Felix seeks changes City Councilman John Henry Felix has introduced legislation designed to curb unorthodox ways of financing the city budget.
to financing
the city budget
City debt refinancing and use
of some funds would be prohibitedBy Gordon Y.K. Pang
gpang@starbulletin.comCouncil members have criticized the way Mayor Jeremy Harris is proposing to balance next year's $1.1 billion operating budget by refinancing $53 million in debt, assuming the sale of a city parcel at $15 million that has remained unsold for several years and taking $60 million from the dedicated sewer fund and $18 million from the H-POWER account.
The Felix package includes:
>> A resolution prohibiting the refinancing of city debt unless the move results in a minimum savings of 3 percent.
>> Bills banning the use of either the sewer or H-POWER funds to reimburse the general fund.
The measures, co-introduced by Budget Chairwoman Ann Kobayashi, would not affect the 2003 budget, which Council members are deliberating.
Resolution 02-140 addresses what key Council members call a growing worry about future debt service and the possibility that property tax rates may need to be raised after Harris resigns to run for governor.
Felix said the city's financial policies call for debt service (the amount needed to cover interest and principal of bonds each year) to be no more than 20 percent of an annual operating budget. He said the city is projected to come close to breaking that limit in two years.
According to administration figures, city debt service is projected to rise to $200 million, or 18 percent of the operating budget, from $104 million (13.5 percent) by 2004, based on annual bond sales of $250 million.
"We don't want to jeopardize the financial health of the city," Felix said, noting that the refinancing for next year will result in $46.5 million in interest payments.
Harris officials could not be reached for comment, but they have insisted that the debt is within reasonable limits. City bond underwriters issue statements assuring that the city's AA bond rating is not in danger of being downgraded.
The resolution also changes policy to forbid the city from using projected revenue from anticipated property sales to balance the budget. The anticipated sale of Block J is expected to bring $15 million to the city budget. That same parcel failed three years ago to pump $8 million into balancing the budget.
Bills 02-44 and 02-45 would bar the transfer of either sewer or H-POWER funds into the general fund to help balance the operating budget.
The administration is taking $60 million, in what it calls reimbursements for past projects, from the dedicated sewer fund after taking $41 million to help balance this year's budget.
The administration also is taking $18 million from the H-POWER special fund account, set up to pay for expenses related to the city's waste-to-energy expenses, to help subsidize refuse pickup. That transfer would be allowed because it goes into a solid-waste account which, while part of the operating budget, is outside the general fund.
City & County of Honolulu
