HILO — After months of talking stink about a general excise tax increase, Mayor Harry Kim on Tuesday asked the County Council to approve it.
“I support this because of a limited choice,” Kim told the council Finance Committee. “I have no other choice except this on the table.”
The committee liked the tax hike even less, voting 3-6 to forward Bill 102 with a negative recommendation to the council for the first of two required hearings. The state law giving the county permission to raise the tax requires a public hearing as well.
The bill puts a one-half percent local surcharge — a half-penny on the dollar — on the state GET, which is currently 4 percent. The county has until March 31 to approve the tax, under the state law.
In a discussion that stretched over five hours, council members chafed at the short timeline they had to explain the need for more revenues and get input from constituents.
Council Chairwoman Valerie Poindexter said her constituents are upset. She said news of across-the-board raises for rank-and-file staff and top officials didn’t improve their mood.
“Here is the government, here is the beast, and we keep feeding the beast. How do we start living within our means?” she asked. “We raised the fuel tax, we said we’re gonna do this, we’re gonna do that, and people haven’t seen anything. … This is so unfair to the people.”
Hilo Councilman Aaron Chung, Hilo Councilwoman Sue Lee Loy and Puna Councilwoman Eileen O’Hara favored the tax as a way to diversify the county’s revenue sources and put some of the tax burden on tourists.
Kim said he looked more favorably on a half-percent GET surcharge after learning from the state that tourists would pay anywhere from 30 to 40 percent, or maybe even more, of the tax. Adding the surcharge would raise about $25 million annually, he said.
If approved after the public hearing and two council hearings, the tax hike would go into effect Jan. 1 and continue until it automatically expires Dec. 31, 2030.
Depending on the final property evaluations currently underway, the county is about $8 million short as it puts together a budget that’s due to the council March 1. Without the GET increase or some other revenue source, the county will have to cut services, Finance Director Deanna Sako said.
“We have cut our costs, we have trimmed our budgets, we have asked our departments to make do with less,” said Sako.
The GET surcharge can be used only for operating or capital costs for public transportation systems, including public roadways or highways, public buses, trains, ferries, pedestrian paths or sidewalks or bicycle paths.
But because the county currently pays for some of those projects partially through its general fund — paid by property taxes — the extra money could free up money in the general fund for other expenses.
Other council members wanted to see a list of projects that would be paid for with the new money.
“This council said loud and clear, we’re not going to give blank checks,” said Kona Councilman Dru Kanuha. “It’s hard for me to give one vote for a blank check right now.”
Kohala Councilman Tim Richards unsuccessfully proposed an amendment reducing both the fuel tax and property taxes that the council raised last year by at least 10 percent. That would result in a net status quo of tax revenue, but from different sources.
“I think they would support an increase if there was a decrease somewhere else,” Richards said.
The committee unanimously approved an amendment by O’Hara recommending any money saved from the general fund go for enhanced police protection.
At least one council member would rather see the property tax hikes than a GET surcharge.
“The more equitable way to raise funds would be to tax those who can most afford it,” said Puna Councilwoman Jen Ruggles, who targeted hotels and resorts, second homes and businesses as possible revenue sources through higher property taxes. “We do have a lot of wealth on this island and we need to be taxing those who can afford it.”
About 30 people sent in written testimony, the majority of it form letters praising the increase as a way to promote “Complete Streets, Safe Routes to School and other improvements that would support active transportation options, such as walking and biking,” many of the letters said. Another three testifiers said they’d support it if food, medical services and drugs were exempted.
All of that boils down to, “We gotta do this, we gotta do this, but no money,” said Carol Ignacio, representing the Blue Zones Project.
Several of the four people testifying in person in support of the tax pointed to the need to fix the county’s struggling Hele-On bus system.
“The bottom line is, we will all survive a half-percent increase with very little notice,” said Patti Pinto.
Pahoa resident James Weatherford said the new money should require “extraordinary oversight” from officials. He said the county needs to fix the bus system.
“What we call Hele-On has been an abject failure,” Weatherford said.
Hilo Realtor Mary Begier said she still had a lot of questions she hoped the administration could answer. It all boils down to trust, she said. She noted the 2030 sunset date in the bill, asking if the tax increase would actually expire then.
“Can you show me a temporary tax?” Begier asked. “Is there any tax we ever turn off?”
Three people sent in written testimony opposing the increase and one spoke against it.
“We just had two tax increases this past year,” said Michael Wilson of Captain Cook. “The cost of living is already very high. … That’s like increasing the cost of living a half percent.”