Proposal could end tax dispute
A contract by the city would help the state collect the transit tax
City and state officials could end a months-long transit tax dispute if the city agrees to issue a contract with the vendor slated to upgrade the state's computerized tax collection system.
"The essence of the proposal is really a $5 million contract to get this thing jump-started and going," said Bob Awana, Gov. Linda Lingle's chief of staff, who has been in talks with City Council members.
The City Council is scheduled to hold a special meeting Thursday to take action on a measure supporting the proposal, which would essentially guarantee the state $5 million for the computer upgrades.
"It seems to be that everyone wants to be part of the solution," Council Chairman Donovan Dela Cruz said. "There are always some things that we can tweak, and there may some challenges that may occur but nothing is insurmountable."
The proposal is spelled out in a June 15 letter from state Attorney General Mark Bennett, in his role as acting governor, to Dela Cruz and Vice Chairwoman Ann Kobayashi, who also chairs the Budget Committee.
Lingle and Mayor Mufi Hannemann have been embattled in a war of words over the collection of the 0.5 percent general excise tax surcharge for county transit projects, which is scheduled to be imposed Jan. 1. The surcharge is expected to bring in $150 million annually, with the state slated to take 10 percent of the revenue.
Lingle initially wanted the city and not the state to collect the tax. But when the state Legislature, which had to approve the change, did not go along, the state administration sought funding to prepare for its new tax collection duties.
But the bill that included an appropriation to pay for the surcharge collection costs, including upgrading the state's computerized tax collection, failed to make it out of this year's legislative session.
Last week, the mayor asked the City Council for $5 million to guarantee payment to the state's computer vendor to prepare for the tax collection, but the Council rejected the mayor's plan.
Lingle said that without the appropriation, the state Tax Department cannot collect the tax.
Lingle and members of her administration began talks earlier in the week with the Council to figure out how to solve the disagreement.
"We're laying out a blueprint, and we need to color it in with the details, which we hope to sit down to do, but we can't sit down at the table and do that now without this approval," Awana said.
If the proposal is approved, the state could use the $5 million to pay the vendor for the computer upgrades, or it could pay out of its 10 percent of revenues collected by the new tax. Should any of the city's $5 million be used, the proposal calls on the state administration to submit an emergency appropriation bill to the Legislature that would pay back the city out of its transit tax revenues.
The mayor has said that whatever is agreed to between Lingle and the Council must also be approved by him.
"Mayor Hannemann has been apprised," city spokesman Bill Brennan said in an e-mail statement. "He's directed staff to begin reviewing the proposals, and will personally review them himself upon his return." The mayor has been on the mainland this past week on a transit-related trip.
State legislative leaders have said Hannemann wants to meet with them Monday morning at City Hall.
The proposal is "win-win (because) the city sets aside some money, and it collects interest," Kobayashi said. "The state doesn't lose because (the money) comes out of the 10 percent."