City has dismal
fiscal outlook

Councilmembers expect
a sobering assessment
from the mayor today

There will be no "smoke and mirrors" in sight when Mayor Mufi Hannemann delivers some bad fiscal news today.

STAR-BULLETIN / 2004 Mayor Mufi Hannemann is expected to reveal somber news today about the city's operating finances.

The city faces mounting debt, and it has no extra money to launch new programs or enough funds to pay to fix old sewers and other projects.

Hannemann's Mayor's Review, an auditlike look at the city's finances and functions led by his senior adviser Paul Yonamine, is expected to provide a sobering look at the city's finances, said Councilman Charles Djou.

"The city's financial picture does not look good," Djou said. He was briefed about the findings earlier this week by an administration official. "The city is up to its eyeball in debt, and we have a lot of obligations," he said.

The mayor is using the review to gain a better handle on the city's operations and fiscal outlook as he prepares to deliver his first State of the City address on Thursday and to submit his first budget to the City Council by March 1.

Djou said that as a result of this "realistic view" of the city finances, bold policy initiatives are probably going to be in short supply because the city will not be able to afford them.

Council Budget Chairwoman Ann Kobayashi said the review will be a welcome departure from former Mayor Jeremy Harris' "smoke and mirrors" fiscal approach.

"It will give us a true picture of the finances of the city," Kobayashi said. "We've been trying to get that picture for a long time."

Djou said: "I think perhaps the Harris administration looked through rose-tinted glasses. I think they were overly optimistic of the fiscal picture because of initiatives they wanted in lean times."

Hannemann's administration has already said that fixed costs such as employee health insurance and retirement have swallowed up a projected $83 million in additional revenue from rising property assessments.

Kobayashi said the financial picture complicates efforts by the City Council to provide citizens with relief from soaring property tax assessments.

Kobayashi's committee discussed several options yesterday, and she said she will probably advance two proposals.

One would cap property taxes at 3 percent of household income for those making less than $70,000 or $80,000. There would be no age limit to qualify.

The second proposal would cap tax increases at a certain percentage each year from a base valuation.

Kobayashi said the first proposal could mean a loss of $40 million in revenue.

"That's why we have to be careful, and yet we want to bring relief to taxpayers," she said.

Kobayashi and Djou said they are not surprised by the dismal outlook. Hannemann, they said, might have no choice but to increase revenues by raising fees, including fees that pay for the city's sewers.

"We're facing all these sewer repairs," Kobayashi said. "I think raising the sewer fees is inevitable. It's been delayed for so long."

Djou said he is against raising property tax rates, but the need to fix the sewer system was underscored by this week's sewer line break along Kalanianaole Highway in his district.

"We have a sewer system that is aging and falling apart, and we have the federal government breathing down our neck. Something has got to be done," he said.