Hannemann's 'no-frills' budget sports tax credit for homeowners
Under the budget, tax credits are set to return more than half of $116M revenue surplus
A one-time tax credit to homeowners, public employee pay raises, and a tax rate increase for commercial property owners are all part of Mayor Mufi Hannemann's proposed "no-frills" $1.64 billion city operating budget for next fiscal year.
His proposal represents a nearly 10 percent increase from the current fiscal year's budget.
"On one hand we're trying to give some (property tax) relief," he said yesterday. "And then ... recognizing that we have fixed costs that we have no control over. It's fixed costs that every administration inherits."
Critics see the budget-balancing act differently.
"What one hand giveth, the other hand taketh away, with increases in sewer fees, increases in the commercial property tax and of course the increase in the general excise tax (for mass transit)," Councilman Charles Djou said.
Hannemann's proposed construction budget is also going up -- to $724 million, or 6.4 percent higher than the current fiscal year's budget -- and includes $351 million in sewer fixes and $40 million in road repair. The city's fiscal year begins July 1.
"The (capital improvement budget) keeps growing because of the need to continue to do the work with our sewers, and that's an ongoing thing," Hannemann said.
Details of the mayor's budgets include:
» One-time tax "discount" of $376 to owners who occupy their home. The tax credit -- $176 more than the credit offered for the current year -- will be applied to tax bills beginning in August for those who are qualified for a homeowner's exemption.
» $23 million in collective bargaining pay increases for white- and blue-collar workers, as well as police. Hannemann said he is budgeting for 4 percent raises.
» Increasing the tax rate for commercial, industrial and hotel/resort properties to $12.50 per $1,000 in valuation from $11.97, as part of an effort to shift more of the tax burden away from residential properties.
» Doubling to $20 million the amount in the city's rainy day fund, including paying future retirement benefits.
» Budgeting $1 million for the proposed start-up costs of an expanded curbside recycling program that includes a $10 monthly fee for a second regular trash collection in one week.
» Nearly $90 million for costs related to the city's proposed mass transit project, including $85 million for the preliminary engineering and environmental impact studies. About $71 million will be funded by revenues generated by the half-percentage-point excise tax surcharge, and $14 million in federal funding.
Rising property values have led to the city taking in $116 million more in gross tax revenues than in the previous yea, but city budget officials say more than half of that additional revenue is being used to offset the $64 million cost of the homeowner tax credit and a proposed $150 tax credit for renters.
CONTINUING FOCUS ON 'BASIC CITY SERVICES'
Mayor Mufi Hannemann's budgetary highlights:
» A $1.64 billion operating budget, up 10 percent from the current fiscal year budget of $1.49 billion.
» A capital improvement budget of $724 million, an increase of 6.4 percent over the current budget.
» About $116 million more in gross property tax revenues.
» Qualified homeowners would receive a tax credit of $376.
» Collective bargaining pay increases totaling $23 million.
» The tax rate for commercial, industrial, and hotel/resort properties would increase to $12.50 per $1,000 in valuation from $11.97.
» Agricultural property tax rates would drop to $5.70 per $1,000 in valuation from $8.57.
"What troubles me is that the city has been raking in money hand over fist and we really need some profound tax relief, and what we're offering is just pennies back to the taxpayers," Djou said.
Sam Slom, state senator and president of Small Business Hawaii, said the increase in the property tax rate for commercial properties will mean everyone will pay more.
"Businesses ... absorb as many (taxes) as they can before they pass 'em along. And they will be passing them along," Slom said. "The mayor is going to be giving a tax break to the residential users, but in the end the residential users are going to be paying more too, because they're going to be paying more for goods and services."
Hannemann defended the budgets.
"For those who may be concerned that we are spending monies uncontrollably, I think what's happened is that you have more attention being paid by this administration to basic city services," he said. "It is a no-frills budget again, with a major focus on basic city services."
Hannemann said that if the City Council wants broader tax relief, members should approve his idea for a new homeowner classification rate that would give owners who live in their houses the lowest tax rate.
The mayor is required to submit his budgets to the City Council by March 2 for the next fiscal year, and the Council must approve the budgets by June 15.