Mayor: Careful with that tax

Hannemann tells the Council that lowering the property tax rate may be "problematic"

Mayor Mufi Hannemann is cautioning the City Council about going too far in lowering property tax rates to offset climbing property values.

"It's easy to play Santa Claus," Hannemann said. "Everyone loves to play Santa Claus with people's monies, but I'm saying you need to put some long-term thinking into this."

Hannemann's comments came yesterday during a taping of PBS Hawaii's "Island Insights," a segment scheduled to air April 30 at 7:30 p.m.

Council Budget Chairman Todd Apo said that from one point of view Hannemann is correct, but that the Council also has some differences with him.

Hannemann said that while he does not want to rule out any of the proposals by some City Council members to lower the current residential tax rate of $3.59 per $1,000 in valuation to below $3, he said the Council needs to think of the long-term implications.

"It'll be problematic. It'll be real problematic to do that," Hannemann said. "And if they're going to do that, then I think they have to be clear that this tax rate may not hold in the out years because we are going to be facing higher bills as well as the fact that with the flattening of the economy we still have to continue to pay for the services that they want government to do."

The mayor said the Council members also should be aware of the political implications they face.

"The problem I have with that is that if you lower it drastically as some of the ideas I've seen below, some of them have to run for re-election next year," Hannemann said. "I need to balance my budget. Are they prepared then to stand with me if we have to raise the tax rate because we've given everything away and now the economy has really flattened out?"

The City Council's Budget Committee meets tomorrow and is expected to approve amendments to the mayor's proposed $1.6 billion operating budget and a $724 million construction budget. A public hearing on the proposed amended budgets is scheduled for April 25.

Apo said it is premature to talk about a specific tax rate until the public hearing, when the Council will get a better sense of what that rate should be.

"On one hand, (the mayor) is absolutely correct; on the other hand, we have a little differences in opinion," Apo said. "We all need to make sure that we're able to cover the city budget, but my concern is about how government has approached the budget in the past."

Previous budgets were created using the amount of revenue generated based on a property tax rate and a plan on how to spend that revenue, he said.

"Whereas my view is really let's focus on what is the expenditures we need to operate the city and then adjust the rates to make sure that we have that revenue," Apo said. "Whether it's an election year or not, you always need to justify your city budget, and I think if you can do that, everyone understands that the rate needs to be what they need to be to meet that budget."