(BIVN) – A bill that would establish a one-half percent general excise and use tax surcharge on the Big Island was heard by the Hawaii County Council Finance Committee on Feb. 6.

Bill 102 would fund the costs of public transportation systems within Hawai‘i County, and would be levied beginning January 1, 2019.

Mayor Harry Kim was sat down to introduce the proposal to the councilmembers in Hilo.

“This is a difficult subject for all of us,” Mayor Kim told the council. “Anytime we talk about increasing taxes.”

“I thank this council very much,” Kim continued, “because for some of you – on your first few months on the job – our approach to you was a difficult one. Asking you to raise the property tax, about 6% across the board. And as soon as you approved that… we come right back to you to increase the fuel tax. And there’s no better way to be popular with you guys then do that, back to back.”

“Some of you might have heard,” Kim said, “that I do not support the excise tax because it is very regressive tax. I wish we didn’t have to come before you, but (it is) a reality of revenues, the reality of expenses.”

County Finance Director Deanna Sako gave a presentation, explaining how the county arrived at this point. During the intense Honolulu rail funding debate at 2017 special session of the state legislature, lawmakers passed a bill that permanently capped the county’s share of the Transient Accommodations Tax (TAT), while at the same time giving the counties another opportunity to enact a 1/2 percent surcharge on GET for the purpose of transportation. Specifically, the county GET collection would go towards operating and capital costs for public transportation systems, including “public roadways or highways, public buses, trains, ferries, pedestrian paths or sidewalks, or bicycle paths”

The Act also increased the TAT rate to 10 and 1/4 percent until December 31, 2030 to help fund the City and County of Honolulu Rail System.

According to the county, the proposed transportation surcharge is:

• One-half percent (.5%) charge added to the four percent (4.0%) state general excise tax (GET) currently paid
• All proceeds would go to Hawaii County for transportation related costs
• Estimated $25 million per year (could be more than this, per the State)
• The ordinance must be adopted by March 31, 2018
• The surcharge would be in effect from January 1, 2019 through December 31, 2030

Sako painted a grim picture of the current state of fiscal affairs. She presented one slide that spelled it out:

• In response to TAT being capped since fiscal year 2011, the county cut and trimmed its budgets while maintaining services, to help get through the recession and recovery
• The county has not funded its reserves, and its fund balance continues to decline
• The county has deferred facility maintenance and equipment purchases
• The county continues to pay increasing labor costs, including fringe benefits, which are controlled by the State
• The county continues to be subject to State Legislature changes that impact its budget and can change from year to year, such as when the state capped TAT and increased the ERS (retirement) percentages that the county pays for its employees

After hours of discussion, sometimes heated, the bill was eventually moved to the full council with a negative recommendation. We have more from the reaction from the council – and the public – to the new tax proposal.