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The Honolulu Advertiser
Posted on: Tuesday, May 25, 2010

$1.82B city operating budget for Honolulu advances

By Gordon Y.K. Pang
Advertiser Staff Writer

Non-occupant homeowners would pay less in property taxes than proposed by Mayor Mufi Hannemann, but at a higher rate than they're paying now, under a budget plan passed by the City Council Budget Committee yesterday.

The full council now takes up the $1.82 billion city operating budget and other components of the budget plan on June 9.

Non-occupant homeowners, who belong in the so-called "non-homeowner" tax classification, would pay $3.58 per $1,000 of assessed value under the plan. That's less than the $3.72 that Hannemann had proposed in March, but more than the $3.42 they now pay.

The tax rates for all other classifications would stay the same as this year, including the "homeowner" (owner-occupant) class, which would continue to pay $3.42.

Budget Director Rix Mauer III said after the meeting that because of lower property values islandwide, the average property owner would see a drop in taxes, including the non-occupant homeowners.

For example, Maurer said, an owner-occupant family of a home valued at $600,000 this year would pay $160 less next year, while non-occupant homeowners would pay $70 less.


The vote to pass the tax rate plan was 4-1, with Councilman Ikaika Anderson the lone no vote. Anderson has consistently rejected the notion that residential property owners should pay more if they don't live in their homes and has pushed for the same tax rate for both residential categories.

Anderson said it's unfair to characterize all those who don't live on their properties as well-to-do or as speculators. He also believes increasing rates only on the non-occupant homeowner class will result in higher rents.

Several O'ahu residents testified against the plan.

Kailua resident Ursula Rutherford noted that Hawai'i has a higher rate of renters than other states. "The tax burden should be shared fairly by all taxpayers," she said.

Several of Anderson's colleagues also voiced concerns about setting two different rates for residential property owners.

Council Chairman Todd Apo, who supported the budget plan, said he intends to introduce legislation that would once again place all residential properties under one tax rate starting with the 2011-2012 budget year.

The council voted 5-4 last year to create two residential tax classifications following heavy lobbying by the Hannemann administration, which argued it needed the flexibility to help ease the burden on owner-occupants.

The other three Hawai'i counties also have two residential tax classes.

In a move to help offset the tax burden on some in the non-occupant homeowner class, the committee moved out a bill giving property owners a one-time $100 tax credit if they have two dwellings on a parcel and have a homeowner exemption on one of them.

Mauer estimated there are about 4,000 property owners eligible to get the tax credit.

The committee also voted to increase the minimum tax paid by nonprofits and others from $100 to $300 annually. It would be the first time the minimum tax has increased since 1993.

In other action, the committee rejected a bill that would have increased the city's fuel tax from 16.5 cents to 19.5 cents a gallon after criticism that the hike would have hit the wallets of long-distance commuters more significantly.

As for other details in the operating budget bill, the latest version calls for slashing about 10 percent of vacant, funded job positions to save $2 million, and trimming current expenses across most agencies by 1.5 percent to save an additional $1.5 million.

About $440,000 in vacant, funded positions in the Honolulu Police Department budget was restored after an appeal by Chief Louis Kealoha.

Kealoha said he needs the money to run three recruit classes of 50 cadets each to fill a forecasted 150 vacancies in the coming year.

The latest draft also calls for taking $5 million from the $10 million that had been set aside for the city's trash hauling contract with Hawaiian Waste Systems. The company was supposed to begin shipping municipal waste in the fall but has yet to do so after running into a variety of problems.

There were no major cuts to parks programs or the Royal Hawaiian Band as Garcia had threatened to do if the budget picture got dire.

The committee voted unanimously to restore $100,000 to its own legislative budget for the filming and televising of council committee meetings.