Mayor urges more funding for retirees' health costs

Some City Council members would like to use the money to cut property tax rates

Pay future retiree health costs now or pay later when funds might not be available, Mayor Mufi Hannemann says.

"We've got to set aside more money now because we may not have that kind of luxury in the future," Hannemann said this week. "Then what we're going to have to resort to are two things: Either we cut expenses or we have to raise fees. So let's avoid taking those steps."

The City Council is targeting $60 million earmarked for health costs so it can make property tax rate cuts.

Council Budget Chairman Todd Apo said he is looking so far at using half of the $60 million to help fund a tax rate somewhere around $3.25 per $1,000 in property value or about a 10 percent cut in the current rate of $3.59. The tax rate multiplied by the property value equals the amount of property taxes that must be paid.

But others on the Council want the tax rate slashed further by using more of the retirement reserve fund money to finance the tax-rate cut.

Hannemann said his administration is talking with the City Council to find the right balance of property tax cuts and money to save for future health costs.

The Employee-Union Health Benefits Trust Fund has not yet told the city how much it would have to pay.

Preliminary indications are that the city could be billed around $93 million next fiscal year.

"Sooner or later, we're going to have to pay that bill. It's going to come due," Hannemann said. "At this point, I continue to feel that it should be around $60 million -- that's still far less than what I think the EUTF will come back at, so I'm hoping Council will see fit that that's what we need to set aside."

But others disagree.

"We have a philosophical difference of opinion," Councilman Charles Djou said.

Djou said it is precisely because there is no firm number that the city should not be setting aside such a large amount of money without justification.

He also noted that the state administration and state Legislature have not yet decided how they are going to deal with the future health care costs.

"There are a number of unknowns," he said.

In the meantime, Djou said, the city should put as much of that money as possible back into taxpayers' pockets.

Apo also said earlier this week that the main downside in not having an amount set aside to fund that liability is the potential impact on the city's credit rating on its bonds.

"There's no legal ramification. The bond raters are going to take some time in figuring out how this new liability is going to affect your rating," Apo said. "They may say it may not necessarily be 100 percent funding ... but if we're committed to saying this is how we're going to deal with all the issues going forward, you are in a much better position to avoid having that liability on your books affect your bond rating."