Mayor Billy Kenoi on Friday unveiled his biggest budget yet, for the first time asking the County Council to spend more than the previous administration spent.
The $412.6 million budget is 4.6 percent higher than last year’s, and 2.3 percent higher than the budget in place when Kenoi took office in 2008. Once amended and passed by the County Council, the budget begins in the fiscal year that starts July 1.
The spending plan does not include any hikes in property taxes or fees. Still, homeowners may see increases in their property taxes because of higher property values. In all, property tax revenues are expected to go up 5.9 percent, to $323.4 million because of increased property values coupled with tax revenue from new construction.
“After five years of declining revenues, we are finally witnessing a modest, measured recovery in property values,” Kenoi said in his budget message to the council. “This will gradually translate into a stronger economy and a brighter budget picture.”
Kenoi said in an interview Friday afternoon that he was relieved property values increased enough to meet the added costs.
“We’re very thankful that our property values and revenues generated meets the increased costs of the negotiated employee salaries without having to increase taxes,” Kenoi said.
The budget reflects $18.4 million in increased employee expenses, most of which comes from union raises negotiated at the state level. The increases come even as the number of employees dropped from 2,787 in 2008 to 2,628 last year.
In addition to covering salaries, the county has added $1.9 million for employee health expenses and an additional $1 million into the GASB 45 post employment health benefit account.
The council will undertake a line-by-line scrutiny of the budget with each county department April 2 to 4. The mayor then submits an amended budget May 5 that takes into account certified property values.
Hilo Councilman Dennis Onishi said the county is benefiting from a significant carryover from last year, coupled with what is likely to be an increased share of the state transient accommodations tax on hotel rooms and short-term rentals, two factors that will help buoy the budget up to meet the increased expenses.
“I’m hoping that property values come up a bit,” Onishi said. “That should create some extra money.”
The council has until June 30, the last day of the fiscal year, to pass a budget or the mayor’s budget automatically goes into effect.
The nine-member body has its work cut out for it if it’s going to honor the restraints it placed upon itself in Resolution 115-13, which raised property taxes after inserting this language: “Be it further resolved that the Council shall take affirmative steps to decrease the overall schedule of real property tax rates by 10 percent prior to the Fiscal Year beginning July 1, 2014, and ending June 30, 2015.”
The council voted 7-2 last year to raise property taxes, with South Kona/Ka‘u Councilwoman Brenda Ford and Puna Councilman Greggor Ilagan voting no.
Council members haven’t been clear on how the council could cut back the tax rate. But all of the members contacted last week were glad there would be no new taxes in the new budget.
“I’m happy to hear that news from the mayor,” North Kona Councilwoman Karen Eoff said. “We had made a collective group statement that we were not going to do that again.”
Last year’s $394.3 million budget was $27 million, or 7.4 percent, higher than the prior year’s budget , but still $8.9 million less than when Kenoi took office in 2008.
“From the beginning of this administration, we have crafted budgets that limit spending, but also allow for targeted investment in our communities and our future,” Kenoi said.
Coming out of the recession, the council had agreed to raise property taxes from 10.2 to 10.8 percent, depending on property classification. That translated to about $150 more a year in taxes for the owner of a $250,000 home.
The tax hikes, coupled with significant hikes in fees, were unpopular with many residents, but most council members saw them as a necessary evil in order to prevent severe cutbacks in county services.
Property taxes are by far the biggest source of revenue for county government. The county’s share of the transient accommodations tax, a surcharge on hotel rooms and short-term rentals, is second. The county also brings in revenue from state and federal grants, interest and user fees.
Last year, motorists saw their total state and local taxes and fees rise annually by $24.70 to $176.70, the first county increase since 2004. Bus riders now pay $1 more a trip, with regular riders charged $2 and seniors, students and disabled paying $1.
In total, property taxes raised $216 million last year. The residential classification, mostly second and third homes or homes not under the homeowner exemption, accounted for the largest chunk of that with $64.6 million in taxes, followed by agriculture and native forest with $41.4 million, apartments with $38.1 million and homeowners with $31.9 million.
Commercial, hotel and resort and industrial, with much lower property tax rates, accounted for $14.2 million, $12.5 million and $9.2 million, respectively.