Hawaii County’s new tax on hotels and short-term rentals helped sweeten county coffers to an extent unseen in previous years.
The county ended the last fiscal year with $70.4 million left over to be applied to future budgets, according to an Oct. 14 report to the County Council.
A portion of that balance, $27.9 million, that remained when the budget year ended June 30 has already been spoken for, as it was used to help balance the current fiscal year’s $785.3 million spending plan that went into effect July 1.
Finance Director Deanna Sako said the balance is the largest she’s seen in her many years in the Finance Department. She attributes the surplus primarily to the new 3% local transient accommodations tax that went into effect Jan. 1, as well as increases in property taxes bought about by a growing real estate market. Careful spending by county departments also helped, she said.
The county generally budgets to allow more revenue to come in than is spent in order to keep a buffer for unexpected expenses and emergencies. Attempts by some council members earlier this year to offer some financial relief by rolling back property taxes were met with resistance from the council majority.
The council, instead increased exemptions for kupuna and low-value properties starting with the next fiscal year, July 1, 2023.
The new measure totally exempts property under $50,000 in value from property taxes, instead of the current $40,000. That means the property owner would pay only the $200 minimum annual tax. For property over $50,000 in value, the homeowner exemption would be $50,000 rather than the current $40,000. With the median home value at $517,000 approximately half the homeowners would get a 20% reduction in their taxable value.
Homeowners between 60 and 65 years old would get $85,000 of their property value exempted from property tax instead of $80,000. Those between 65 years old and 70 years old would get a $90,000 exemption, a new category. Those 70 years old to 75 years old would get a $105,000 exemption, compared to the current $100,000. And those 75 years and older would get $110,000 of their property value exempted.
The county is probably going to need that leftover money, Sako added.
“We expect expenditures to increase based on the current market — everything is costing more,” Sako said. “We do not expect to see a significant rise in revenue so we will most likely need this fund balance to help balance the budget. We are very early in the process yet, so time will tell.”
The council Finance Committee is scheduled to discuss the matter when it meets at 1 p.m. Tuesday. The committee is meeting in council chambers in Hilo, with some council members also participating from the West Hawaii Civic Center. The public may testify at those locations or at the Waimea or Pahoa council offices or via Zoom by registering with the Clerk’s Office in advance.
“Given increased revenues across the board, the fund balance is more than adequate to meet guidelines,” said Finance committee Chairman Matt Kanealii-Kleinfelder. “We must ensure that tax dollars go towards the projects and services our residents depend on.”