Property tax hikes loom as lava flows

HILO — Property tax hikes could be back on the table, as county expenses increase even as property values erode, thanks to lava inundation in Puna.

The decrease in taxes due to depressed property values was estimated Friday at $1.2 million, but intense volcanic activity over the weekend means the number could be closer to $6 million, county officials said Monday.

And that’s just the property tax loss from affected properties. Agricultural losses over a broader geography could contribute even more to the negative revenue balance, they said. At the same time, county overtime, road construction and other costs are piling up.

Finance Director Deanna Sako told the County Council on Monday that she would be bringing a full report today as the council takes up the budget on first reading. She said it’s not too late for the council to schedule a public hearing on a range of property tax rates.

Sako promised an “interesting discussion tomorrow but definitely different from what everyone is expecting.”

“There’s a lot of moving parts. … We’re going to talk about a lot tomorrow,” Sako said. “There’s going to be a lot more information on rates tomorrow.”

Asked after the meeting if the administration is recommending property tax hikes, Sako responded, “There are a variety of options. All options are on the table.”

“Unprecedented,” “bleak,” “serious” and “dynamic” were among the words council members used to describe the collision of natural forces with their budget planning. Property tax rates must be set by June 20 and a balanced budget presented in time for the July 1 start of the fiscal year.

“We’ve got a big problem ahead of us,” Kohala Councilman Tim Richards said. “Everybody was working on the budget and then we have a curve ball thrown us by Madame Pele.”

Puna Councilwoman Eileen O’Hara agreed.

“This budget is bleak … it’s very disconcerting, even in good times,” said O’Hara. “In the last what, 17-18 days, bleak doesn’t even begin to describe it.”

The discussion came about as Richards introduced measures that would cut property taxes and fuel taxes. Because of the realities of the budget, Richards withdrew one bill and postponed the other.

“We’re not looking at our budget and our revenue stream together,” Richards said. “Looking at our budget going forward, things are out of whack, out of kilter, and we need to have those conversations. … We are painting ourselves into a corner when it comes to our budget.”

“We have to be sensitive to what’s going on, yet we have to balance a budget,” Richards added. “I don’t think the budget is balanced right now. … We’ve got a lot of balls up in the air.”

Property taxes account for 74 percent of county general fund revenues, according to Mayor Harry Kim. Earlier this month, he presented a $518 million budget, a 5.5 percent increase over last year.

And then there are the new costs.

Sako said the administration is preparing monthly reports to send to federal agencies.

A presidential disaster declaration was approved May 11. The disaster declaration means that federal assistance will be available for public facilities such as roads, public parks, schools and water pipes damaged or destroyed by the Kilauea volcanic eruption and earthquakes. It also covers costs for emergency protection measures including personnel for security and roadblocks, geologists and the military.

But even if the reimbursements are approved, the county will still have to come up with its 25 percent share for the Federal Emergency Management Agency and its 20 percent share for the Federal Highway Administration, Sako said.

Estimates of costs to date were unavailable Monday.

“We’re already gathering data; we’re preparing the spreadsheets,” Sako said. “This is unprecedented and we’re all going to have to work together.”

Richards worried about the long-term ramifications to farmers and ranchers. That’s not just a one-year thing, he said, saying there could be a “$10-$30-$40 million loss on the ag side alone.”

He said the council will have to find ways to help mitigate losses, “keep these guys in business.”

Sako said it’s probably too early to tell if island farmers and ranchers will qualify for U.S. Department of Agriculture rural assistance grants.

“Because it’s fairly early, we don’t know all the impacts yet,” Sako said. “We are all worried about the farmers, the homeowners.”