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Council committee forwards $816.8M budget for approval

It includes lower or flat property taxes for most categories; anticipates shortfalls

By Melissa Tanji 6 min read

Maui County Council's budget committee on Thursday recommended an $816.8 million budget for the coming fiscal year, which includes mainly lower or flat property tax rates.

The proposed budget is around $53 million less than Mayor Michael Victorino's budget of $869.8 million, which was released at the beginning of the coronavirus pandemic in March. Emergency orders and business closures would later bring the county economy to a halt.

The proposed council committee budget does take into account shortfalls not foreseen back in March, including the possibility of having no hotel room tax allocations from the cash-strapped state. Last fiscal year, the county received $23.48 million.

With hotels not operating, there are revenue losses in wastewater and solid waste budgets. And Thursday, the committee was notified that car rental companies may send vehicles back to the Mainland. The committee estimated that if half of the 22,000 rental cars on Maui are shipped away, there could be a revenue loss of $1.27 million from the highway fund, which would create a shortfall in the fund by around $730,000.

In an email following Thursday's meeting, council Economic Development and Budget Committee Chairwoman Keani Rawlins-Fernandez said this session would likely be "the most strenuous" in history as the committee worked with the administration on numerous changes due to the pandemic.

"The committee moved successfully through uncharted waters -- putting Maui County on the map -- succeeding in our mission to maintain public participation, accepting oral testimony from an average of 30 people and a high of 80 people at one meeting," Rawlins-Fernandez said of the budget meetings done with the public testifying via video, phone or written testimony.

"We provided, homeowners, businesses, hotels and resorts tax relief from the year before, despite the anticipation of receiving zero transient accommodation tax and shortfalls in wastewater and solid waste due to many hotels not operating," she added.

The committee worked with county departments on where cuts could be made, such a deferring purchases on new equipment, reducing travel costs, eliminating new positions and holding off on capital improvement projects that could wait.

But the committee did approve raises for its top management and staff in the Office of Council Services. Councilors noted that the Salary Commission had given 2 percent cost of living raises to heads of county departments, and that wage parity was important for all departments.

The first reading of the budget by the full council is scheduled for May 22. The second reading is scheduled for June 5. The council, by law, has until June 10 to approve a budget otherwise Victorino's proposed budget for the July 1 to June 30, 2021, year becomes law.

A public hearing on the proposed property rates will be held May 15. This includes a $10.70 rate for hotels and resorts that testifiers at a public hearing Wednesday night wanted lowered to $9.37 as proposed by Victorino. The current rate is $11 per $1,000 valuation.

Hotel workers and lobbyists asked for a lower rate, noting that the industry is suffering with most hotels currently shuttered. An official from one resort said losses could amount to $50 million. One hotel worker said his employer continues to pay his medical coverage and asked members to reciprocate that "aloha."

Council Member Yuki Lei Sugimura, who asked for a reduction in the hotel rate to $9.37, noted the job losses due to the downturn in the visitor industry.

"The visitor industry had helped us and taken us forward as a community," she said. "It's going to be a whole new industry, it's not like we saw previously."

Sugimura said there will be a need for social distancing and could be fewer hotel guests, which means less workers. She asked Rawlins-Fernandez to consider lowering the rate.

Rawlins-Fernandez said that if the mayor's rate was accepted, the committee would need to find more than $4 million elsewhere. She was willing to have her proposed rate of $10.70 lowered to $10.50.

Rawlins-Fernandez said she wanted to have enough of a "positive balance" in revenues "for any anticipated curveballs we have been experiencing," such as the news Thursday of lost revenues on rental cars.

A vote was taken on the $10.50 rate and it failed. Those voting in favor of the lower rate were Sugimura, Mike Molina, Riki Hokama and Tasha Kama. Those against were Rawlins-Fernandez, Kelly King, Tamara Paltin, Shane Sinenci and Alice Lee.

In speaking against the reduction, King said "jobs are lost because of COVID-19, not because of property taxes." She added that the property tax rates are fairly low and noted that CEO's of major hotels, who make millions, are not taking pay cuts to help workers.

"What are they doing to reduce the hurt to their employees?" King asked. "I don't think the jobs has a direct relation to the property tax."

Also on Thursday, Paltin's amendments to the property tax rates were approved. This included having short-term rentals at one rate of $11.08 and changing the nonowner occupied first tier to $5.45, lower than $5.59 proposed by Rawlins-Fernandez.

Paltin said lowering the rate for the first tier for properties valued up to $800,000 could put relief on those who rent to residents. She also asked to increase the third tier, which includes property values more than $1,500,000 million, to $6.90, up from $6.50 proposed by Rawlins-Fernandez.

Paltin said that for these types of million-dollar homes nonresident owners leave them empty and that they should pay more taxes to keep them empty.

The amendments all passed.

The committee voted to keep the rates for five tax categories the same as the mayor's proposals -- apartment, commercial, agricultural, conservation and time share.

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

This post contains a correction from the original version regarding which council members voted in favor of a lower tax rate for hotels and resorts. It also includes a clarification from the original version regarding the shortfall in the highway fund.

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PROPOSED PROPERTY TAX RATES

Listed are the current rates and the mayor's and council budget committee's proposed rates. The full council is set to approve the rates May 22. A public hearing will be held May 15 on the rates. The rates are per $1,000 of assessed valuation.

• Owner-occupied: $2.90; $2.61; $2.51 for homes valued up to $800,000, $2.56 for homes between $800,001 to $1.5 million, $2.61 for homes more than $1.5 million. (No tiered rates currently and mayor did not tier rates).

• Nonowner occupied: $5.60; $5.60 for homes valued up to $800,000, $6.20 for homes $800,001 to $1,500,000, $6.50 for homes more than $1,500,000; $5.45 for homes up to $800,000, $6.05 for homes $800,001 to $1,500,000 and $6.90 for homes more than $1,500,000.(No tiered rates currently)

• Apartment: $6.31; $5.55; $5.55.

• Commercial: $7.39; $6.29; $6.29.

• Industrial: $7.48; $7.11; $7.20.

• Agricultural: $5.94; $5.94; $5.94.

• Conservation: $6.43; $6.43; $6.43.

• Hotel and resort: $11; $9.37; $10.70.

• Timeshare: $14.40; $14.40; $14.40.

• Short-term rental: $10.75; $10.75 for homes up to $900,000, $11 for homes more than $900,000; $11.08 for all tiers.

• Commercial residential: $4.60, $4.60, $4.40.

Starting at /week.