HILO — The Hawaii County Council adopted a substantial fuel tax increase Friday with some strings attached.
The 7-2 vote allows the county to boost its fuel tax — currently the lowest in the state at 8.8 cents per gallon — incrementally to 23 cents. The phased approach will bring the Big Island on par with Maui County, which has the highest fuel tax in Hawaii, in the 2019-20 fiscal year.
Motorists will see the first hike of 6.2 cents as early as October followed by 4-cent annual increases the next two years. That’s contingent, however, on the Public Works Department submitting a comprehensive plan to the council regarding how the funds are spent.
“The administration has to show us and be accountable for the additional monies …,” said Puna Councilwoman Eileen O’Hara, who introduced the amendment adopted by council.
“If I don’t see these improvements, particularly a positive impact in my district, I will be advancing legislation to stifle that future increase,” she later added.
The fuel tax supports the county’s highway fund which covers road maintenance, highway division salaries and helps fund the Hele-On bus service. The state charges a separate tax of 16 cents per gallon.
The funds are allocated based on miles of road in each district. That gives Hilo 30.7 percent of the fuel tax funds, Puna 20.5 percent, North Kona 14.5 percent, South Kohala 11 percent, Ka‘u 7.1 percent, Hamakua 6.7 percent, South Kona 3 percent and North Kohala 2.9 percent.
Public Works calculated the required rate hikes based on a drop in the county highway fund’s fund balance from about $13 million in 2011 to $5.2 million projected for this year.
Deputy Finance Director Deanna Sako said the county will be able to share with the council more details on when and where the additional money will be used once it knows when the tax increase will go into effect.
She said that’s dependent on the state Department of Transportation implementing them at the pump, which would either be in October or January. Afterward, a budget amendment would be required.
Despite some sticker shock, most council members found the hikes justifiable given the county hasn’t touched the tax in 30 years and the highway fund is facing shortfalls. Still, there was apprehension about asking more from residents less than two months after approving tax increases for all property classes minus affordable rentals and homeowners.
“My concern is it’s too much too fast,” said Kohala Councilman Tim Richards, who voted no along with Puna Councilwoman Jen Ruggles. He said he could support higher fuel taxes if the increases were smaller and more spread out.
Kona Councilman Dru Kanuha said he’s concerned about public safety if roads deteriorate.
“What I know is the highway fund is suffering,” he said. “Suffering means less roads being paved, less mass transit being utilized.”
Sako estimated the increase, which is less front-loaded than Mayor Harry Kim’s proposal but still tops out at the same rate, will cost someone driving 10,000 miles a year about an additional $3 to $4 a month during the first phase.
A second public hearing Thursday evening attracted only a handful of testifiers, mostly in support.
Greg Smith, while speaking from Pahoa, said he sees residents paying either way, whether for car repairs as a result of deficient roads or through higher taxes.
“We got to pay for government services,” he said. “Do keep up with inflation so we don’t have these bites,” Smith added.
Floyd Eaglin of Hilo told council members he was OK with a gas tax increase but wants them to be more mindful of the cumulative impact. Referring to the recent property tax increases, he said the county should consider layoffs or furloughs before more taxes.
“We can’t keep going at the rate we’re going,” he said.
A business owner testifying from Kailua-Kona noted it’s already expensive to do business in the state.
“Have we looked at all the options before we start taxing the people of Hawaii?” he asked.
Council members indicated they haven’t had the last word on taxes, with several expressing support for creating a committee to dig deep in the county’s tax code and find ways to lower the burden on residents.
Hilo Councilwoman Sue Lee Loy said the fuel tax increases will take pressure off the general fund.
“I’m reluctant to support this because I don’t like the way it unfolded,” she said. “But knowing that this sets a pattern and trend for us going forward there will be no excuse from the administration to not take a serious look at real property tax reform.”
Email Tom Callis at tcallis@hawaiitribune-herald.com.
FUEL TAX SCHEDULE
Current Hawaii County tax: 8.8 cents per gallon
2017-18: 15 cents
2018-19: 19 cents
2019-20: 23 cents
TAX BY COUNTY
Maui: 23 cents
Kauai: 17 cents
Honolulu: 16.5 cents
Hawaii: 8.8 cents
State: 16 cents
FUEL TAX COLLECTIONS
April 2017
Honolulu
• 24 million gallons
• $3.9 million
• 1,433 miles of roads
Maui
• 5.8 million gallons
• $1.3 million
• 596 miles of roads
Hawaii
• 7 million gallons
• $619,073
• 985 miles of roads
Kauai
• 2.6 million gallons
• $451,095
• 310 miles of roads
Source: State Department of Taxation, Hawaii County