Proposed Hawai‘i County Budget Includes Tax Increases
Hawai‘i County Mayor Harry Kim’s new proposed budget calls for property tax rate increases and a vehicle fuel tax increase.
Mayor Kim released the FY 2017-18 budget to member of the Hawai‘i County Council on May 5, 2017, for their review and approval, along with the the Capital Improvement Program for the next six years (FY 2017-2018 to 2022-2023).
The operating budget for FY 2017-18, which ends on June 30, 2018, is 6.1% bigger than last year’s.
This balanced budget includes estimated revenues and appropriations of $491,241,880 and includes the operations of 11 of the county’s special funds as well as the general fund.
The mayor went on to highlight some of the significant changes in this budget as compared to the March budget proposal, as, he said, many of the expenses were unknown at that time.
Mayor Kim said the largest expenditure change since March was for:
- county salaries and wages related to collective bargaining unit agreements;
- heath benefits that were expected to rise by 6%, but actually rose by 10%;
- retirement benefit rates passed by the state Legislature were actually lower than previously anticipated;
- fire deparment overtime was partially restored;
- council contingency funds were restored;
- funding for much-needed equipment was added to the budget, including $600,000 to replace some of HPD’s aging vehicles, and another $600,000 for the island’s bus system;
As far as revenue changes, the mayor highlighted:
- the TAT (transient accommodations tax), which the Legislature reduced, “putting additional strain on our budget;”
- although the real property tax values increased, the increase did not provide enough revenue to balance the budget.
In summary, the mayor said that another $21.5 million was needed to balance the general fund budget.
The mayor, therefore, proposed increasing the real property tax rates by about 6.5% on all classes of property except affordable rental.
The minimum tax rate will also be raised. To help offset the increase for those on a fixed income, the mayor proposed the addition of two age exemptions: one at 75 and another at 80.
The mayor also added funding for a position to create a new classification for vacation rentals, which will impact county revenues starting in FY 2019.
Mayor Kim also proposes increasing fuel taxes over a three-year period to improve the transit system and island roadways.
The Capital Budget includes 48 projects requiring a total appropriation of $173.9 million.
Capital projects are typically funded by debt (bonds, state revolving fund loans), revenue sources (fuel tax, other special revenues), state grants, federal grants or loans, and other financing options (fair share contributions or special financing districts).
The Capital Budget presented by the Mayor includes capital projects of which about $97 million are intended to be funded in whole or part by bonds, $67 million to be funded by the State Revolving Loan Fund or State CIP, $9.8 million to be funded by federal and $0.05 million to be funded by fair share contributions.
“Every year, we strive to present a budget that is fiscally constrained (in terms of prudent debt service planning) and selective, based on rational criteria,” the mayor wrote in his message to the council.
The Government Finance Officers Association, a professional organization of government officials, recommends a prudent debt service limit to be 15% of general expenditures.
The lower the interest rate and the greater the revenues, the more can be borrowed while staying within the prudent debt service limits, the mayor wrote.
The proposed operating budget for this coming fiscal year includes debt service for short-term bond anticipation notes, which are used to reduce carrying cost and insure that cash will be available for projects as needed, the mayor wrote.
“As budgeted, the resulting total debt service is estimated at 9.57% of the general expenditures,” Mayor Kim wrote. “If all debt that has been authorized by the County Council was issued, the debt service percentage would be 12.63% of the general expenditures.
A Capital Improvement Project is eligible for funding from the capital budget if it is a major nonrecurring expenditure, such as:
- Land acquisition;
- Infrastructure improvement other than buildings that add value to the land or improves utility (roads, drainage, sewer lines, parking, landscape or similar construction);
- New buildings or structures or additions to buildings, including related equipment and appurtenances which are integral to the new structure;
- Nonrecurring rehabilitation, remodeling or expansion of infrastructure and buildings;
- Planning, feasibility, engineering, or design studies related to capital improvement
- Information and communications technology infrastructure.
Download more information about Hawai‘i Island’s proposed CIP: CIP 2017
To find the current and proposed budgets, go online.