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The Honolulu Advertiser
Posted on: Tuesday, February 28, 2006

Hannemann budget focuses on essentials

By Robbie Dingeman
Advertiser Staff Writer


Mayor Mufi Hannemann said he supports three City Council tax-relief proposals:

Bill 1 (2005) doubles the basic homeowner’s exemption from the current $40,000 to $80,000 for owner occupants up to 64 years old. Owner-occupants 65 and older would be eligible for a homeowner’s exemption of $120,000. This bill would replace the current system, where the standard $40,000 exemption increases in five-year steps beginning at $60,000 for property owners 55 and older, up to $120,000 for those 70 and older. This would begin next year.

Bill 66 (2005) adjusts the filing requirement for those 75 and older with low-income super-exemptions. Rather than reapply annually, the bill would require them to reapply every five years up to age 90. After 90, they would not have to reapply.

Bill 80 (2005) provides a tax credit for owners granted a home exemption where title holders have an aggregate income of no more than $50,000. Eligible owners would receive a tax credit for any amount that exceeds 4 percent of their income.

Hannemann said he isn’t sure whether he’ll support another council proposal:

Bill 12 would establish a new way of setting tax rates that would adjust for increases in the city’s fixed costs, such as salaries and debt service. This bill recommends the city take the basic budget, adjust it for inflation and add any increases to fixed costs, then set the tax rate to bring in that amount.

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Some highlights of the mayor's city budget proposal, which asks the City Council for nearly 10 percent more this year than last year in the $1.49 billion operating budget and 32 percent more in the $629 million construction budget:

  • $10 million for environmental programs, primarily to meet new federal mandates regarding storm water pollution control and to expand the "greencycling" automated curbside green waste recycling program islandwide;

  • $10 million for police crime lab expansion;

  • $77 million for streets, including $33.1 million for the North-South Road in Kapolei;

  • $50.2 million for the Honolulu High-Capacity Transit Corridor Project;

  • $7.3 million for the implementation of the second phase of integrated financial and human resources software system;

  • $5.1 million to install fire sprinklers in the Honolulu Municipal Building;

  • Nearly $4 million for Blaisdell Center improvements including air-conditioning and new risers;

  • $2 million for new comfort stations at the Waipi'o Soccer Complex;

  • $1 million for Wai'anae Coast alternate route to prevent the Leeward Coast from being cut off by accidents on Farrington Highway.

    Source: City and County of Honolulu

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    In a budget long on roads and sewers and short on pricey "nice to have" projects, Mayor Mufi Hannemann agrees with the City Council that some modest property tax relief is a "need to have."

    Yesterday, Hannemann unveiled details of his record $1.49 billion operating budget. Along with the sewer work, public safety, traffic and transportation, and other such issues that dominate the proposal is room to finance tax-relief bills passed this month by the council, he said.

    Hannemann also proposed a construction budget of $629 million, larger than any capital improvement program since at least 1994.

    Among some of his key spending priorities:

  • $344 million for various sewer-related projects islandwide.

  • $32 million for additional fuel and electricity costs.

  • $33.1 million for construction of the long-planned North-South Road in Kapolei.

  • $30 million for road resurfacing and repair.

    By law, Hannemann must submit a balanced budget. The nine-member City Council has until June 15 to adopt a city budget, which sets out the municipal government's spending plan for the fiscal year beginning July 1.

    This was Hannemann's second proposed budget, and while it continued his emphasis on less-glamorous issues, it included only one minor fee increase: a $2-per-ticket increase in the price of admission for tourists visiting Honolulu Zoo.

    Last year's budget included a number of fee increases, ranging from sewer fees to the vehicle weight tax.

    Generally, council members said they understand that the mayor's goals are modest because they believe he is still playing catch-up to years of postponed spending and maintenance.

    But Hannemann showed he wants to work with the council on the hot-button issue of soaring property taxes.

    "We recognized all along that the city needs to relieve the burden being placed on property taxpayers by higher real-property assessments," he said yesterday.

    The mayor said he's willing to sign into law three of four measures passed by the City Council even though they weren't much like what he wanted.

    Skyrocketing property tax values sent tax bills shooting up into double-digit increases over the last three years, prompting hundreds of complaints from taxpayers. If tax rates were left the same this year, as Hannemann proposed, and there was no major reform, the city would bring in an additional $125 million.

    Hannemann earlier proposed crediting $40 million of that back to homeowners as some form of tax credit of about $300 per owner.

    The council instead came up with proposals that fell short of that but targeted homeowners younger than 55 and those earning less than $50,000.

    Hannemann said he's uncertain what the financial impact would be of all the council's measures, estimating that they could cost from $3 million to $40 million in revenue.

    He said he is not so sure what he will do about Bill 12, a measure passed by the council that would change the way assessments are made, switching from market value to a calculation tied to the cost of core city services, adjusted for inflation. Hannemann must decide by later this week if he will veto that bill.

    The mayor said he hopes to continue to work with the council to come up with property tax relief for the long term. He said he still hopes the council will back his suggestion to create a homeowner's classification that could receive a lower tax rate than other property owners and could be adjusted year to year.

    Hannemann said he still would like to see an additional $20 million added to a reserve fund but has heard the council's reluctance about accumulating savings now while residents are complaining that they are raiding their own savings to pay soaring property taxes. "I still maintain you can give them relief and still save some," he said.

    Council Chairman Donovan Dela Cruz said he's happy to hear the mayor promising to fill 44 parks positions. With more than 50 parks in his North Shore district, he said, he knows how much people rely on basic park upkeep.

    Dela Cruz said that the record budgets may seem expensive but he believes they tackle "long overdue" upkeep and maintenance that will save taxpayers money in the long run.

    Councilman Charles Djou said he is happy there were no tax increases proposed, and he praised the mayor for trying to focus city government on basic needs.

    Djou said the city still needs to ratchet down its spending. "From my perspective, the solution is you've got to cut taxes," he said.

    And he said he hopes more can be done to ease the tax burden for residents. "I think we should give more property tax relief to homeowners," he said.

    Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.