HILO — The public will have two opportunities to weigh in on a proposed quarter-percent increase to the general excise tax before the County Council takes its final vote Tuesday.
Administration officials say there’s a twofold reason for instituting the tax: to patch an estimated $5 million hole in the current budget and to diversify county revenues, to spare property owners future tax hikes.
About 30 percent to 40 percent of the GET is paid by tourists, they say, while property taxes currently account for more than 70 percent of the county’s operating revenues.
“Putting all your eggs in one basket, which is real property tax, isn’t really smart,” Deputy Finance Director Nancy Crawford told the Cost of Government Commission on Thursday, adding the GET means “visitors will have an opportunity to contribute to our infrastructure as they certainly reap the benefits of it.”
A divided council, by a 5-4 vote last week, barely passed Bill 159, a downsized version of the mayor’s GET surcharge attempt. The new bill trims the tax from one-half percent to one-quarter, and curtails the length of the tax to Dec. 31, 2020, rather than the Dec. 31, 2030 deadline allowed by the state Legislature.
But passage is by no means guaranteed, with several council members saying they voted yes only to move the bill forward to a public hearing. Input from their constituents will determine how they ultimately vote, they said.
Council Chairwoman Valerie Poindexter was one of the ‘no’ votes. She was still on the fence Friday, and seeking reassurances from both the public and the administration.
“Some are OK with the increase to help with the shortfall because that’s what we do in emergency situations,” Poindexter said about members of the public who’ve weighed in. “A lot are skeptical about any future improvements in services and are still saying no. Feeling that throwing more money into the county’s coffers will not change departments’ priorities and management of programs.”
Poindexter said she’d be asking probing questions before deciding how to vote.
“My question to administration is — what assurances do we have that county government will become more efficient,” she said. “Should the GET pass, we need to put some safeguards in place, that is within our jurisdiction, to hold administration accountable. “
The county has scheduled a public hearing for 5 p.m. Monday, when council members will listen to the public but will not discuss or debate the bill. Then, at 9 a.m. Tuesday, the council will take one last round of testimony before taking its final vote.
The public hearing and the council meeting will be held at the West Hawaii Civic Center in Kailua-Kona, with public testimony also taken by videoconference at Hilo council chambers, the Waimea and Pahoa council offices, the Naalehu state office building and the old Kohala courthouse.
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 county administration attributes the $5 million loss to the loss of property tax revenues from property destroyed, isolated or otherwise devalued because of the lava flow through lower Puna. Although the county is getting at least $12 million from the state, and the Federal Emergency Management Agency is expected to reimburse the county for most of the disaster relief efforts, that money can’t be used to patch the property tax revenue hole, they say.
“That loss never gets made up by FEMA or the state,” Crawford said.
If passed, the tax goes into effect Jan. 1, raising about $10 million for the 2018-19 budget year, and $20 million the year after that. The money can be used only for transportation improvements, mass transit, sidewalks and trails, under the state law that allowed the optional tax.
But, because the county currently uses almost $5 million from its general fund to finance mass transit, the tax revenues could free up that amount in the general fund.
The county currently doesn’t get any of the GET, which is collected by the state. The tax is collected on almost all transactions in the state, but doesn’t apply to most prescription drugs or federal food assistance programs such as SNAP or WIC, Crawford said.