Mayor Kim Proposes Several Tax Hikes in Budget Amendment

Hawai`i County Mayor Harry Kim recently released his proposed $491 million budget for the county. The budget is 6.1 percent larger that last fiscal year’s version. This new proposal amends a previous budget submitted by the mayor in March.

Mayor Kim cited several reasons for the amended budget request, most notably an increase in salaries and wages for employees through collective bargaining. He noted that all bargaining agreements expire at the end of June, and of the eight that are up for renewal, only five arbitration awards have been received. Figures from the five awards are being used to estimate the outcome of the other three bargaining units.

Additionally, health care benefits are increasing at a larger rate than expected. Back in March, Mayor Kim’s budget request factored in a six percent increase in health benefits, but that the increase is now likely to be closer to 10 percent, according to Mayor Kim. He says, however, that it is being offset by a reduction in retirement benefit payments.

Further putting a wrinkle on the County’s budget proposal was a $1.86 million reduction in the island’s portion of the Transient Accommodations Tax and a lower projected fund balance, which decreased by about $2.4 million.

Now faced with a multi-million dollar gap in an attempt to balance the budget, Mayor Kim has put several items on the table, starting with an approximately 6.5 percent increase in real property tax rates. Exempt from the tax hike are those in the affordable rental status. Two homeowner age exemptions will potentially be put in place at ages 75 and 80 to protect those who live off of fixed incomes. These changes are expected to generate $21.5 million.

Along with the increase in property taxes, the Mayor’s office will try to hire a Real Property Tax Valuation Analyst. One of the tasks placed on this projected hire will be to create a new classification for vacation rentals.

A change to the County’s fuel tax is also expected to close the gap between spending and revenue. The tax has not changed since 1988, but because of a decline in franchise tax revenue, Mayor Kim is proposing a staggered three-year increase in the fuel tax to fund road projects and the transit system.

Also new to the budget proposal is a $600,000 investment in new vehicles for the Hawai`i Police Department and another $600,000 for the Hele-On bus system.

“This proposed budget represents our departments’ best efforts to meet the needs of our residents in a timely and fiscally responsible fashion, while continuing to maintain the level of services our residents deserve,” said Mayor Kim in his message to the Hawai`i County Council. “As our economy continues its gradual recovery, we are committed to continuing investment in infrastructure, transportation, public safety, and creating safer and healthier communities. These investments are critical to the future of our Hawai`i Island.”

Mayor Kim’s proposal will head to the County Council for review.