County Council Update

I wanted to give you an update of some happenings in our county:

KAMUELA AIRPORT AIRLINE SERVICE

As most of you know, the Waimea Air Service has been subsidized by the federal government to the tune of $397,000 annually. Moving forward, the federal requirements for this subsidy require community participation. The intent is to help underserved communities; with a definition as beyond 40 miles from the nearest major airport.

Waimea airport is 39 miles from Kona. Only two airports in the nation fall under this expectation: Waimea and one in Pennsylvania. Initially our state expected to pay the share of 5 percent, or approximately $20,000 out of airport landing fees, however this was not allowed. If we were to lose the subsidy, going through the process to reinstate it is difficult, expensive and not guaranteed.

Through a collaborative effort between Representative Cindy Evans, Senator Lorraine Inouye, and our county government, we have secured the subsidy for at least another year. Funding has come from the Hawaii County Council; myself, Councilwoman Sue Lee Loy, Council Chair Valerie Poindexter; and the Office of the Mayor.

Additionally, the Waimea Community Association has pledged $500 and the Kohala Coast Resort Association $1,000. A special thank you goes out to the Kohala Coast Resort Association as although they will see no direct benefit of that service, they recognize their employees and families would and they are supporting their employees by doing so. Thank you! Work will continue on securing funding for subsequent years.

FISCAL MANAGEMENT OF THE COUNTY OF HAWAII

The budget season for fiscal year 2018-2019 is upon us. Doing a historical review, in 2000 the county budget was approximately $197 million. By 2008, this had swelled to approximately $400 million. During the global financial crisis of 2008-2010, we saw a reduction of approximately 10 percent in the overall budget to approximately $365 million. Increases over the past seven years has taken us to where we are today: approaching $500 million.

Last fiscal year the mayor’s initial budget proposed in March was $474 million. In the May revision, this had gone up to $491 million, a $17 million or 3.5 percent increase. A great deal of this was due to increases in the collective bargaining agreements that the state had made.

This did not set well with me, and in the revisions I attempted to initially propose an approximately $2.5 million reduction, with another council member wanting to increase the budget by almost $10 million. What we ended up with was a token reduction of approximately $500,000, but at least it was a reduction.

In order for this to work, unfortunately the Real Property Tax (RPT) rates had to be increased. No council member liked that but if we do not have a balanced budget by start of the next fiscal year, the mayor’s original budget submitted in May would automatically be adopted. In the long conversations on the tax rates, homeowner and agriculture rates were left untouched. The end result was increases in other categories ending up being from 1 percent to 6 percent with the minimum tax rate doubling from $100 to $200.

It was also left that a complete review of the RPT rates would be undertaken and everything looked at in context with each other. This is currently underway and is well represented by nongovernment people from the communities and experts in their respective areas. I am looking forward to their report in the not too distant future.

Concurrently, we knew that the fuel tax was being proposed with an increase. It had been 30 years since an increase was made and that was in part the justification. I had wanted to incorporate the conversation with the budget talks but was told they were considered independent of one another.

I did not, and still do not, see it that way as Hawaii has one of the highest tax burdens in the nation. This concept of “silo legislation” and not looking at the big picture as far as impacts are concerned, I firmly believe sends us down some poor paths. Had we cut the budget/spending harder I might have been inclined to support a modest increase of the fuel tax at the time, but that was not what was presented for our consideration. Since we had a balanced budget at that time, an increase would raise another $5 million in taxes and therefore, I voted no on the fuel tax increase.

As to the Transient Accommodation Tax, or “TAT,” I went back and studied the history of TAT to develop an understanding of it. This was put in place in 1986 with the intent to help fund or offset the impact of our visitors. During the initial years, 95 percent of the TAT collected went to the counties, with 5 percent to the state. Approximately $65 million was collected and distributed to the counties in approximately the following manner: 44 percent to City &County of Honolulu, 23 percent to Maui, 19 percent to Hawaii Island and 14 percent to Kauai.

Fast forward to today, the last 30 years has seen the state use the TAT for other funding. Specifically, the Hawaii Conventions Center, the Hawaii Tourism Authority and now the Honolulu Rail have all received funds. Allocation percentages to the counties have remained similar, but the total allocation to the counties has been capped at $103 million.

This year it is anticipated that more than $500 million in TAT collections will be made. Many agree with me that this is not fair to our counties. At this allocation, our county receives approximately $19 million. In 2016, UHERO (University of Hawaii Economic Research Organization) wrote a paper coming out of a working group wherein they found that approximately a 50/50 split between the state and counties would be fair.

At the start of the Hawaii Legislature last month, I spoke on behalf of the Hawaii State Association of Counties (HSAC) to the leadership of the House and Senate, and presented our collective opinions and urged them to adopt a metric similar to that presented by the UHERO paper. If this were to happen, our county’s share would over double to $40 million. The president, of HSAC, Councilman Dru Kanuha, set the stage by introducing the members of the board and other council members in the room. He then asked Councilwoman Maile David to bless the meeting and set a tone for our discussions. This segued into my presentation and ultimately allowed for the county council from the Big Island to set the tone of what turned out to be a well-received presentation.

Now, our county is considering legislation as it relates to the General Excise Tax (GET). Though there is support for this in some constituent groups, many I have heard from are deeply concerned by an increase in the overall tax burden. So am I.

Under the confines of the Sunshine Law, the only way we can discuss this as a council is if it is on the meeting agenda through some form of legislation or communication. Though the Sunshine Law is great for transparency, it precludes anything for the council but through public discussion. This is extremely inefficient and accordingly very expensive for the county and thus its constituents.

As many of you have heard me say, we should listen to all proposals. To borrow from Councilwoman Sue Lee Loy, “Good information affords us the ability to make good decisions.”

By the information I have been able to assemble, the County of Hawaii generates approximately $200 million of GET collections annually. The 0.5 percent surcharge would thus generate approximately $25 million more specifically for the county. Who would pay this?

In evaluating the numbers, each island visitor spends approximately $180 a day. At this rate, with an average of 30,000 visitors a day every day for a year, this translates to approximately $10 million generated in the additional GET collections specifically for this county. By these numbers, 40 percent is thus paid by nonresidents or our visitor industry.

What about the other portion? Yes, this would be paid by the residents but here is the caveat: if we also have a concurrent reduction in RPT and fuel tax I might consider supporting it. By my estimate, an approximate reduction of 5-10 percent would decrease the tax burden to the people by approximately $15 to $30 million. Adding back the revenue from the GET 0.5 percent would then give our county an overall increase revenue stream, while holding the resident’s total burden essentially unchanged.

Some believe my numbers are conservative and actually our collections would be greatly increased. This helps our retiree on fixed income as it pertains to the RPT and the young families that have to drive a great deal to get to work. This could be a good direction for our county and our people if our concessions in the RPT and fuel tax are achieved. Stay tuned for more as these issues progress.

Please take notice that Mayor Kim and his administration are seeking community meetings islandwide to discuss his recent GET increase proposal. District 9 has secured the following dates and encourages all to attend:

• Saturday, Feb. 17, 2018 at 11 a.m. – North Kohala at the Kohala Intergenerational Center

• Monday, Feb. 19, 2018 at 11 a.m. – Waikoloa at the Waikoloa Elementary/Inter School Cafeteria

• Monday, March 12, 2018 at 6 p.m. – Waimea at the Waimea School Cafeteria

As always, it is a great privilege to continue to serve as your councilman and I look forward to our future together.