HILO — It took a volcanic eruption and a few compromises to convince them, but a majority of County Council members now supports a half-sized version of the previously ill-fated general excise tax surcharge.
The council, on first reading Wednesday, advanced Bill 159, creating a one-quarter percent county surcharge on the state GET. The measure, adding a quarter-penny tax on a dollar purchase, next goes to a public hearing and one more vote before taking effect Jan. 1.
The bill was amended to keep the tax only until Dec. 31, 2020, rather than the 2030 date allowed by the state Legislature.
Because the tax is itself taxed, the tax on a $100 purchase would increase by 26 cents, raising the purchase from $104.17 to $104.43, once the 4-percent state GET is also taken into account.
The council voted 5-4 to pass the measure, with Puna Councilwomen Eileen O’Hara and Jen Ruggles, along with Kona Councilman Dru Kanuha and Hamakua Councilwoman Valerie Poindexter, voting no. Action on the county budget was ongoing at press time Wednesday.
The council had previously rejected a half-percent surcharge, an amount Mayor Harry Kim was still advocating Wednesday.
“Know that the needs are greater than I’ve ever seen it. … This is a most critical time as to where we go as a community. … I care not to live in a community where we just want to maintain,” Kim told the council.
“The vast majority of people who pay the bills, our bills, realize that we need to step forward on this to make a better community,” Kim added. “We will do what we can do with the money you give us.”
Council members were frustrated about being asked to pass budget increases before the full fiscal impact of the lava emergency is known.
“Are we balanced? From what I’m hearing from real property we are not,” said Kohala Councilman Tim Richards. “We have the fiduciary responsibility to pass a balanced budget.”
O’Hara responded the budget was balanced when it was drafted.
“We could sit here at the table until this is resolved but we could all be 6 feet under by then,” O’Hara said. “This could go on for years, folks.”
The council faced the option of passing its annual budget with a $5 million hole in it, cutting services, furloughing employees or raising general excise taxes or property taxes.
“We are in dire financial straits because of a situation that’s out of our control,” said Hilo Councilman Aaron Chung. “This is an extraordinary time.”
Lava inundation in Puna so far accounts for $5 million in lost property tax revenues. That figure is expected to increase as lava flows continue.
The county is also accruing about $2 million monthly in extra expenses for emergency response, most of it from overtime for county workers. Most of the disaster relief costs are expected to be repaid with federal and state emergency funds, while the property tax loss is not reimbursable.
Kim said he’s meeting with Gov. David Ige and federal and state emergency management agencies today. He’s asking Ige for $50 million of the $125 million appropriated by the Legislature for flood response on Oahu and Kauai. More money was appropriated than spent for those disasters, he said.
“Our actions today could send us into a downward economic spiral and that’s not what we want to do,” O’Hara warned. “It pains me to raise taxes. But they won’t receive any help from us if we don’t have any money. It’s as simple as that.”
O’Hara ultimately voted against the tax, after the bill was amended to shorten the time-frame. She and Chung said the GET shouldn’t be looked at as an emergency measure but as a way to diversify revenues.
The specter of employee furloughs was enough to push those previously against the GET over to the other side, albeit reluctantly.
“I really feel between a rock and a hard place because I don’t want to pass a budget that’s not balanced,” said North Kona Councilwoman Karen Eoff, saying the quarter-percent is a compromise during this emergency.
”I don’t like this raising taxes, but I like the .25 percent better than I like the .50 percent at this time,” said South Kona/Ka‘u Councilwoman Maile David, chairwoman of the Finance Committee. “I’m not liking where I’m leaning but I don’t like any of our options right now.”
The general excise tax surcharge can’t be used directly for emergency response, but it will free up almost $5 million of general fund revenues currently being spent for mass transit.
Finance Director Deanna Sako cautioned against dipping into the $6 million budget stabilization fund, $6 million disaster fund or $15 million fund balance. That money will be needed to keep the county running as it waits for reimbursements of money it must put out for the ongoing lava emergency, she said.
Myles Miyasato, representing the Hawaii Operating Engineers Industry Stabilization Fund, was the only member of the public speaking on the general excise tax. He opposed the measure.
“Our hearts go out to everyone (affected by the lava flow), especially the children. … How do you levy a tax on these people?” Miyasato said. “We brought up concerns at the last meeting and none have been addressed in this bill.”