Recapping state’s legislative and county’s budget sessions

CHAIR'S 3 MINUTES

Earlier this month, the 2018 state legislative session came to an end. Throughout the session, I closely monitored measures that could potentially impact Maui County.

This week’s column serves as an update on the critical measures that have either been deferred or passed by the Legislature.

The Legislature deferred Senate Bill 648, Senate Draft 1, House Draft 1, which would have provided the county with an additional $14.8 million in transient accommodations tax revenues. If the bill had passed, the county could have received approximately $38.3 million from TAT revenues for the upcoming fiscal year. Instead, the county will collect a little over $23.4 million from the TAT.

During recent budget deliberations, the County Council made conservative revenue estimates and did not factor the potential TAT windfall from the proposed bill into Maui County’s 2019 fiscal year budget.

In last year’s special session, the Legislature decided that the Neighbor Islands would help fund Honolulu’s rail project by increasing the TAT by 1 percent. Maui County generates approximately $15.9 million a year to support the rail project.

The Legislature and the governor approved House Bill 2587 House Draft 1, Senate Draft 2, Conference Draft 1, which will allow the counties to collect additional revenue from a general excise tax surcharge. The bill specifies that the Neighbor Island counties can utilize proceeds from the surcharges only for operating and capital costs of public transportation and roadway infrastructure.

The same measure was introduced last year and the county has been hesitant in accepting the state’s proposal because of the mandated conditions on use of the proceeds. Kauai County has been the only county, so far, to exercise the GET surcharge option.

Senate Bill 2922, Senate Draft 1, House Draft 1 was also approved by the Legislature and proposes a state constitutional amendment that would allow state lawmakers to establish a surcharge on investment real property. The revenues of the surcharge would be used to fund public education.

As it relates to the taxing powers and duties of local government bodies, the Hawaii Constitution currently states, “the taxation of real property shall be exercised exclusively by the counties.” Maui County’s main source of income is from real property taxes, which accounts for more than 40 percent of its total revenue.

Increasing real property taxes by adding a surcharge will burden many residents and make balancing the county’s budget in the future very difficult.

The unintended consequence of adding a surcharge on real property tax lies in passing the burden to renters, who are part of the county’s workforce. As a result, the potential surcharge could further exacerbate the state’s affordable housing crisis.

Last week, the County Council’s Budget and Finance Committee recommended its 2019 fiscal year budget bill to be considered by the full council.

The county’s main sources of revenue for the proposed budget bill are generated from real property taxes, charges for services, general obligation bonds, licenses and permit fees, transient accommodations tax, and fuel and franchise taxes. The committee-adopted proposal looks to generate more than $750 million in revenues, with over $320 million coming from real property taxes.

The budget bill also proposes slightly lower real property tax rates in most categories.

Capital improvement project highlights in this year’s proposed budget include money for the construction of the Wailuku Civic Complex, funding to initiate the construction of a new central transportation hub for the Maui Bus, improvements to park facilities and road improvements.

The bill is anticipated to be passed by the council later this month and will go into effect on July 1, pending the mayor’s final approval.

Mahalo.

* Mike White is chair of the Maui County Council. He holds the council seat for the Paia-Haiku-Makawao residency area. “Chair’s 3 Minutes” is a weekly column to explain the latest news on county legislative matters. Go to MauiCounty.us for more information.

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