Mayor reports $50 million gap


POSTED: Friday, February 20, 2009

Mayor Mufi Hannemann warned of increases in fees and a strong possibility in raising real property tax rates to make up for a $50 million shortfall in the city's upcoming budget.

;[Preview] Hannemann Outlines Budget Crisis Plan

Mayor Hannemann announced that he, along with 36 department heads and directors, will receive a five percent pay cut to chip in to the state's $220 million budget shortfall.

Watch ]


In his annual State of the City speech yesterday, Hannemann proposed several cost-cutting measures, including freezing wages for employees represented by two major unions and voluntary pay cuts for himself and his Cabinet members.

Hannemann delivered his speech in the Mission Memorial Auditorium next to Honolulu Hale in front of about 300 people with a makeshift stage in the center. In typical Hannemann fashion, he began with a song, “;Welcome to My World,”; and changed some of the lyrics to match his message.

To reporters after the speech, Hannemann described the city's financial situation as “;daunting.”; But during the 42-minute address, the mayor kept a serious but optimistic tone that the city will survive the recession without cutting core services.

“;Our journey ahead looks difficult and demanding,”; Hannemann said. “;The path is dark, and we don't know what challenges await us. But I have always been one who has not retreated from fear, who has not cowered before the unpopular.”;

As the city faces a $50 million deficit - $10 million more than what Hannemann had earlier expected - city officials will likely have to make some unpopular changes - with increasing property tax rates one possibility.

“;We have turned over every rock,”; Hannemann told reporters. “;I think taxpayers in Honolulu will know that if we have to raise fees in Honolulu, it's going to be done only as the ultimate last resort. If property tax rates do go up, I can tell you this, it won't go up past 50 cents.”;

By that, Hannemann meant an additional 50 cents per $1,000 valuation. The residential rate is currently $3.29.

Hannemann said more details in making up the deficit will come on March 2, when he submits his budget to the City Council.




Speech highlights

        » The city is facing a $50 million budget deficit this year, $170 million next year.

» Hannemann said there will be fee increases and a possibility of property tax rate hikes.


» Union employees might not receive a pay increase, but there will not be furloughs, layoffs or decreases in benefits.


» Hannemann and his Cabinet members will take a voluntarily pay cut.


» TheBoat, Hannemann's pet project, might be eliminated.


» The neighborhood boards might be restructured for efficiency.


Councilman Todd Apo said that with the cost-cutting measures the city undertook last year - such as a hiring freeze and travel prohibitions - a rise in property tax rates is likely.

“;My guess is there's probably going to be likely that they're looking at a rate change,”; Apo said. “;It's not popular, but if we're sticking with core services, taxpayers need to burden that cost. We're going to be as careful as we can.”;

The city will face an even more challenging fiscal year in 2010-2011 with an expected $170 million less in revenue, Hannemann said.

Hannemann and his Cabinet members have agreed to work one day a month without pay, which will equal about a 5 percent pay cut, or about $250,000 to $300,000 a year, according to acting Budget Director Rix Maurer III.

The city also will not offer pay raises to employees with the Hawaii Government Employees Association and United Public Workers as it enters negotiations toward a new contract. The current contract expires June 30.

Hannemann said he does not expect there to be layoffs, furloughs or cutbacks in health or pension benefits.

“;It's not unexpected to hear that, because we're well aware that the counties and state are facing very similar situations,”; said Randy Perreira, HGEA executive director.

Hannemann is also considering eliminating TheBoat, his long-favored intraisland ferry system, which has had poor ridership numbers since its inception last year. The city will evaluate the project in April, and if it is deemed ineffective, the $5 million project will be cut.

Other considerations include streamlining the neighborhood boards and merging the Fire and Emergency Services departments.

Despite the shortfalls, Hannemann said the city is still moving forward with the city's $4 billion rail transit system with a groundbreaking late this year.

But he sent a strong warning to the state Legislature, which is considering taking a tax dedicated to the Honolulu system to make up its own $1.2 billion shortfall.

“;After coming so far, and with so much at stake, some legislators and state administration officials want to take the transit money - steal it, really - choosing to do what's easy over what's right,”; Hannemann said. “;This is an utter breach of faith with the people.”;