Logistics could curb transit tax set for '07
Debate over what agency will collect the revenue remains
The Jan. 1 collection of the 0.5 percent general excise tax surcharge for mass transit could be in jeopardy as the city and the state continue to argue over the details of running the tax collection system.
"Do I consider this a serious setback? No, I don't, but it does mean that we may delay ... collecting the tax Jan. 1 if the governor doesn't sit down with her state Tax Department and make it a priority for them to do this," Mayor Mufi Hannemann said yesterday.
COUNCIL OKS BUDGETS
The City Council approved $1.48 billion operating and $680 million capital improvement budgets. Here are highlights:
» A 16-cent property tax rate reduction for residential property owners, resulting in $19.5 million in tax cuts.
» Increase in property tax rate by 60 cents for commercial, industrial and hotel-resort property owners, for an additional $13 million in revenue.
» A one-time $200 tax discount for owner-occupied homes, costing $27 million.
Gov. Linda Lingle was out of town yesterday, but state Tax Director Kurt Kawafuchi said the state administration has been working hard to meet the Jan. 1 deadline.
"My strong preference is not to delay it. I want to make that clear. My strong preference is to still possibly start it on Jan. 1. There's a lot riding on this, including federal funding, and we certainly don't want to jeopardize that if possible," Kawafuchi said. "I don't know if it's possible at this point if we can start on Jan. 1. ... We're looking to see if that would be possible."
The comments came after the City Council rejected by a vote of 6-3 a request by Hannemann's administration for a $5 million guarantee of payment for the vendor designing the computerized tax collection.
The state law that authorized the levying of the 0.5 percent excise tax surcharge for city mass transit projects also mandates that the tax be collected by the state Tax Department, which now collects the state's 4 percent general excise tax.
Gov. Linda Lingle unsuccessfully tried this past session to get the Legislature to designate that the county collect the tax.
The excise tax surcharge is scheduled to go into affect Jan. 1, and the state would receive 10 percent of the surcharge revenue for administrative costs.
The plan was to have the $5 million in place to guarantee payment should the state Legislature not approve start-up costs.
Funding for the system was lost this past session when a bill appropriating money for the system failed to make it out of the Legislature because of concerns over another tax measure included in the same bill.
City officials said the state told the city that if the money was not put up, the state would not collect the tax.
Council members balked at the request and questioned why the city was bailing out the state.
"I'm also very upset at this point that the city government constantly has to fix the state's mess," said Councilman Charles Djou.
The mayor said his administration have been "jumping through hoops" to address the state's concerns on collecting the tax.
"It is clear we continue to have problems with the Lingle administration accepting the fact that the Legislature said they must collect the tax," Hannemann said.
But Kawafuchi said that is not the case.
"The administration and the Tax Department have been dedicating a lot of its most key people and top resources and top people to try to figure out a way to make this happen," he said.
Among the things the department has been doing are preparing the necessary forms that will be used for the process and coming up with rules to determine who would be subject to the new tax, Kawafuchi said.
"We are running out of time to be starting on Jan. 1. We haven't hit yet, but ideally we'd like to get started as soon as possible," Kawafuchi said.
Hannemann administration officials said delaying the collecting could mean a delayed schedule for constructing a mass transit system as well as additional costs.
The city's chief transportation planner, Toru Hamayasu, said the disagreement could cause problems for any federal funds the city might receive if the local funding is questionable.
"If this shows difficulty in collecting the money to keep that local commitment, that will send a signal to Congress," Hamayasu told Council members.
The U.S. House appropriated $250,000 this week for Honolulu's mass transit funding, which city officials said is good news.