Council leadership defends property tax, fee hikes, record $823.5 million budget

Package sent to mayor for his signature, no signature, veto

Maui County Council Chairwoman Kelly King (from left) and Keani Rawlins-Fernandez, chairwoman of the council Economic Development and Budget Committee, hear from Maui Humane Society Chief Executive Officer Jerleen Bryant about her experience with this year’s budget process. Council leaders held a news conference Thursday to discuss their $823.5 budget, the largest in county history. The Maui News / MELISSA TANJI photo

WAILUKU — Maui County Council leaders Thursday justified property tax rate hikes and fee increases in the $823.5 million county budget they passed, saying members put the property tax burden on the visitor accommodations industry.

Council Chairwoman Kelly King and Economic Development and Budget Committee Chairwoman Keani Rawlins-Fernandez held a news conference on the seventh floor of Kalana O Maui to discuss the budget, the largest in county history, passed on May 28.

The council’s $671 million operating budget, which runs from July 1 to June 30, 2020, is 3 percent or $23 million more than what Victorino proposed. The capital improvement project total is $153 million, 15 percent higher or $20.1 million more than the mayor’s proposal, according to the council.

To fund the budget, the council approved property tax hikes in all but one category, including the homeowner rate. The increases were higher for visitor industry categories, including for hotels, up 17 percent, and short-term rentals, up 16 percent. The homeowner category rate was raised 2 percent.

The mayor’s budget kept most property tax rates at current levels, but called for 3 percent increases for hotels and short-term rentals. Even without rate hikes, the county was expected to gain more revenues from property taxes based on increased valuations.

There also are rate hikes for water and sewer, which mirror the mayor’s proposal. King said that the council did not approve all of Victorino’s fee hikes, but when they did it was no more than proposed by the mayor.

“The council opted for economic investment in Maui County, rather than austerity,” King said in a news release.

She explained that to fund programs and projects sought by the public and envisioned by the island plans, the council raised property taxes. The council’s revenue increases will net $17.7 million more than the mayor’s tax proposal or from $338.1 million to $355.7 million.

Following the news conference, Managing Director Sandy Baz said the mayor will have 10 calendar days from receipt of the budget to sign it, let it become law without his signature, veto it entirely or by line item.

The council will then have 10 days to override any vetoes, said Baz, who attended the news conference for Victorino, who was recovering from a dental procedure.

Victorino said Thursday afternoon in a news release that he had received the budget from the council.

“Now, we’ll be able to evaluate expenditures and appropriations and determine their impacts on administration departments and our community,” he said. “We also need to forecast and analyze the tax burden on our community in the next fiscal year and beyond.”

In an interview following the news conference, King said the council approved fee increases, such as water and sewer rates, that were the same as proposed by Victorino. Rawlins-Fernandez added that those services are supposed to be self-sustaining but will require general fund support.

For the next fiscal year, general water consumers, who use from 0 to 5,000 gallons per month, will see their costs rise from $2 to $2.05 per 1,000 gallons; from $3.80 to $3.90 for the next 5,001 to 15,000 gallons; $5.70 to $5.85 for the next 15,001 to 35,000 gallons; and $6.35 to $6.55 for 35,000 gallons and above.

An average household consuming around 15,000 gallons of water per month, will see their water bills go from $67.25 to $69.05, but water consumption various depending on a property size and other factors, administration officials said.

In his budget proposal, Victorino kept property taxes mainly flat for most categories but did propose increases for short-term rentals from $9.28 to $9.55 and hotel and resort from $9.37 to $9.60. The homeowner rate remained at $2.85. All rates are per $1,000 net taxable assessed value.

The council chose to increase rates in most categories, including short-term rentals from $9.28 to $10.75 and hotel and resort from $9.37 to $11. Homeowners would see an increase from $2.85 to $2.90.

“While we generated an increase of property taxes, it was really the tourism industry that will be helping better mitigate the impacts that are felt by our residents from increased traffic and road uses, to emergency services of our police, fire, lifeguards, to impacts to our environment,” Rawlins-Fernandez said at the news conference. “Hotel and resorts will really be contributing to the amount of property taxes it should have been in the past few years.”

She noted that Maui County’s hotel and resort rates, even with the increases, remain lower than other counties. On Oahu, for example, the property tax rate for hotels and resorts for the next fiscal year was increased by $1 to $13.90.

Hotel workers and industry leaders testified during council budget hearings against the substantial increases, expressing their fears that the property tax hikes will hurt the industry and their jobs.

King and Rawlins-Fernandez also said that a temporary investigative group has been organized to meet with experts to analyze potential tax reform measures.

As for the size of the budget, King said that the council did trim the budget and is not funding all of the projects proposed by departments.

The budget includes funds for affordable housing with the council doubling the appropriation of property tax revenues to the Affordable Housing Fund from 2 percent to 4 percent and allocating more than $14 million. The council also appropriated another $1.4 million to affordable rental housing programs.

The council also put in $8.8 million for cultural and economic development, $28.1 million for road improvement and $500,000 for planning for shoreline retreat due to climate change and sea level rise.

This spring’s budget review process was the first for the new council leadership, led by two-term council Chairwoman King and freshman Council Member Rawlins-Fernandez, who chaired the budget committee.

King said that the budget process at times may have “seemed chaotic” but that everyone was working hard, including council and administration staff and officials.

“It’s evolving,” King said of the process. “Every year, it evolves and gets a little bit better.”

Early in the process, King and Rawlins-Fernandez touted calling for written reports by department heads instead of having them wait for appearances before the council, more real-time transparency of budget changes online and no late night meetings.

Administration officials did end up having to appear before the council, per members’ requests. Meetings did go into the night, though not past 11 p.m., Rawlins-Fernandez said. To reduce meeting length, she set a time limit for council members to speak.

Department reports were posted online but were voluminous, and even Rawlins-Fernandez acknowledged that there were a lot of documents to look through.

There were methods to navigate the documents, and Rawlins-Fernandez is thinking about making a video next budget session to assist the public in finding budget documents.

There also is money in the next budget for new budget software.

Also appearing at the news conference were six nonprofit leaders, who spoke favorably about the new budgeting process and for funding their organizations received. Jerleen Bryant, CEO of Maui Humane Society, and Debbie Cabebe, CEO of Maui Economic Opportunity, were among those appearing at the news conference.

* Melissa Tanji can be reached at mtanji@mauinews.com.