HILO — Hawaii County’s 2017-18 spending plan was hit with a double whammy Thursday, when a legislative conference committee deadlocked on the county share of the hotel tax and firefighters were awarded a more than 2 percent pay increase.
The budget woes came even as property values inched up, bringing revenues up slightly even without any tax increases.
“We’re trying to cost it out, but we’re going to have to raise taxes,” county Managing Director Wil Okabe said Friday. “We’re looking at all the options, but we have to cut costs, and we have to raise revenues.”
Among the tax and fee options are property taxes, gas taxes, permit fees and a one-half cent general excise tax surcharge. Property taxes have been raised three times in the past five years.
The firefighters’ increase of 2 percent this year, 2.25 percent next year and a step increase over the two years of the contract is likely to set the tone for all the other employee unions up for collective bargaining this year, even more so because it was set by an arbitrator.
The firefighters’ raises alone will add $1.1 million in salary and fringe benefits to the new budget, Deputy Finance Director Deanna Sako said Friday.
Each one percent increase for all of the unions would add $2.5 million to $3 million annually to the county’s $474 million budget.
The amount concerned Okabe, but Hawaii Fighters Association President Robert “Bobby” Lee said it was a fair settlement for both the union, which wanted more, and the government, which wanted less.
“I believe it’s a good compromise,” Lee said. “I don’t hear any grumbling from the employers’ side.”
County officials were hoping the county share of the so-called hotel tax, or transient accommodations tax, would be increased this year to help local governments make up for shortfalls. The Senate had recommended the cap be increased from $103 million to $108 million.
But that’s apparently not the case, said Okabe. He said the latest word from county lobbyist Andy Levin has this year’s $103 million cap lowered back to $93 million, at the request of the House.
The county had estimated the TAT at $19.2 million in its budget, but that number will have to be reduced almost $2 million if the county share is reduced. The TAT is the second-largest revenue source behind property taxes.
The TAT money, SB 1290, is mired in a House-Senate conference committee as legislators hash out the amount. The committee scheduled a new meeting for Monday after failing to reach agreement Thursday. If no agreement is reached, the amount automatically goes back to $93 million.
And if the county is looking at increases in property values to make up for the new expense increases and revenue losses, that may be a disappointment as well.
Certified property values released Thursday show a projected property tax of $280 million, plus interest and penalties, about $900,000 more than the county’s earlier forecast.
County Council Finance Committee Chairwoman Maile David said she’s still waiting for the final shoe to drop.
“I anticipate serious considerations will have to be discussed and all available options explored,” David said. “Until we get firm numbers, I would not want to speculate.”
Mayor Harry Kim on May 5 will present his final proposed budget taking the new numbers into account. After approval by the council, the budget goes into effect July 1.