Mayor Harry Kim started a public meeting on a proposed general excise tax increase Monday evening by reading a list of priorities he identified while speaking with residents during the last election.
There was public transportation, road and parks maintenance, county hiring practices, and, yes, even cutting taxes.
That last one has proved out of reach for the administration, which with approval of the County Council raised property and gas taxes last year to deal with budget shortfalls and lagging infrastructure.
Kim, during the meeting in Pahoa ahead of today’s do-or-die vote on a GET increase, noted while addressing the approximately dozen people present that he is now facing his “third strike.”
Still, he tried to win over skeptics of the one-half percent local surcharge, which the county can raise to fund public transportation and roads, by highlighting the expenses mostly out of the county’s control, such as collective bargaining unit raises that are negotiated statewide, and the need to get the mass transit system back on its feet.
“We need to fix our roads; we got to get our transit authority at least to the road to recovery,” Kim said.
“It’s a hard thing to ask three in a row,” he added. “Our choice is to fix it or let it stand.”
The council, while meeting as the Finance Committee, gave the surcharge a negative recommendation with a 3-6 vote. The bill can die today if it fails to get a majority vote in support. If there are enough yes votes, it will advance to a second and final reading.
Puna Councilwoman Jen Ruggles, one of the no votes, said during the Monday meeting that the tax increase hits low-income people the hardest.
“I believe there are options for more progressive taxes,” she said, while giving a tax on luxury homes as an example.
General excise is a state tax that applies to business activity and impacts everything from food to rental income. It’s currently at 4 percent for retail sales. The bill would raise that to 4.5 percent, with the last half-percent ending up in county coffers.
The county estimates that would raise another $25 million a year, with 30 to 40 percent from visitor spending.
For each $100 spent, shoppers will pay an extra 54 cents as a result of the increase, the county estimates.
Puna resident Bob Dukat said the tax shouldn’t exist in the first place.
“This is a slippery slope,” he said. “You open the door, and the mountain is going to fall in. The GET is a tax that should not be.”
Deanna Sako, county finance director, said the administration is looking to prioritize improvements to the mass transit system, which is in a state of disrepair and lacks functioning buses, if the tax increase passes.
Puna Councilwoman Eileen O’Hara said she supports the tax increase on the condition that the county also puts a hold on additional gas tax hikes.
“The GET puts us on track to actually plan for the explosive growth we have in Puna,” she said Monday evening.
Otherwise, painful cuts are coming, O’Hara said.
A resolution to stop additional fuel tax increases was postponed during Tuesday’s Finance Committee meeting. Council members said they wanted to wait until after the GET vote.
Additionally, county staff say the increase in fuel tax from 8.8 cents to 15 cents per gallon on Aug. 1 is bringing in less revenue than expected. While the county estimated an extra cent in tax would generate another $1 million a year, Aaron Brown, Public Works business manager, said the figure is closer to $850,000 because of lower consumption.
The county fuel tax is scheduled to reach 23 cents in the 2019-20 fiscal year, when it matches Maui’s rate.
The county administration is in the middle of planning for the next budget, which begins July 1.
Sako said it hasn’t been determined yet if any additional tax increases are going to be needed on top of the GET.
Kim claimed there is no fat in the $490.8 million budget after telling departments to tighten their belts. He also pledged to cut taxes in the future if the county can afford it.
Union negotiations aren’t the only reason expenses are increasing for the county. The county Salary Commission recently authorized large pay increases for administration positions and council members that adds $1.3 million to the budget.
The mayor and many top administrators got raises in 2014, while some others hadn’t seen a raise in 10 years. Salaries are mostly funded through property taxes.
The county has until March 31 to approve the GET increase, under the state law.
Email Tom Callis at tcallis@hawaiitribune-herald.com.