HILO — Big Island motorists and property owners will feel the pinch of higher taxes this year, following a revised budget released Friday by Mayor Harry Kim.
The $491.2 million spending plan is 6.1 percent more than the current budget. It relies on almost across-the-board property tax rate increases and an increase in the minimum property tax. The only category spared is affordable rentals, which will retain their $6.15 in tax per $1,000 in property value.
While he didn’t factor it into this year’s budget, Kim is also seeking a whopping 116 percent increase in the gas tax later this year. It would rise first from 8.8 cents a gallon to 19 cents, with increases of 2 percent in each of the next two years until it reaches 23 cents. That’s the amount Maui now charges and is the highest rate in the state.
The Hawaii County gas tax currently is the lowest in the state, bringing in just over $8 million. It was last raised in 1988.
“It is quite a jump,” agreed Deputy Finance Director Deanna Sako. “Our roads are deteriorating and we need to fix them.”
Kim said he had no choice in raising taxes. Faced with 4 percent increases in salaries negotiated statewide, and a $2 million cut in the transient accommodations tax from the state, he had few options, Kim said. The county’s second-highest source of revenue, the TAT, also called the “hotel tax,” is at $17 million this year.
“This has got to be the most difficult thing I’ve done as mayor, past and present,” Kim said.
In addition to covering increases that the county has no control over, there’s also $600,000 to start replacing aging police vehicles and $600,000 to address problems with the Hele-On bus system. Overtime for firefighters was restored to the tune of $1.9 million.
The proposed budget will be heard by the County Council on May 17, and then will be subject to a public hearing on the new rates. The council has the option to add to and delete from specific line items, as long as the finalized budget is balanced.
Council Chairwoman Valerie Poindexter said she’s asked the mayor and cabinet to take the budget on the road.
“I’m hoping the mayor and the cabinet are willing to come out to our communities, so they can present the budget as well as hear back from communities, especially with the tax increases,” Poindexter said.
The council, which had faced a zeroing out of its $810,000 contingency fund, now sees it reduced to $675,000 in the new budget. The council uses the fund to distribute money to nonprofits and county agencies for projects in their districts.
Kim had campaigned saying he didn’t want to raise taxes, and then, once he’d taken office, softened that stance to he’ll try not to raise taxes, but once he saw the fiscal straits the county was in, he said he realized he had no choice.
Most of the expenses such as salaries and wages, employee retirement programs and old bond debt are out of his hands.
Each 1 percent salary increase for all of the unions currently up for new contracts adds $2.5 million to $3 million annually to the budget. There’s also an additional $500,000 to pay for new bond debt anticipated.
“These increases were our last resort,” Kim said. “That resort became the only resort unless I took drastic measures, such as laying people off.”
This will be the third time property taxes have been raised since 2010. The new fiscal year starts July 1.
Property in the homeowner class valued at the island average of $300,000 with no other exemptions would see its annual tax increase $120, from $1,845 to $1,965. Property in the residential class, which includes second and third homes and rentals, valued at the same amount, would see its tax increase $195 from $3,015 to $3,210.
The proposed tax hikes follow a 34.4 percent increase in property tax revenues over the past five years, from $198.3 million in 2012 to $266.5 million in 2016. The new budget contemplates $282.1 million.
The property tax revenue increases come from a combination of higher tax rates and higher property assessments.
The county also is looking at property owners who pay only the minimum tax rate. Some 35,689 property owners paid the $100 minimum property tax last year, with some paying as little as $25 annually. That’s out of 140,858 taxable properties.
The new plan doubles the $100 minimum to $200 annually, while reducing the $25 annual tax on properties worth $500 or less to zero.
The budget also gives a break to the increasing number of elders. The current $100,000 property assessment reduction for those 70 and over will be increased to $110,000 for those between 75 and 80 and $120,000 for those 80 and older.