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Tax-break extension City plans to extend and expand a seven-year tax exemption program on new construction are in trouble.
in trouble at Council
The initial ordinance gave 7-year
breaks for any new constructionBy Gordon Y.K. Pang
gpang@starbulletin.comThe exemptions are designed to help stimulate the economy, but members of the City Council's Budget Committee indicated yesterday that they agree with dozens of resort industry union workers who testified that the program may help only major corporations and amounted to "corporate welfare."
The initial ordinance approved in 1999 allowed for a party to apply for a seven-year exemption on any improvements on nonresidential properties made through June 30, 2003. The ordinance applies to new buildings or the portions of existing buildings that are improved or expanded.
The committee deferred action yesterday on two bills, pushed by Mayor Jeremy Harris during his State of the City address in January, that would:
>> Extend the deadline during which a party can apply for the exemption to June 30, 2005.
>> Expand the program to include residential construction, and extend the deadline for application to June 30, 2005.
Committee members said they want the city's property tax assessment team to return next month with a better picture of the two bills' impacts on revenues, but made it clear they are leaning against them.
Tax assessment officers said the program now costs the city about $2.3 million a year in lost revenues. They gave a "conservative" estimate that the program, if expanded, would result in the loss of $2 million more in new revenues.
Eric Gill, financial secretary-treasurer of Local 5 of the Hotel Employees and Restaurant Employees union, said Oahu hotels qualified for exemptions totaling $7.6 million since the program began more than two years ago.
"This tax break seemingly benefits large hotel companies while providing minimal benefits to the community," Gill said.
Hotel owners, he said, have used the Sept. 11 tragedies as an excuse to promote policies unfair to workers.
Nearly 40 Local 5 workers and their supporters pounded home the point.
Myrna Vite, who works in a Waikiki hotel as a housekeeper, said it is duplicitous for the hotels to be "disrespecting" workers while "asking for handouts that the rest of us will have to pay for" in taxes.
Hawaii Hotel Association President Murray Towill, the only person to testify yesterday in favor of the exemptions, said "clearly the tax incentives helped to make the projects feasible."
Towill also noted that only about half of the improvements qualifying for the exemptions to date have been in the hotel industry.
Councilman Gary Okino was among those who indicated he is against the bills. He noted the city is struggling to balance its operating budget without the new revenues. He said he doubts the new projects would have been stalled if the exemption program were not in place.
Councilman Jon Yoshimura, who helped shepherd through the initial exemption program, said after the meeting that the program has "stimulated some very important investment and the creation of both short- and long-term jobs."
City & County of Honolulu