A one-quarter percent surcharge will be added to the general excise tax in Hawaii County starting Jan. 1, following action Friday by the County Council.
After teetering on the winning and losing side of a 5-4 vote for months, the bill passed 7-2 just one day before the state-imposed deadline. Voting no were Kona Councilman Dru Kanuha and Puna Councilwoman Jen Ruggles.
Almost all the council members were unhappy with the compromise measure.
“I’m going to be voting yes to one of the stupidest bills I ever saw,” said Hilo Councilman Aaron Chung.
But with a $5 million hole in the budget caused by the loss of property taxes from lava-plagued Puna, and big hikes in costs from collective bargaining and other employee-related expenses, the majority of the council felt it had no choice.
The tax is projected to raise $10 million for the fiscal 2018-19 budget year that starts Sunday, and $25 million a year after that, before it expires Dec. 31, 2020.
Coming around to vote yes since the GET surcharge failed 4-5 on June 19 were Puna Councilwoman Eileen O’Hara, Hilo Councilwoman Sue Lee Loy and Kohala Councilman Tim Richards.
O’Hara, who asked for reconsideration of the failing vote in a special council session, supported the GET as a way to diversify county revenues but balked at the compromise bill because it cut the percentage the state allowed from one-half percent to one-quarter percent and shortened the time it would be in effect from Dec. 31, 2030, to Dec. 31, 2020.
“This could be a much better piece of legislation,” O’Hara said.
O’Hara pushed for a commitment that the bill would be changed to a 2030 expiration date before the year is out. But her colleagues refused to do so, with several questioning whether they were even allowed to make that pledge under the Sunshine Law.
Lee Loy also previously supported the increase, but voted against the bill last time because the administration hadn’t provided a detailed accounting of how the new money would be spent. That was provided Friday.
Lee Loy also pushed for the full half-percent with a later expiration date. She said if the council killed the bill on the table, it would have another chance to vote on the full amount in January, although it wouldn’t go into effect until Jan. 1, 2020.
“I never wanted to bring a Band-Aid,” Lee Loy said. “I wanted to bring the cure.”
Richards consistently pushed for a rebalancing of revenue streams by adding the GET surcharge while reducing property taxes and gas taxes. He bristled that the GET without those decreases raises the $518 million budget to $523 million, even taking into account the estimated $5 million loss in property taxes.
Richards urged the administration not to spend all of the increase, but to put it aside for safekeeping for future emergencies. The bill, he said, is “contorted.”
“We’re here with increased revenue … We’ve increased our expenses to match our revenue streams,” Richards said. “We’re talking about balancing our budget, not expanding it.”
Revenue from the GET can be used only for transportation-related projects such as roads, mass transit and trails. But because about $4 million in mass transit expenses are paid from the general fund, shifting that to the GET fund will free up most of the $5 million to patch the hole in the budget. That will allow current county services to continue.
That’s if property taxes in Puna and elsewhere on the island don’t continue dropping. Because no one knows when and where the lava will stop, the real loss won’t be known for some time.
“I really feel that $5 million is going to be very short,” Mayor Harry Kim told the council. “The county of Hawaii is going through a very difficult time right now. … This county needs your help.”
Kim reminded the council that he can’t spend “one dollar” without council approval.
After spending $4.9 million to cover the budget hole, the county wants to spend an additional $3.6 million of the GET for buses and equipment, programs such as shared ride and bike share, and expanded routes, said Deputy Finance Director Nancy Crawford.
About $1.5 million of the 2018-19 tax will be used to plan and design Ane Keohokalole Highway phase III. Acquisition of rights of way for that project will account for an additional $1 million in 2019-20.
Also from the $25 million in taxes in 2019-20, $11.5 million will go for mass transit and $700,000 will be spent acquiring rights of way for Oneo Lane.
And $5.6 million will be spent on preventive maintenance for Kawili Street, Alii Drive, Kinoole Street and Manono Street, while $6.4 million goes for major resurfacing projects on Lanikaula Street, Waianuenue Avenue, Kamehameha Avenue, Kilauea Avenue, Komohana Avenue and Mamalahoa Highway-Kiloa Road.
Kanuha and Ruggles have consistently voted no.
Kanuha has said his district already pays some of the highest taxes on the island, and constituents don’t want to pay more.
Ruggles said her district is the poorest and the “poorest of the poor” will feel the hit the most.
Her statements drew a reaction from Hamakua Councilwoman Valerie Poindexter, the council chairwoman.
“I’m not willing to cut the services of the poorest of the poor who use our facilities,” Poindexter said.
Because the tax is itself taxed, the tax on a $100 purchase will increase by 26 cents, raising the purchase from $104.17 to $104.43, once the 4 percent state GET is also taken into account.
That translates into $2.27 monthly for a household spending $10,000 annually on taxed items, $11.36 monthly for those spending $50,000 annually and $22.72 monthly for those spending $100,000 annually, Crawford said.
The tax isn’t applied on most medications or on SNAP food assistance.
“I’m extremely grateful for this decision,” Kim later said in a statement. “This is nothing but good for the people of this island. We needed so badly to try to make this a better place.”
Email Nancy Cook Lauer at firstname.lastname@example.org.