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The Honolulu Advertiser
Posted on: Sunday, December 18, 2005

Rise in property values sets up a political test

By Jerry Burris
Advertiser Columnist

During last year's mayoral campaign, candidates Mufi Hannemann and Duke Bainum did something relatively unusual for politicians seeking a vote:

When pressed, as always, on the topic of taxes, neither Hannemann nor Bainum would rule out the possibility of a tax increase in their administration.

That's normally a topic where candidates duck and cover.

But both men were experienced City Hall veterans, and each was campaigning on the idea that Honolulu faced a considerable pile of deferred maintenance that would not be covered without some extra cash.

The previous administration of Jeremy Harris went almost to the end without raising tax rates. In fact, Harris often proposed reducing rates in the face of rising property values.

He kept the ship afloat through aggressive cost-cutting, technological fixes and — at least from the perspective of Harris and Bainum — an overly enthusiastic program of deferred maintenance of roads, existing parks and the like.

Well now, the moment of truth is here.

The latest property valuations are in and they show an average increase in values of something like 26 percent. Leave tax rates where they are and this adds up to a substantial windfall for the city.

Homeowners are already struggling and are unlikely to be happy about seeing the tax bill go up 26 percent on the old family home simply because cash-rich speculators have been buying and selling up and down the street.

So it would be politic to offer talk about relief, or to promise that some of the impact of higher values will be offset by lower rates.

To his credit, and in keeping with what he said during the campaign, Hannemann is not ready to do that just yet.

The mayor told reporter Robbie Dingeman that the city might just need the extra money for debt service, salaries and benefits and for long-overdue repairs to roads, sewers and other city services. He also wants to build up the city "rainy day fund" which is minimal today.

Keeping the money for any purpose is not going to be immediately popular.

The trick now will be to avoid a "if-we-have-it, then-we'll-spend-it" mentality and instead make a rational case that the influx of cash is truly needed.

Hannemann is talking about a modest $200 credit for older homeowners (they can already apply for extended exemptions) to help folks on fixed incomes who are stuck in homes with rapidly escalating values. That will help a bit, but it will still be quite a shot.

What lies ahead is a political test, perhaps the first big one of the Hannemann administration. Can he convince the City Council and the taxpaying public that they will have to pay considerably more to get the quality of city government they want?

The voters chose a candidate who warned taxes might have to go up in the near future.

Now, we're about to see if they meant it.

Reach Jerry Burris at jburris@honoluluadvertiser.com.