HILO — Council members stood firm Tuesday that they’re not ready to raise taxes to plug a $7 million hole in the budget that county officials attribute to an ongoing volcanic emergency in Puna.
In a hearing on the county’s $518 million spending plan, a majority of council members dismissed hikes to property taxes and general excise taxes, but they also couldn’t agree on $7 million in spending cuts to balance the budget. The county charter requires the budget to remain balanced.
The budget passed on first reading by a narrow 5-4 vote after about seven hours of discussion, with no amendments to try to balance it.
“This is a junk situation,” said Kohala Councilman Tim Richards, one of the no votes. “Is this budget balanced? It’s clear we don’t have a balanced budget. … I’m not ready to vote on it.”
Also voting no were Hilo Councilwoman Sue Lee Loy and Puna Councilwomen Eileen O’Hara and Jen Ruggles.
The operating budget, Bill 110, will be taken up June 6 on final reading.
“We have to defer to our experts,” said Hilo Councilman Aaron Chung, suggesting council members take their ideas to the Finance Department to be ready for the final reading.
“We just have to deal it, like any household,” Chung said. “If we’ve got an emergency, we have to deal with it. … If we’ve got to cut services, we’ve got to cut services.”
The shortfall comes from a combination of $3 million in lost property taxes from property destroyed in Puna, and an estimated $4 million in added costs for disaster response.
So far, the lava alone has rendered 55,000 acres, about 2.1 percent of the island’s total geography, uninhabitable. The 2,247 parcels include 1,583 classified as homeowners and 429 farmers.
More than $745,000 had been spent on emergency overtime as of May 15. Road repairs, security, shelter meals and other supplies have accounted for another $635,000 or so, Finance Director Deanna Sako said.
“I know it’s an election year, but we’ve got to do what’s best for our county,” said Sako, in recommending tax increases. “At some point we’re going to have to raise revenues, if not this year, then next year. … I know it’s not popular. I apologize.”
The administration provided sample across-the-board property tax increases, ranging from 1.8 percent to 4 percent, to raise $3 million, to $9 million more.
The county has until June 20 to hold a public hearing and set property tax rates, if it decides to go that route. The deadline to pass a general excise tax surcharge is June 30.
But most council members said they’d rather see a combination of spending cuts and higher fees, for everything from bus fares to golf fees to county parks. The council also considered raising about $8 million through a 5-cent-per-pound charge on garbage thrown at the transfer stations.
Sako warned that fee increases, like tax hikes, can also generate public discontent.
“Whether we call it a tax or call it a fee, it’s going to impact the public,” Sako said. “I know many people don’t want to raise taxes and I understand that but if we don’t, I have to find $7 million in cuts and I will find $7 million in cuts and if I find $7 million in cuts, I can’t guarantee anyone is going to be happy with that.”
The county could also borrow from other funds, such as the Public Access, Open Space and Natural Resources Preservation fund, up to $2.5 million, but it must be paid back within a year. The council also looked at taking money from geothermal funds, but was cautioned against it by Planning Director Michael Yee.
Although the county expects some of the costs to be reimbursed by the Federal Emergency Management Agency, that won’t happen soon enough to help the budget. In fact, some FEMA reimbursements from the 2006 earthquake are still in the pipeline, Sako said.
The council also banked its hopes that the state Legislature will fund an emergency bailout, like the $100 million aid package it approved during its last regular session for flood damage on Kauai and Oahu. This time, it would take a special session, something county officials and the island’s legislative delegation are currently working on.
Reducing the workforce through layoffs takes at least a year and really wouldn’t save much money, Sako said. For example, county employees making $100,000 a year, if laid off, have “bumping rights,” based on seniority, at their current salary for any county job they qualify for. The displaced employee, in turn, has bumping rights to any county job he or she qualifies for, and so on. The end result could be the displacement of a $20,000 clerk, Sako said.
“The decisions you’re going to make today and the next few weeks, they’re going to affect the whole county,” Managing Director Wil Okabe told the council. “The decisions that are made by this council will have grave impacts on the county.”
