Mayor to seek
property tax hike

City officials will limit
the maximum tax increase
to $49 million

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By Crystal Kua
ckua@starbulletin.com

The city administration will propose a real property tax rate increase to generate no more than $49 million in additional revenue.

[ PROPOSALS ] The budget that will be submitted by Mayor Jeremy Harris to the City Council will include: >> A property tax increase that will generate no more than $49 million in additional revenue than the current level of $384 million. >> Elimination of 1,000 vacant positions at savings of $33 million. >> A 1 percent cut in most department budgets. >> A construction budget that is below $300 million or about $150 million less than the current budget. >> Creating self-sufficiency in some departments.

City Budget Director Ivan Lui-Kwan said officials are working on various proposals to keep the budget for the next fiscal year lean. Mayor Jeremy Harris will submit the budget to the City Council on Sunday.

"I think the budget was real lean to begin with," Lui-Kwan said. "It's down to the bone."

With an estimated $159 million shortfall to overcome, the administration will propose in the next budget:

>> The tax rate increase will keep real property revenues between the current level of $384 million and the 1994 level of $433 million.

>> Cutting the funding for more than 1,000 vacant positions at a savings of $33 million.

>> Most departments have been told that their operating budgets for next year will be 1 percent less than this year. The current operating budget is about $1.1 billion.

>> A construction budget of less than $300 million, which is about $150 million less than the current capital improvement budget.

While Harris is expected to unveil details of budget this weekend, including the amount of the tax increase, Lui-Kwan discussed generally what the fiscal 2004 budget will look like.

"What (the mayor's) told me is that we want to create value for the customers of the City and County of Honolulu or the taxpayers, and the way you do that is by continuing the high level of performance by our executive departments at the lowest possible cost to the taxpayers," said Lui-Kwan, a Hilo native with a legal and business background who came to the city from the private sector. "The goal is to see what is the lowest cost we can deliver the service."

But City Council members say they will try to see if further cost savings can be realized.

"Of course, the devil is always in the details," said Councilman Charles Djou.

Council Chairman Gary Okino said he believes that the administration will be submitting a "bare-bones budget," but he has lots of questions on how the administration will balance the budget.

"If you look at a tax increase, I think we're going to look at whether it's fair," Okino said.

He said that he has heard that most of the increase might be taken from nonresidential categories, but the city should also look at residential categories as well. "Maybe they should also share in the tax increase."

Budget Chairwoman Ann Kobayashi said: "A lot of people already had a tax increase when the assessments went up. We've had complaints of people having their assessments go up 100 percent. Who will the burden fall on, because this past year the assessment really hit the property homeowners, the small property owner, so we don't want to get double-hit, a double whammy."

Djou said, "A tax increase is just the wrong thing to do in our current economic environment."

While Lui-Kwan declined to say how much of a tax increase will be requested, he said he will be able to meet the mayor's requirement while also not burdening the individual tax too greatly.

"If things hold up, we will be able to meet the mayor's challenge to keep it below $433 million, he said.

Lui-Kwan also said that the 1 percent cut and the cut in vacant positions have led to a lot of stress on those carrying out the directives.

"It's really created huge anguish, and it requires immense discipline by the departments to do that," he said.

Carol Costa, director of the Customer Services Department, said her department will have 25 percent fewer positions next year, and the Department of Facility Maintenance will have 29 percent fewer positions.

"The potholes will get fixed, but it may take a day or two longer," she said.

Lui-Kwan said they have tried to offset the cutting of positions by allowing some to be filled if those positions are crucial or essential to public safety, department operations, generating revenue or are funded by state or federal money.

He also said the approach to the construction was the same -- that only necessary projects like sewer and landfill improvements will be funded.

Okino and Kobayashi will also be watching to see if the administration dips into the sewer and solid-waste funds again to balance the budget or seeks increases in sewer fees.

"In previous years they raided the sewer fund and the solid-waste fund. Because we're facing sewer repairs and the landfill issue, they are not able to go there again," Kobayashi said.

Okino also said that the city could get out of the business of providing certain unnecessary functions. "We may be able to save some more money."

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City & County of Honolulu