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The Honolulu Advertiser

Posted on: Tuesday, June 28, 2005

Collecting transit tax too costly, mayor says

 •  Chart (opens in a new window): Measures Lingle might veto

By Derrick DePledge
Advertiser Capitol Bureau

Mayor Mufi Hannemann has told the Lingle administration it would be too expensive for the city to collect a new mass-transit tax, creating a potential clash with Gov. Linda Lingle, who has threatened to veto the tax if the state has to collect the money.

The mayor said he informed the administration about his concerns last week, before Lingle announced she might veto a bill giving counties the option of adding the tax if the state receives up to 10 percent of the revenue for administrative and collection costs.

The tax — a 0.5 percent surcharge on the state's 4 percent general excise tax — could fund a multibillion-dollar rail project in Honolulu and is considered essential for the city to receive federal money for the project. A conflict between the city and the governor could give pause to wavering lawmakers and new fodder for tax opponents.

"We'd have to start from ground zero," Hannemann said yesterday. "So my feeling is the state is really in a better position to enact and collect the tax. They're set up for it."

Yesterday afternoon, at the State Capitol, Lingle repeated that she may veto the tax unless state lawmakers promise to delete the provision giving the state a share of the revenue. The governor and her advisers said it was a fundamental issue of "home rule" — the primary reason Lingle has supported giving counties the tax option.

Lawmakers have said they would consider Lingle's request, either in a special session in July or next year, but it is unclear if they have the two-thirds votes necessary in the House and Senate to override a Lingle veto. Although the issue had been raised by the administration before, it was not a dominant theme in the extensive debate over the tax at the Legislature.

"They simply didn't want to listen to us on this point and we were trying to make it clear that we felt this was a real flaw in the bill," Lingle said yesterday at a news conference. "And it's unfortunate that it can reach this point where they could have just made that change, collaborated with us somewhat on it."

Hannemann also said it was unfortunate that such a critical issue was not settled much sooner. The City Council is scheduled to hear the transit tax again on July 6, six days before the July 12 deadline for Lingle to decide whether to veto the bill.

"I'm still very hopeful that she will, in the end, at least let it become law without her signature," the mayor said.

The city estimates it could cost $10 million to $12 million in computer hardware and software expenses to start collecting the tax, and an additional $30 million over the first four years of collection.

The state, which already collects the excise tax, estimates that it would initially cost $3.6 million to start administering the additional tax and then about $2.5 million a year thereafter. Central to the administration's objection is that the state could receive as much as $15 million a year from the new tax, much more than the state Department of Taxation needs for collection.

Hannemann cautioned that the city figures are quick estimates and would likely be revised if the tax moves forward. State tax officials also suggested that the city's estimates might be too high.

Minimum-wage hike

Lingle released a list of bills yesterday that she may veto, and lawmakers will have to decide whether to return for an override or special session or wait to consider the bills again next year.

The governor said she was reluctant to challenge the Legislature's work, and the number of potential vetoes — 34 — would be the lowest since she took office. "But the public counts on the governor stepping in when there's something wrong with the bills," she said.

Lingle said she would allow an increase in the minimum wage to become law but indicated she may veto several other bills important to organized labor.

The wage for workers on the bottom rung will increase by $1 over the next 18 months, from $6.25 to $6.75 in January and to $7.25 by January 2007.

Lingle had been critical of the Legislature for not increasing the tip credit — which businesses can deduct from workers who earn tips — and reducing the amount businesses pay into the unemployment insurance fund. But she said she would let the minimum-wage increase become law without her signature.

Targeting bills that were favored by labor unions could also tempt Democrats to defend their union allies and advance a theme by Lingle and the Republicans that the last session was difficult on the business community.

But Lingle also risks alienating some Republicans and business leaders by not fighting the minimum-wage increase, which was opposed by restaurants and the Retail Merchants of Hawai'i. She already disappointed many anti-tax conservatives and Realtors after she signed a bill into law last week that raises the conveyance tax on higher-end real-estate sales to pay for affordable housing and land conservation.

Workers' comp

Many of her Republican supporters have also pleaded with the governor to veto the transit tax, reminding her of her past anti-tax pledges. The future of the transit tax will likely be the toughest decision for Lingle and state lawmakers over the next few weeks. House and Senate leaders are expected to meet separately over the next week to talk strategy, which could be influenced by an internal leadership struggle in the Senate and concerns about how the tax might play with voters in the 2006 elections.

The governor, meanwhile, plans to veto a bill today that restricts the administration's power to continue to implement new workers' compensation rules that took effect in May. Democrats believe the governor bypassed the Legislature after failing to reach agreement on the rules with lawmakers.

Lingle will also likely veto a bill that requires state and county governments to negotiate with unions before worker transfers, assignments, layoffs or terminations. The governor has claimed the bill could impact public safety and services by limiting where public workers can be moved, but unions have said that it would give labor the right to negotiate moving, housing or pay allowances for workers about to be transferred.

Lingle said she is still undecided about whether to veto a bill that would allow the teachers' union to go outside state health plans and purchase benefits for teachers through a trust. Union teachers have had that right in the past and have pressured Democrats to restore it for years.

"Teachers will be very disappointed if the governor vetoes it," said Roger Takabayashi, the president of the Hawai'i State Teachers Association, who was attending a national teachers' union conference in Los Angeles. "We'll be watching it real closely and recommending that teachers make contact with her."

Other union leaders believe Lingle was sending a message with her veto list.

"That's an understatement," said Randy Perreira, executive deputy director of the Hawai'i Government Employees Association, who was pleased, however, that the governor did not threaten the minimum-wage increase.

"I think this governor has seen to it to show that she is not supportive of working people," Perreira said.

Extra session possible House Democrats are holding an informational briefing today on the workers' compensation bill to prepare lawmakers for a potential override session. "We disagree with the governor on these bills, but we owe it to the public to review her reasons to veto. Going back into session to override vetoes is a serious matter, with a significant cost to the taxpayers," said House Majority Leader Marcus Oshiro, D-39th (Wahiawa). "We also need to give our members as much information as possible on whether an override session is warranted."

State Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai), the president and executive director of Small Business Hawai'i, said it is the business community, not labor unions, that should be complaining.

"The last hope that we've got is that she will veto the (transit tax)," Slom said.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com or 525-8070.