Council edges toward fuel tax hike


POSTED: Thursday, May 14, 2009

The City Council is pushing a 3-cent-a-gallon fuel tax increase and plans to discuss raising property taxes next week.

;[Preview]  City Council Looking To Raise Gas Taxes

The City Council is considering raising gas taxes as well as looking at reducing the property tax hikes that have been proposed.

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The Council Budget Committee advanced yesterday a bill to raise the county's fuel tax to 19.5 cents a gallon.

Committee members deferred taking action on a real property tax increase proposed by Mayor Mufi Hannemann, delaying the matter until Monday, when they take another crack at crafting the city's operating budget for fiscal year 2010, which begins July 1.

Budget Chairman Nestor Garcia said he wanted to give members time to study the various revenue-generating options and funding-cut proposals available to balance the budget.

When taken together, an increase in the fuel tax could raise enough money to lessen or eliminate the need to increase property taxes, Garcia said.

“;This is more art than science, trying to figure out whether or not if I pull down here, what can happen here,”; Garcia said. “;We could see a drop in the (property tax) rate ... but in order to do that, maybe the fuel tax has to come into play.”;

Hannemann has proposed an increase in the property tax rate of 30 cents, placing it at $3.59 per $1,000 of a property's value. The property tax hike proposal, coupled with increases for some bus fares, Honolulu Zoo entry, public golf courses and other fees, was aimed at closing a $50 million gap in the 2010 budget.

The increase in the fuel tax was proposed by Garcia, who said every one-cent increase in the fuel tax would bring in an estimated $3 million. If enacted, the new tax would go into effect by August.

City Budget Director Rix Mauer III said the administration had discussed the possibility of raising the fuel tax, but decided to instead pursue more reliable sources of revenue. He noted that last summer, as fuel prices soared, gasoline consumption fell along with gas tax revenue.

The proposed tax of 19.5 cents a gallon would be on top of federal taxes of 18.4 cents a gallon and state taxes of 16 cents per gallon. Hawaii has among the highest taxes on gasoline of any state.

Any city increases would come on top of several state tax hikes approved by the state Legislature for the next fiscal year. They included higher income taxes for individuals making more than $150,000, and an increase in the hotel room tax.

Garcia said the fuel tax has to be considered as the Council looks ahead to the 2011 fiscal year, with a looming budget deficit of more than $176 million.

Councilmen Charles Djou and Duke Bainum voted against the fuel tax increase, which now goes before the full Council for a public hearing on May 27.

Bainum also cautioned that a fuel tax increase might lead to increased costs for fueling the city vehicle fleet, potentially offsetting any revenue gains.