Finance Committee Gives Proposed Decrease to Fuel Tax Unfavorable Recommendation

A measure intended to provide some relief for Big Island residents from the pain of extraordinarily high fuel prices at the pump seems like a good move — at least on the surface.

Resolution 363-22, introduced by Finance Committee Chairman Matt Kaneali‘i-Kleinfelder, proposes to reduce the county’s fuel tax for on-highway diesel and gasoline from 23 cents per gallon to 13 cents per gallon. Kaneali‘i-Kleinfelder introduced the measure based on what he’s been hearing in the community and what’s happening globally in regard to fuel costs.

“Hawai’i Island is unique. We’re huge,” said Kaneali‘i-Kleinfelder on Tuesday, April 5, during a Finance Committee meeting. “Every single island can fit in ours. Our residents drive farther. We spend more on gas.”

He added that Big Island residents driving for work are spending an extraordinary amount on gas and transportation. Many people also drive fairly large vehicles.

“You can just see this is having a really hard effect on our community,” Kaneali‘i-Kleinfelder said.

And while a majority of the committee agreed with the resolution’s intent, many members questioned whether a decrease to the county coffers, especially in funds that help maintain the 1,000 miles of roadways and bridges around the island, would be worth the relief at the pump.

According to county Finance Director Deanna Sako, if approved, the measure would mean a roughly $7.5 million decrease to the county coffers based on the current fiscal year’s budget and $8.3 million when looking at the next fiscal year. The fuel tax is one of three revenue sources for the county’s highway fund.

Funds generated by the tax are used for various county needs, including highway and roadway maintenance and paving projects, bridge projects, providing matching dollars for federal funds awarded for road and bridge projects, signal lights, streetlights and even traffic enforcement operations of the Hawai‘i Police Department.

“This actually impacts a lot of our services,” said county Public Works Director Ikaika Rodenhurst.

A majority of committee members agreed and expressed concern that taking more than $7 million out of the county’s budget, regardless of the intent, could jeopardize future projects. The county has hundreds of miles of dilapidated roadways and bridges and taking funds away that could be used for maintenance and repair or even match federal grants for the same purposes didn’t sit well with many members.

There also was some sentiment that the burden of paying the fuel tax doesn’t rest wholly on island residents. Sako reminded the committee that visitors also pay the tax at the pump.

Councilwoman Sue Lee Loy said that while the measure would save people a few dollars at the pump, if the county’s roads are bad, it would cost people more to fix problems with their vehicles, such as damaged shocks or struts. She questioned whether decreasing the fuel tax really would provide relief.

“Or is this just a feel good shot in the arm?” asked Lee Loy.

Committee members also questioned where the county would make up the difference from the loss of revenue and had concerns about not having funds available in the event of an emergency.

Kaneali‘i-Kleinfelder suggested the funds lost could be made up with additional funds being generated by real property taxes and the highway fund balance. He also pointed out that wouldn’t be a permanent solution, depending on how long the decrease in fuel tax stayed in place, but it would be about a year before the county would have to account for the loss in revenue.

He also reminded the committee that regardless the wording isn’t in the measure, his proposal is meant for temporary relief and the council could come back to the issue at any point in the future.

Council Chairwoman Maile David said the thought behind the measure is great, that the council could do what it can to help the island’s communities, but council members also have the responsibility to balance that with the impacts of unknowns.

“That’s my biggest concern,” Lee Loy said, adding she doesn’t want to have to scramble to find funds from another place for emergencies or other purposes that could be covered by those additional revenue sources the county has available that instead would be essentially committed to covering the loss of revenue from a decrease to the fuel tax.

Councilwoman Ashley Kierkiewicz summed it up, agreeing that there would be short-term relief, but the council needs to also think about the long-term grief taking that much money out of the county budget could create.

“I’m just feeling like there could be too many unintended consequences to passing a measure like this,” said Kierkiewicz.

Committee members also found wisdom in seeking public input. A public hearing would be required before further consideration of the measure at the full council level, giving island residents the opportunity to weigh in.

“I’d like to hear what the people want,” said Councilwoman Rebecca Villegas.

In the end, the committee forwarded the resolution to the full council level with an unfavorable recommendation. A public hearing on the measure will be conducted Tuesday, April 19, and the measure will be on the agenda for further consideration by the Council during its Wednesday, April 20, meeting.