan out, such as the sale of city-owned land and buildings.

And there's a big wild card in the deck: Nearly 3,000 city workers could soon get pay raises under a union contract that has been in arbitration.

These factors raise major concerns about the mayor's proposal, said council budget chairwoman Ann Kobayashi.

A decision on the Hawai'i Government Employees Association contract is expected this month, and could cost tens of millions of dollars that the budget doesn't cover.

The contract would cover two years, starting in July 2003, and could grant raises retroactively. The union includes city clerks, secretaries, budget analysts, computer programmers and other workers.

The bus fare and vehicle tax increases were tied to bus worker and police union contracts that were pending when the last budget was approved.

No money was set aside for either contract then, and none is earmarked for any HGEA raises now. Harris said including money in the budget for raises would undermine the city's bargaining power, and that he does not believe raises are warranted at this time.

But if they are awarded through binding arbitration, Harris and the council may have to consider new fees or taxes unless the city opts for service cuts and layoffs. A decision by the arbitration panel is due by March 23.

Kobayashi said that since the police union received a raise through arbitration, it's likely HGEA will, too. Failing to factor it into the budget is a big mistake, she said.

"I'm worried about that," Kobayashi said. "I just don't want the administration to come and say we have to raise this tax or that tax and push us into a corner like they did with the police raises."

The annual raises of 4 percent, and improved benefits, are expected to cost $18.6 million for 1,900 officers during the first two years.

The HGEA contract covers nearly 1,000 more workers, and could cost more. The union also asked for raises of 4 percent each year, HGEA deputy executive director Randy Perreira said.

Selling city property

Harris' budget relies heavily on the sale of city property, which could take some time to accomplish or run into snags.

Plans to sell a downtown parking lot that factored into earlier budgets dragged on for years. The city finally agreed to sell the property, known as Block J, for $4.5 million less than the budget assumed.

Some say balancing the new budget by selling more property seems highly speculative.

"When it comes to this mayor, you gotta put a lot of salt on his ice cream," said Tax Foundation of Hawai'i president Lowell Kalapa. "It looks good, but you've got to salt it down to look at what's really at the heart of it."

But Harris said if all goes well, the sale of commercial property and more than 1,000 apartments would generate more than $175 million.

About $117 million would pay off debt linked to 12 apartment buildings, $32 million would help balance the budget, and $30 million would go to a reserve fund, he said.

Paying for raises

Harris said the reserve is not being built up to cover any union pay raises, and that he strongly urges the council not to view it as a bail-out account if any are approved.

Paying for raises would require a dedicated revenue stream, not a one-time raid that leaves a hole the following year, he said.

Kobayashi said that's why she's concerned that Harris wants to balance the operating budget with money raised by selling the commercial property.

"That's never a good idea, because it's a one-time influx of money," she said.

Kobayashi said the council would look for other ways to save money, such as leasing new computers instead of buying, and increased privatization of government jobs.

She said she has lots of questions about how the apartment buildings would be sold. Many of the units are reserved for lower-income renters, and any sale would require council approval.

Harris said the sales would include a rent-to-own program that would allow the tenants of 311 apartments to buy those units. Other apartments will be sold at market rate, and some will remain available to renters, he said.

Harris said it appears the city will carry over $36 million from this year's budget into the coming year, but that there's no question the vehicle tax increase was necessary to cover the police raises.

"You cannot and should not run a government budget so that you are broke at the end of the year," Harris said after unveiling his new spending plan. " ... If you're going to approve a pay hike, you need to realize that there's a cost associated with that and you need to provide a funding source to pay for it."

Carrying a cash balance into the next year helps protect the city's excellent bond ratings, he said.

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