County might feel turmoil pain in ’09, but not now

WAILUKU - The turmoil on Wall Street won't have an immediate impact on County of Maui finances, but the national economic meltdown could spell a double-digit drop in revenues next year.

The county increased its bond ceiling from $40 million to $50 million in the last budget and might not have to borrow money for at least 12 months, said Finance Director Kalbert Young. That spares the county from having to attempt a bond sale in the current market, when it would have difficulty finding investors and would likely have to pay higher interest rates, he said.

"We're very fortunate we're not in the financial market right now," Young said.

Gov. Linda Lingle announced Tuesday that the state would delay a planned sale of more than $600 million in bonds because of uncertainty in the financial market.

County Council Chairman Riki Hokama also said the county was fortunate.

"The county is still in a very solid financial position," he said. "We're not in dire need of cash or in dire need to borrow money."

He said the county should wait out the storm before it seeks financing.

"We're in a position that we can do that," he said.

In the series of community budget meetings being held around the county this month, Mayor Charmaine Tavares said, she has been telling residents the county is facing a tight budget in 2009.

"The message we have when we start is about what the revenue picture is - from reduced fuel taxes because people are using less gasoline, the reduced TAT (transient accommodation tax), that the real property assessment is expected to be down, and that we are facing increased costs of goods because of the higher transportation costs," she said.

Tavares and Budget Director Fred Pablo held a community meeting Wednesday night in Paia and will hold the final community session at 5 p.m. today at the Lanai Community Center.

In all of the sessions, she said, residents understand the revenue issue, but "they don't want us to cut them . . . They are appealing for programs that are seen as essential to them and their communities."

She said the top appeals are for the Maui Bus transportation program and support for Maui Economic Opportunity.

"We've been doing so good for so long, it seems strange to have to talk about tightening the belt," Tavares said.

Both Hokama and Young said the county is far from safe from the fallout of the country's economic woes, and is likely to be indirectly affected.

While the county hasn't done business with the investment firm Lehman Brothers, which collapsed last week, a number of private businesses or developments on Maui may have their financing affected, Young said.

The shaky condition of insurer AIG will also not directly affect the county government but will have a big impact on local residents and businesses because of its vast reach, he added.

"It's very scary," Young said.

He continued to project a 10 percent drop in real property tax revenues as a result of a slowing real estate market.

"There are pretty widespread declines in property value," he said.

With a decline in visitors, Hokama anticipated a significant drop in transient accommodations tax revenues, with a "gut feeling" the decline could be as steep as 20 percent. The state Tax Department's monthly report on tax revenues in August said TAT revenues were down 28 percent.

Real property taxes represent around 70 percent of the county's General Fund revenues. The transient accommodations tax, or taxes on hotel room rates, are collected by the state and distributed to the counties, making up about 7 percent of Maui's General Fund revenue.

Hokama also anticipated a drop in county fuel tax revenues, as high gas prices lead people to drive less and buy fewer gallons at the pump. The fuel tax represents about 24 percent of the county's Highway Fund revenues, which pays for road improvements and projects.

Overall, "the county could foresee a single- to double-digit decline in revenues next year," Hokama warned.

While Lingle has advised her directors to prepare for across-the-board budget cuts to state departments, Hokama, who will not be on the council next year because of term limits, called the approach "too simplistic."

The county should instead look for cuts department-by-department, he said.

There's not much the county can do to prevent the declines, he said.

"There's many things happening outside the county's control on the national and international markets," he said.

* Ilima Loomis can be reached at iloomis@mauinews.com.