Mayor wants new revenue from City Council

By Andrew Pereira
Published On: May 15 2013 11:47:00 PM HST

Honolulu Mayor Kirk Caldwell says the city could run out of money this year, so it's up to the city council to figure out a way around it.

HONOLULU -

Honolulu Mayor Kirk Caldwell says the burden to pass a balanced budget has shifted to the City Council after his proposal to increase the county fuel tax by a nickel per gallon suffered a speedy defeat back in March.

"It rests with the council," the mayor told KITV4 when asked about potential revenue enhancers. "As you know, we submitted a balanced budget (and) we raised $15 million from the fuel tax. That was killed, (and) that means they have to find $15 million in order to balance the budget."

In a Monday letter sent to council members, Managing Director Ember Shinn outlined the administration's growing concern over the lack of new revenue in the face of pay raises and benefit increases for public workers that could reach $37.5 million.  Shinn also noted that an additional $5 million is needed to cover lump sum vacation payouts for employees leaving the city during the upcoming fiscal year, which begins July 1.

"To cover these costs you could tap into centralized provisional accounts such as the Provision for Other Post-Employment Benefits (OPEB) and the Reserve for Fiscal Stability Fund," Shinn wrote. “However, be aware that the City needs to fund OPEB to meet its obligations to provide health benefits for retirees and needs to set aside reserve funding in case of emergencies. In addition, bond raters consider the funding of these accounts as a measure of the city’s financial stability, therefore decreased funding could affect the City’s bond rating.”

Caldwell said his administration hopes to use $25.6 million originally set aside for vacant positions toward collective bargaining settlements. Led by Councilman Ikaika Anderson, the council cut funding for vacant positions from $60 million to $30 million. Anderson said he wants to see the total cost of arbitration awards for police officers and fire fighters before he commits to any new revenue enhancers, whether it's new fees or additional taxes.

"As far as the arbitrated pay raises," said Anderson, "I will need to see exactly what those pay raises are going to amount to before I will guess whether or not we have the necessary monies to meet the demand."

With council members racing to pass a balanced budget by a City Charter deadline of June 15, Shinn wrote additional revenue may only be possible by raising bus fares, or increasing property taxes.

"At this late date, an increase in the real property tax and/or bus fare increases may be the only options," said Shinn.

Budget Committee Chairwoman Ann Kobayashi said the council would likely increase the cost of a 4-day bus pass from $25 to $35, but that she and a majority of her colleagues have no desire to raise the overall cost of riding The Bus, or raising taxes on homeowners. Caldwell said in increase in the 4-day bus pass would only raise $200,000.

"We're going to look at increasing the four day pass because that doesn't really affect our everyday riders," said Kobayashi. "As far as property tax, we've said many times we're not going to tax people out of their homes."

Still, Caldwell is troubled the city may actually run out of operating funds half-way through the new fiscal year, and questions why the council increased the budget for grants-in-aid to $15 million, an all-time high.

"So, instead of shrinking (the budget), it's grown larger, but they haven't enhanced revenue," said the mayor. "We could run out of money. That means the police (and) the fire department could be impacted negatively on their training and recruiting. These are core services, (and) there's nothing more important than public safety."

According to administration figures, grants-in-aid have grown exponentially over the past three budget cycles. In fiscal year 2012, the council set aside $2.8 million for nonprofits. The following fiscal year, that amount was increased to $5.5 million. Now, the council is poised to grant awards totaling $15 million.

"The state's grants-in-aid are under $10 million, and their budget is three times as large as ours," said Caldwell. "Something's out of kilter here."

On that point, Anderson agrees with the mayor and plans on introducing a budget amendment during a council hearing June 5 that cuts $10 million in grants-in-aid awards.  Under an amendment to the City Charter passed in April, the city must set aside 0.5 percent of general fund collections for nonprofits.

"I know that with my colleagues that may not be a popular decision," said Anderson. "I think that goes to show that I have some disagreements with my colleagues, which I think is fine, everyone's allowed their own opinion."

Caldwell said he supports Anderson's amendment to cut grants-in-aid, and noted that any amount above the $5 million mandated by the City Charter would be awarded with little oversight from his administration.  

"I'm hoping Ikaika Anderson prevails on this proposed amendment, and I hope there's enough votes to support it," said Caldwell. "I think it brings it into balance and it puts it where it should be, which is going through the Department of Community Services.

Anderson said the June 5 council hearing where budget bills will face final readings could be delayed if it appears the city’s spending plan may not balance out.

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