The Big Squeeze: Part 3, utilities

HILO — The saying, “a rising tide lifts all boats” applies to taxes and fees too, putting the squeeze on private businesses and utilities that usually raise prices to compensate.

That’s the case in the housing market, especially with rentals, as hikes in property taxes, utilities and garbage pickup costs are often passed down to the renter.

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The renter feels some of the squeeze, but so does the landlord, said Tam Vu, interim dean of the College of Business and Economics at the University of Hawaii-Hilo. Landlords can’t pass all the costs on to tenants for several reasons, she said.

“First, many landlords want to keep long-term tenants who might move out if the rental fees go up, so the landlords look around and wait, worrying that they might lose some good tenants to the other landlords,” Vu said. “Since in the U.S., the landlords are not allowed to collude with each other, they end up (so they) cannot raise the rental fees high enough to cover the costs.”

“Second, the rental fees are controlled in part by the local governments, which always try to protect the low-income residents, so it is not easy to increase the rental fees,” Vu added. “As a result, both the landlords and the tenants suffer from a tax increase.”

Nancy Cabral, owner of Day-Lum Rentals and Management Inc. in Hilo, says a sewer fee increase currently under consideration by the County Council would be an especially hard hit for condo owners, as association fees would have to rise to pay for it.

After unanimous approval from a council committee, the sewer fee increase proposal was cleared by the Environmental Management Commission and now returns to the council for two final votes.

The current $27 monthly fee would increase to $39 on March 1, if approved by the council in time. That’s a 44.4 percent increase. Increases would continue annually until the monthly charge reaches $52 in 2021.

And it’s not just the county government that’s raising prices. Electric rates, set by Hawaiian Electric Industries after approval by the state Public Utilities Commission, are likely to increase next year, after an average cost increase of 7.4 percent this year.

The average residential cost for electricity would go up 3.4 percent late next year if the PUC approves the increase, Hawaiian Electric Light Co. President Jay Ignacio said in an open letter to the public published in the newspapers.

The money would be used to help pay for rising operating costs, as well as modernizing the grid and continuing a vegetation management plan. If approved, a typical residential bill for 500 kilowatt-hours on Hawaii Island would increase by $8.21 a month. Any increase would likely not take effect until late 2019.

“If you were affected by storms, flooding, earthquakes or the eruption, then you saw our employees in action,” Ignacio said in the Dec. 9 letter. “That we continued to make progress toward our state’s renewable energy goals while responding quickly and effectively to emergencies is a tribute to the commitment of our employees and their pride in serving our communities.”

Water charges, controlled by the semi-autonomous county Department of Water Supply, also are inching up, following a five-year rate plan approved in 2015. The water bill includes an energy charge, a water consumption charge, a set standby charge and a power cost charge that fluctuates with the price of electricity.

Water bills would likely go up about 2.6 percent next year, following an 8 percent increase this year.

Cabral said Big Island rentals have been increasing incrementally, but landlords have been holding the line so as not enter the zone that would be considered price-gouging, since the county is still under an emergency proclamation because of the recent natural disasters.

She said her company has been suggesting to landlords that they stay in the affordable rental category, where property taxes are significantly lower in exchange for landlords keeping their rents at or below rates set by the county each year.

The price rubbish haulers pay at the county’s Hilo and West Hawaii landfills went up in 2018 to $108 a ton, a 27.1 percent increase, with annual increases to continue until the price reaches $116 in 2022.

The increases most affect commercial customers, such as those with dumpsters like condominium dwellers, retail shops, grocery stores and other businesses. Small haulers who pick garbage up curbside for residential customers will see a residential credit increase that should wipe out the tipping fee hike, officials said.

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The garbage pickup hike coupled with the proposed sewer hikes could especially hurt landlords renting condo units, Cabral said.

“That’s going to have a huge impact,” she said. “The owner is going to look at both and say, ‘I’m spending more and making less.’”

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