TAXWatch: Squirreling Away Money at the Dept. of Transportation

Well, it looks like the Hawaii State Watch Doggie has woken up from his nap. 

A:  Hey!  Keeping watch is hard work!

Q:  Undoubtedly.  So what are you reading there?  It looks like an Auditor’s report — “Review of Special Funds, Revolving Funds, Trust Funds, and Trust Accounts of the Department of Transportation.”

A:  Oh, yes. It’s an outrage. 

Q:  What’s the problem?

A:  Well, you know that the DOT is telling the Legislature to raise taxes.  Fuel tax, vehicle weight tax, registration fees.  Taxes, taxes, taxes. 

Q:  So how are they different from any other government agency?

A:  The auditor found that they have lotsof money lying around. More than $120 million in accounts that haven’t been even touched for five years. 

Q:  And they’re asking for more. 

A:  And that’s not all.  A few years ago, the Feds got mad at them because they had close to a billion dollars in unused federal money.  The Feds gave us money to work on roads and bridges, and it wasn’t getting spent, so they were saying, “Why should we give you more money if you can’t spend what you have?”

Q:  But they have been working the backlog down over the years. 

A:  Come on. More than a hundred million that hasn’t been touched for years?  Makes me want to bite someone. 

Q:  Jeez!  Don’t look at me so intensely when you’re saying that!

But didn’t they say that most of the money is a reserve that they have to keep around for their airport bonds?

A:  Hey, if the bond agreement requires millions to be held in reserve, DOT should have been able to point to the part of the bond agreement saying that. Did they? No!  And there’s more.

Q: There’s more?

A: There’s a law that says that DOT has to report all of their funds to the Legislature.  They’re not supposed to squirrel away their money.

Q: So how much did they fail to report?  Enough to buy a few bags of kibble?

A: More than $120 million.

Q: Different from the $120 million that they found lying around?

A: There’s some overlap, but mostly in addition to the idle $120 million.

Q: Did DOT say why those accounts weren’t reported to the Legislature?

A: Airports Division said that the Airports account the Auditor identified had no money in it anyway and they forgot to report it. The other divisions didn’t say anything.

Q: Not even “Oops,” eh?  But they did report some of their accounts to the Legislature, right?

A: Yes, but not accurately.  The Auditor found that Highways Division’s fund reporting was inconsistent and sometimes inaccurate.  For example, a fund reported as “Revolving & OHA” was actually five different funds, and noneof them were related to OHA.

Q: Oh, man.  Whatever can we do about that?

A: I’m going to bite someone on the schnozzola.

Q: If you can reach it, that is.  You’re only a 7-pound doggie.

A: Details.

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Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.