County Council postpones action on proposed GET increase

Foreseeing the almost certain death of a bill raising the general excise tax, the County Council voted unanimously Wednesday to put it on life support.

At least temporarily.

The council agreed to postpone further action until no later than May 5, even though the state-imposed deadline to have the law in place is March 31. If the bill is again taken up, it will need to be voted up twice to be passed.

The council voted 3-6 against the bill during a Feb. 6 committee hearing.

Puna Councilwoman Eileen O’Hara, one of the three solid supporters of the measure, said she’s willing to “throw the die,” in hopes the state Legislature will grant the county an extension. The other supporters were Hilo Council members Sue Lee Loy and Aaron Chung.

“We simply don’t have enough information to make a decision,” O’Hara said.

O’Hara and Kohala Councilman Tim Richards, a no vote, submitted legislation to reduce the fuel tax if the GET is going to be raised. Richards said he was willing to vote yes Wednesday, if only to “make sure this conversation doesn’t end today.”

“We’re stuck with a weird timing situation with this,” Richards said. “We’re faced with a making a decision without having enough information to make good decisions.”

Other council members weren’t ready to take that step, saying if they had to vote Wednesday, the vote would be “no.”

“My community tells me loud and clear they don’t want this passed,” said Kona Councilman Dru Kanuha.

“Maybe we should just tighten our belt rather than coming up with across-the-board tax increases,” said South Kona/Ka‘u Councilwoman Maile David.

“This could be the straw that broke the camel’s back,” said Council Chairwoman Valerie Poindexter of Hamakua.

She said older constituents on fixed incomes can’t bear the additional cost.

Puna Councilwoman Jen Ruggles is a steadfast “no” vote. She suggested the council again raise property tax rates on the hotel/resort class, and impose a “luxury tax” on the county’s 1,060 second homes worth more than $1 million. Raising property taxes would obviate the need to raise other taxes, she said.

Council members said they wanted to see Mayor Harry Kim’s budget before making a decision. His draft proposed budget is due to the council by March 1, with a final proposed budget due by May 5.

The state Legislature in September gave the counties the opportunity to add a half-cent surcharge to the state GET, which is collected on everything from rent to services to food and medicine. Honolulu and Kauai adopted the tax, but so far, Hawaii County and Maui have not.

If passed, the half-cent county surcharge would be added to the 4-cent state tax starting Jan. 1.

Bills moving through the state Legislature would extend the counties’ deadline to June 30. In addition, the Senate version, SB 3088, would allow counties to spend up to 40 percent of the proceeds on expenses other than related to transportation and, in addition, allowing up to 2 percent of the surcharge on private roads that serve a public use.

SB 3088 is scheduled for its final committee vote, the Senate Ways and Means Committee, on Friday. The House Finance Committee on Feb. 16 passed the companion measure, HB 2587, with unknown amendments. The legislative session continues until May 3.

At the council’s request, Kim scheduled community meetings around the island to explain the tax and hear constituent concerns. Nine of them were hosted by Wednesday.

“I’m not pushing for an extension,” Kim said. “I’m ready to do it now.”

Kim told the council the GET surcharge would be the first tax that goes directly from tourists to the county. The state currently collects GET and transient accommodations taxes on hotels and resorts. He said 30 percent to 40 percent of the GET would be paid by island visitors.

“This gives us an opportunity to take money from the tourists, their fair share,” Kim said. “(The GET) is the only way the county has direct payment from the tourist to the county government.”

Testifiers speaking in person and submitting written testimony were mostly opposed to the tax hike. Opponents included real estate agents and the Hawaii Food Industry Association, who were concerned about increases to the cost of living. Proponents included the Hawaii Regional Council of Carpenters and the Hawaii Public Health Institute, who favor transportation improvements and alternatives such as sidewalks and bike paths that encourage a healthy lifestyle.

Kim said the first year, should the bill pass, the county anticipates using all of its GET revenues, estimated at $25 million, to fix the county transit and bus system. GET money paid to the Mass Transit Agency could free up about $7 million in property tax revenue that currently goes to shore up the struggling program.

Kim said he’s been criticized for adding 400 employees to the payroll during his first eight years in office. He said 350 of them were much-needed police and firefighters.

In 2000, there were 2,053 county employees serving a population of 148,677 at a cost of $175.8 million, or $249.4 million in 2017 dollars, according to a newspaper analysis of census data, county budgets and financial audits. Today, there are an estimated 198,449 residents being served by 2,479 employees, with a price tag of $491 million.

While he did raise taxes in his first administration, he lowered them as well, Kim said. He also created a rainy day fund as a savings against emergencies. That account currently contains about $6 million.

“It’s unreasonable to expect the government not to grow when the population grows exponentially,” O’Hara said. “This is not out of line. We’ve got to provide services.”

Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.