Harris wants savings
to lessen taxThe Council, though, would
like to use a $10.1 million
windfall to cover pay raises
Mayor Jeremy Harris and City Council leaders differed yesterday over how to use a $10.1 million "windfall" from the refinancing of city bonds.
Harris said the unexpected funds should be used in part to reduce by half a proposed increase in the property tax rate for businesses in next year's operating budget.
But City Council Budget Chairwoman Ann Kobayashi said the savings is enough to take care of other budget items: an increase of $6 million to pay for arbitrated pay raises for white-collar employees, and $4 million in potential lost revenue if the Council goes against Harris' proposal to increase the "tip fees" charged to commercial trash haulers who dump garbage at the landfill.
The city is refinancing $321 million in bonds at a lower interest rate of 3.9 percent from a higher rate of about 5 percent, officials said.
Harris said it is the first time the city has received an interest rate lower than 4 percent. The refinancing will result in interest payments by the city going down and payments over a shorter time frame, officials said.
As a result the city will save nearly $1 million in the current fiscal year and $27 million the next fiscal year, which begins July 1. That is $10.1 million more in savings than the city originally anticipated, Harris said.
And he says he plans to recommend to the City Council that the money be allocated as follows:
>> Using $6.7 million to reduce the need to hike business property taxes. Harris now proposes to increase tax rates for hotel/resort, commercial and industrial properties by 3.5 percent, making the rate $11 per $1,000 in valuation. Harris originally proposed increasing the rate by 7 percent.But the Council might have other uses for that money.
>> $1 million for the Fire Department to fund an increase in costs to cover temporary assignments as a result of an arbitration award.
>> Adding $2.4 million in a "rainy day" account."The immediate problem is funding the raises," Kobayashi said. "If he doesn't want to use (the savings) for the raises, then we have to keep cutting the budget."
An arbitration panel awarded the Hawaii Government Employees Association an average 8 percent in raises: a 5 percent across-the-board raise and step increases averaging 3 percent for years of service.
Harris did not budget for the raises when he first sent his proposed $1.22 billion operating budget to the Council in February, and he is not counting on the refinancing savings to pay for the raises, either. "This is not an appropriate time for collective-bargaining pay raises," he said.
Councilman Charles Djou, who also opposes funding the raises, said the City Council might approve the mayor's original, higher tax increase to balance the budget. "The City Council should not be raising taxes more than the mayor," Djou said.
Kobayashi is recommending that the Council make around $4.8 million in cuts and restore about $2.1 million in programs to help balance the operating budget, according to a draft of her proposal.
Harris decried the cuts, especially those to road maintenance, garbage collection and disposal, sewer maintenance, driver licensing, an abandoned vehicle program and Honolulu City Lights.
"Those are basic service budgets, and it certainly doesn't make sense to do that at a time when the Council is preparing to increase its own budget by over one-third from what it is this year," Harris said of the $2.6 million jump in the Council budget.
Kobayashi said, however, that the Council's budget includes increased budgeting for running elections and a national conference the Council is hosting next year. She is recommending about $87,000 in cuts to the Council budget.